USDC on Cardano
Episode by Peter Bui on January 16th, 2024
The latest drama on Cardano is the debate around having USDC natively on Cardano.
The push to for USDC on Cardano
Stablecoin ecosystem in crypto
Howey Test on Investopedia
Mynth’s Idea on Funding via Project Catalyst
Current Stablecoins on Cardano
Comment about what Mehen is
Freezing Assets is not Required
Circle’s Terms, Legal & Privacy
YouTube poll. Let me know what you think
Participate in the poll and let me know what you prefer in regards to stablecoins on Cardano.
There has certainly been a lot of debate in the Cardano community around the Circle Stablecoin, USDC, and I wasn’t going to comment on this or do a video about it because there’s a lot of coverage already, but I had to put this together, just put some of my thoughts in place and get your opinion as well. So this all came about a few days ago when Dan, Crypto Recruiter, put out this post.
saying that it’s time for USDC to be on Cardano and let me just go through this post really quickly so you can get up to speed with all of the information that’s going on at the moment. Now people are wanting USDC or some sort of stablecoin to appear on the Cardano ecosystem, a more broadly accepted stablecoin that is. And you know with the stablecoin it will bring wider adoption, interoperability and efficiency in trading because now you can just trade.
directly to a stablecoin as opposed to ADA and then a stablecoin on a centralized exchange. There’s a lot of increased use cases in DeFi as well with a lot more possible TVL being locked into various liquidity pools and smart contracts. And of course market confidence with a very well known branded USDC. It’s widely known across the crypto space. So a lot of people do use it. And if you have a look at the overall stablecoin space in crypto, it’s got a
total market cap of $133 billion at the moment. It’s a massive amount of assets being held in stables and not much of that is being held on the Cardano ecosystem. We go down a little bit further here you can see Tether being of course the number one it’s one of the very it was the very first stable coin out there. But if you have a look at what Cardano has to offer at the moment there isn’t much. We have IUSD which is this synthetic USD from Indigo.
stablecoin as well as well as this mint which is the new player on the block but you can see the values here we’ve got 14 million what 4.7 it’s not that much I don’t I don’t think these numbers are absolutely accurate but they are absolutely tiny in comparison to what we can see with usdt and usdc overall across the entire crypto space now going back to dan’s post
He mentions here, Circle requires a fee to implement the SDC. And from what I know and what I’ve heard, it’s in the tens of millions of dollars. So it’s a massive amount of money to get it implemented. There’s a couple of barriers to entry here and people are hounding Charles, IOG, Cardano Foundation to just pay for this and get it done and implemented. Now I have one really big issue with that and it all comes down to the Howey test.
and how they may be interpreted if Charles or IOG or the Cardano Foundation pay for that implementation. And one of the criteria is here. Let me just read all the criteria for the Howie Test. Howie Test conditions. Howie Test consists of four criteria, an investment of money, expectation of profit, common enterprise and reliance on the efforts of others.
Now I’m not a lawyer so I can’t confirm this but from my own interpretation if Charles, IOG, or the Cardano Foundation or even a Emurgo paid for USDC to be available on Cardano, would that be seen as an effort from the founding entities to increase the value of ADA? And I can see the reluctance for the foundation to not pay to play in this case for USDC because it may be seen as a security.
it may have that type of impact. So I’d love to hear what your opinions are in regards to that. Leave a comment down below. So if we can’t get the funding from the founding entities to do it, so how about we find funding in other ways such as maybe Project Catalyst? And we have a post here from Mint that asked that direct question. How about we make a Project Catalyst proposal to inject liquidity into existing Cardano ecosystems?
inject 2 million liquidity into existing Cardano stablecoin ecosystems, so that’s a GED or or a MINTH and can we use those funds from Project Catalyst? And Danny replied who is running Project Catalyst at the moment, Catalyst grants cannot presently be used to bootstrap liquidity. Okay so that’s out of the picture, that’s out of the gang. Okay so overall it’s not looking good so we can’t get USDC because we’re not paying to play.
with the USDC, we can’t bootstrap liquidity this way. So what are our other options in the Kedana ecosystem for stablecoins? We have a few. Obviously we have Jed, but that also has its problems. At the moment, I can’t even mint Jed for whatever reasons. And also it’s region locked, it has all sorts of barriers there already. It’s also, in my opinion, quite capital inefficient where you have to use a lot of ADA to mint Shen.
