At the recent Token2049 event in Singapore, BitGo made waves by announcing its plan to launch a new dollar-backed stablecoin called USDS. This stablecoin aims to stand out from the crowd by offering unique incentives for liquidity providers, potentially transforming the landscape of digital asset trading and asset price stability.
USDS will be backed by an assortment of short-term Treasury bills, overnight repos, and cash—similar to many existing stablecoins. However, BitGo is marketing it as an open-participation stablecoin. The twist? It’s designed to reward institutions that add liquidity to its ecosystem. According to BitGo CEO Mike Belshe:
"Existing stablecoins serve an important role, but we see an opportunity to create something more open and fair. The key innovation with USDS is that it rewards those who help grow the network."
The platform will reportedly allow seamless onramps from USD, USDC, and USDT without any conversion fees for institutions, individuals, and DeFi participants globally. This could enhance the efficiency of crypto exchanges and improve the overall crypto liquidity network.
The main feature of USDS is its novel approach to incentivizing liquidity providers. Institutions that contribute to the network will receive returns generated from the stablecoin’s reserves. Belshe explained:
"Returns from the cash backing USDS will be shared with liquidity providers. This not only incentivizes participation but also aligns the interests of all parties involved."
While this model might sound appealing at first glance, one has to wonder if it's just another way for BitGo to consolidate power in a space already crowded with players vying for dominance.
As if launching a new stablecoin wasn't enough of a challenge, BitGo faces scrutiny and potential hurdles right out of the gate. Last August, risk analysts at BA Labs proposed changing protocol parameters to minimize exposure to Wrapped Bitcoin (WBTC), citing concerns over impending custody changes that would move BitGo’s WBTC business from the U.S. to jurisdictions some deem less favorable.
Adding fuel to the fire is Justin Sun's involvement; his past associations with other cryptocurrencies have raised eyebrows—and not in a good way. Sun's history includes controversies that have led many in crypto circles to question his every move.
BitGo's partnership with BiT Global—a company linked directly to Sun—for custody of WBTC has sparked significant concern within the community. There are fears that Sun's involvement could jeopardize decentralization and trust in WBTC itself. Key players in DeFi like MakerDAO are reportedly considering proposals to offboard WBTC due precisely because of these apprehensions.
BitGo’s launch of USDS presents an intriguing case study on how new innovations can emerge amidst controversy—and perhaps even because of it. While Justin Sun may polarize opinion as much as any figure in crypto history, one thing is clear: his presence guarantees scrutiny.
Whether or not USDS succeeds may depend as much on its backing as on its innovative incentive structure for liquidity provision—and whether those backing it can weather a storm of skepticism.
