FDUSD - HongKong based Stablecoin live on Binance

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stablecoin

2023-08-30

Hong Kong-based First Digital Group announced on July 26 that its stablecoin, First Digital USD (FDUSD), has been listed on Binance, the world’s largest cryptocurrency exchange by volume.
The FDUSD is backed 1:1 with “high-quality cash and cash equivalent reserves,” according to a press release, and it is redeemable 1:1 for an equal value in U.S. dollars. These reserves are held in regulated financial institutions’ segregated accounts and monitored and audited by independent third parties. FDUSD aims to offer a “transparent, reliable, and trusted alternative” to conventional assets amid increasing volatility in the market.

Background

First appeared on June 1, 2023 via a Tweet of  Changpeng Zhao- CEO of Binance, at the same time the Hong Kong Securities and Derivatives Exchange Commission (SFC) implemented an open-door policy for Crypto.

"However, FDUSD is yet to be determined if it is licensed in HK, if so with SFC regulations:
- Only listed coins that have existed for 12 months and are present in the unique prices provided by reputable units, so it can only be Bitcoin, Ethereum, Litecoin, Bitcoin Cash, Polkadot, Solana, Cardano, Avalane, Polygon and Chainlink;
- The airdrop cannot be organized;
- Allows the market maker to operate, but this unit has nothing to do with the exchange;
- Imposing Travel Rule to combat money laundering;
- Does not support stablecoins;
- Do not provide derivative services such as lending, staking, margin, futures, etc."

First Digital, the parent company of the issuer FD121, is described as Asia’s leading multi-faceted trust partner bridging traditional and digital finance. It has over 3 decades of experience and provides services including structuring, custody, payroll, escrow, and administration. First Digital labs registered their company headquartered in Hong Kong, founded on May 27, 2019 by Gunnar Jaerv and Vincent Chok. They have raised a total of $25.2M through funding rounds.

FD121 Limited is a subsidiary of First Digital, specifically established to issue stablecoins allowing FDUSD to “leverage the resources, experience, and reputation” of the broader First Digital group.

FDUSD audit reported by PeckShield, an industry leading Blockchain Security Company. Established in 2018 with headquarters in Hangzhou, Beijing and San Francisco, Peckshield has an experienced team from Qihoo 360, Microsoft, Intel, Juniper and Alibaba, etc. They are used to detect Batch OverFlow vulnerability of ethereum smart contract.

How does FDUSD work?

FDUSD's price-holding mechanism is relatively simple when compared to other stablecoins. Each FDUSD can be exchanged for 1 USD in the reserve fund. So, when an agent deposits some reserves (say USD) with a stablecoin treasury, they are entitled to an amount of the stablecoin determined by the pegged price. Similarly, agents may wish to exit their positions in the stablecoin and redeem the reserve asset. There have to be enough reserves to support the stablecoin in circulation at the pegged price, which lends credibility to the value of the stablecoin.

FDUSD is designed to benefit their users, including:

  • Transferable: FDUSD enables frictionless and streamlined transactions. Spot trading pair for FDUSD available on Binance: BNB/FDUSD, FDUSD/BUSD and FDUSD/USDT.
  • Redeemable FDUSD to US dollar: backed by high-quality reserves- cash and cash equivalents, which enable holders the ability to redeem their FDUSD tokens for their equivalent value in US dollars.
  • Programable: FDUSD is programmable, allowing for the creation of smart contracts, escrow services, and insurance arrangements without intermediaries. This programmability empowers users with greater control over their financial transactions while reducing transaction costs and increasing transaction speed and accuracy.
  • Low fees: one notable benefit of FDUSD as a cryptocurrency on the blockchain is its ability to offer cost-effective transactions with minimal fees. Unlike traditional financial transactions, which often incur high fees, blockchain-based transactions generally involve lower costs.This cost-efficiency makes FDUSD an attractive and economical choice for users.
  • Operates on Decentralized Networks Isolated from custodian's bankruptcy: This is what makes FDUSD unique, collateral is registered under another legal entity is FD121. FD121 Limited (“FD121”) was established for the sole purpose of issuing stablecoins. It is a subsidiary of First Digital Group Limited (“FDG”).

Advantage and Disadvantage of FDUSD

  • Advantages

FDUSD is a fiat-collateralized Stablecoin that is fully backed by fiat and equivalent assets. The Peg holding mechanism of this Stablecoin is simple, stable, and easy to operate under bad market conditions.

Listed by Binance - the largest ecosystem today. There are many doubts that FDUSD is the "second child" of Binance, after BUSD was banned from issuing in early 2023. Nevertheless, FDUSD is still being expected to have a rapid growth rate

  • Disadvantages

The biggest risk of fiat-collateralized Stablecoins is in the “decentralization” aspect. In the case of BUSD, they require off-chain reserves. Funds are managed by a small number of custodians, users will have to trust these custodians to act honestly.

In addition, fiat-collateralized Stablecoins have the right to blacklist an address making these wallets interoperable with that Stablecoin. This strategy is useful in freezing the funds of hacker wallets, making it impossible for them to transfer hacked victims' funds, but on the other hand, they show the power of these organizations to govern who may and may not interact with their Stablecoins.

Conclusion

The Binance listing may result in a rise in the supply of the FDUSD Stablecoin. FDUSD's market cap reached $324 million as of August 28th, 2023, based on Coingecko and CoinMarketCap.

FDUSD now available on Ethereum and BNB Chain with planned support for an increasing number of blockchains.

About VNST

VNST is a decentralized stablecoin with transparent on-chain data, guaranteed by the stable value of the most popular and reputable stable coins in the global crypto asset market. The stablecoins that ensure value for VNST have transaction volume and stability proven over a long period of time, issued by reputable organizations with proven potential and periodically audited. VNST will be a safe, reliable solution, providing diverse and convenient choices and expanding future applications for users in the Web3 field in Vietnam and around the world.

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