Goldman Sachs’ backed fintech startup Circle announced it will be launching its own version of the US dollar. Called Circle USD, it will aim to solve the problem of volatility when it comes to cryptocurrencies.
Goldman Sachs (NYSE:GS) is officially the first banking institution to back digital currency thanks to start-up Circle, which is backed by the financial giant.
Circle announced on Tuesday (May 15) its own version of the US dollar called the Circle USD Coin (USDC).
According to the announcement, the coin will allow Goldman Sachs’ customers to buy USDC fiat tokens for payments and trading in the crypto ecosystem.
One of the main goals of the new digital currency is to help mitigate some of the biggest concerns when it comes to cryptocurrencies, including volatility. Circle says that cryptocurrencies lack a “price-stable medium” of exchange, and that a store of value is missing.
“A price-stable currency, such as a token pegged to the US dollar, is critical for enabling mainstream adoption of blockchain technology for payments as well as for supporting maturation in financial contracts built on smart contract platforms, such as tokenized securities, loans, and property,” a statement reads.
In comes the USDC, which the company says “provides a full reserve US dollar-backed stablecoin,” and is supported by the CENTRE open-source framework. What this means is that various developers can step in and work on the project and foster its development.
CENTRE will oversee Circle’s offering, while Bitmain is leading a US$110-million strategic investment in Circle. Other key investors include: IDG Capital, Breyer Capital, General Catalyst, Accel, Digital Currency Group and Pantera, along with new investors Blockchain Capital and Tusk Ventures.
This isn’t Goldman Sachs’ first dip into the cryptocurrency sector. In early May, for example, the New York Times reported that the banking institution was looking to move ahead with its plan to set up the first bitcoin-trading operation at a Wall Street bank.
The Times further reported that the bank wouldn’t be buying or selling bitcoin, but rather would be looking at getting regulatory approval on the risks associated with holding the digital currency.
Following Circle’s announcement on Wednesday, shares of Goldman Sachs dipped slightly by 0.77 percent to close at US$239.10 on Thursday (May 17).
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Editor’s note: This article has been updated as of May 23 to make the correction that Goldman Sachs does not own Circle and is merely financially backed by Goldman Sachs.
Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.