the reserve coin and also a lot of ADA to mint Jed itself. So a lot of users that are hoping for price appreciation for ADA may not be minting Jed and that’s kind of where it is at the moment. And if you have a look at the Jed stablecoin and DeFi Llama, we currently have just under 40 million ADA locked into the ecosystem at the moment. You can see the inflows and outflows at the moment. And if we have a look at the TVL graph, it seems to be tapering off at the moment as well.
exiting the GED ecosystem for maybe that price appreciation of ADA too. Now another option that we have is one chain and one chain has been implemented for a good while now and we actually have the ability to bridge USDC from different ecosystems. So here you can see I’m bridging being from the BNB chain USDC over to GDANO and then I can have a wrapped version of USDC.
on the Cardano blockchain and that’s trading widely on multiple different DEXs in the ecosystem. Another option we have here is MINTH. So MINTH is a brand new protocol. It’s fairly new and they are getting out there at the moment to try and show people what they can actually do. But here you can see you can, if you have liquidity over on Tron, USDT on Tron, you can actually convert it over to My USD on Cardano and use that as a stablecoin. So it’s a one-to-one backed stablecoin.
They have a nice little mechanism to keep that price as stable as possible. I have covered it in previous videos. I’ll put a link down below. But what about USDM, the one from Mahan? If you have a look here, if you don’t know about it, Jillian from USDM writes, if you read a white paper, you’ll see that USDM is essentially the USDC regulatory and finance model just on Cardano.
with the added benefit of being on Cardano, which includes the added security and decentralization that comes with it. With the added bonus that is community focus and plan to start a foundation to start supporting other promising Cardano projects. It’s just like USDC but better. Now one of the features that USDC needs is the ability to claw back or freeze assets, whether it’s from criminal activity, a hack, security hack, whatever it is.
USDC want to reserve the right to freeze those assets. So it’s a very centralized implementation. Now, I always thought that this was a regulatory requirement in the United States to be able to do this. It’s actually not. And in this video clip here, which I’ll link down below for you guys, Matt from Mahan Finance explains that it is not a regulatory requirement. Here in this post from Ed,
The USDM stablecoin cannot be frozen nor clawed back unlike all ETH stablecoins like USDC, USDT. Freezing features are not a legal requirement in the US. Now I did have a look at the terms and conditions of USDC from Circle. Circle reserved the right to block certain USD addresses and freeze associated USDC. And this may be temporary, permanent and may be associated with illegal activity.
law enforcement as well. They also can blacklist addresses and circle reserve the right to block the transfer of USDC to and from an address on chain. Now this is kind of a good thing because when a hacker gets hold of a lot of certain assets they may sell it to a stablecoin and then try to transfer it out to a certain exchange and when the security people get involved and they know their certain addresses,
they can get Circle to block those addresses and those assets can be frozen and the hacker won’t be able to exit with that particular liquidity. So in a way it’s a good thing. But that isn’t technically possible on the Cardano ecosystem. Stablecoins such as USDM, GED, IOSD, they’re native assets. They’re not controlled by a smart contract. They will reside in your wallet and there’s no way to claw back or freeze those particular assets.
may be appealing to criminal activity. Just saying, it’s appeared in my comments, my videos quite often. But I have been told by other people that there may be a way to create virtual assets to have that ability to freeze and claw back. So this is actually already being developed as well. So this was a comment posted on one of my videos. So just wanted to update you that you can freeze assets on Cardano.
Saturn, from Saturn NFT, so that would be Nick, has created a standard which Nick is calling virtual assets. These assets will work just like how it works on EVM based chains using SIP68 as a basis. So pretty cool and I did check to Nick quickly and he said he’s written the smart contracts for this. So if anyone from Circle is watching this or listening, contact Nick from Saturn NFT and have a look at those smart contracts.
because as far as I know, all he needs is liquidity to implement a version of USDC on Cardano with clawbacks and freezing assets. I do have a poll that I just put out on my YouTube. If you have a look in the comments down below, please give it a vote. Let me know what your preference is in regards to stable coins on Cardano. If you found this video interesting and useful, please consider giving me a thumbs up, click subscribe, click that notification bell.
All that really helps the YouTube algorithm and I’ll see you in the next video.