Their new company, Global Currency Organization (GCO), developed the USD Digital (USDD) token. It aims to break through with exchanges, traders and OTC desks looking for a stablecoin product but unwilling to develop one themselves.
Former employees of JPMorgan, Intel and TrustToken have unveiled a dollar-backed stablecoin with a twist: revenue sharing for the institutions that use it.
A novel fifty-fifty revenue sharing model incentivizes that adoption, GCO says, and USDD’s placement on the ethereum blockchain provides users with transparency.
“It’s the best of both worlds”, said CEO Joe Vellanikaran. “They get the stablecoin, and they get the revenue that GCO shares with them.”
Vellanikaran began working on stablecoins at TrustToken as a general manager for the San Francisco firm’s TrueUSD token – also pegged to the dollar.
He recognized the value stablecoins brought to institutional investors and individuals, especially in moving money across markets. Backing the tokens with USD brought more stability and trust.
“Let’s say you’re a Japanese student living in the U.S. and you want your parents to send you funds”, Vellanikaran told CoinDesk. “With the current process, you’d either need a U.S. bank account or be subjected to long delays and conversion fees. With our stablecoin, you should be able to receive your funds in a matter of days.”
Vellanikaran wants to expedite a worldwide adoption of blockchain-based currencies, which he said will come about “in the next 10 to 20 years.” But that global shift will only come with institutional support, he said.
“For a company to emerge and help move all these dollars to the blockchain, we really have to open it up to the partners” who want to use stablecoins, he said, adding:
“That’s what we think we can do through revenue sharing.”
JPMorgan Warns Stablecoins Like Libra at Risk of ‘System Gridlock’
The new breed of stablecoins led by Facebook’s Libra could be vulnerable to failure in periods of network stress.
According to an analysis from JPMorgan released on Sept. 5, they lack the short-term liquidity of other payments systems, so usage could grow faster than the network can safely support.
Transaction growth could outpace network capacity
In a note to clients, analysts highlighted the potential for substantial growth in stablecoin payment systems like Libra.
But JPMorgan urges caution if the networks become responsible for a significant proportion of global transaction activity. The note explains:
“As currently designed and proposed, they do not take into account the microstructure of operating such a payment system. The risk of payment system gridlock, particularly during periods of stress, could have serious macroeconomic consequences.”
Further risk to Libra from negative yields
Another risk pointed out in the note was that of negative yields. Libra will rely on income from collateral in its reserve account of fiat currencies. However, yields on most major currencies are already negative, and trends point to further global monetary easing.
JPMorgan notes:
“Any system that relies on reserve-asset income to fund operational and other ongoing costs becomes unstable in a negative yield world … a fully negative yielding Libra reserve has become a plausible (some would argue likely) risk.”
Facebook’s Libra is one of a raft of incoming stablecoins from entities such as Binance, and even the Chinese central bank.
