USDC is Coming to Cosmos
USDC stablecoin will soon be launching on the Cosmos (ATOM) Network via Nobel, a token issuance protocol startup on the interoperable blockchain. On March 28, Noble announced it has partnered with stablecoin issuer Circle to mint the first fiat-backed crypto token on Cosmos’ Inter-Blockchain Communication (IBC) protocol.
The Cosmos Network was developed to serve as a communication hub for different blockchains without having to rely on a centralized server.
The network, regarded as the ‘Internet of Blockchains’, uses the IBC protocol to ensure that distributed ledgers can communicate securely with each other’s apps and services using interoperable smart contracts on a single decentralized hub.
Noble is one of more than 50 networks in the Cosmos IBC ecosystem.
Noble Partners With Circle to Enable Native Support for USDC Stablecoin on Cosmos Blockchain
Noble noted that the IBC-enabled ecosystem has never had a “native, fiat-backed stablecoin” that is highly liquid and fully collateralized. With its collaboration with Circle, Noble will enable more than 50 blockchains on the Cosmos Network to access USDC natively via the IBC.
According to the announcement, the stablecoin integration will accelerate “hundreds of millions of dollars” in liquidity over the coming months on Cosmos. Noble seeks to rectify existing challenges faced by the blockchain’s users and applications when interacting with bridged assets from other ecosystems.
Noble predicts hundreds of “highly liquid, well adopted” blockchains to exist on Cosmos in the future and each protocol will need to adopt a fungible version of USDC, which the company expects to fulfil.
Noble says the minting of USDC is just the beginning as the token issuance protocol will become a gateway for all digital assets that may be coming into the IBC ecosystem. Circle also went on Twitter to announce the collaboration. However, both companies have not confirmed a date as to when USDC will launch on the Cosmos chain.
In addition to Cosmos, USDC is natively hosted on eight other blockchains: Ethereum (ETH), Solana (SOL), Avalanche (AVAX), Tron (TRX), Algorand (ALGO), Stellar (XLM), Flow (FLOW), and Hedera (HBAR). USDC is also bridged to Layer-2 networks, Arbitrum (ARB), Near Protocol (NEAR), Fantom (FTM), and Polygon (MATIC).
Although the stablecoin has been bridged to Cosmos, it was never hosted natively on the blockchain. For the time being, Cosmos users can only get access to stablecoins like USDC and USDT through IBC bridging protocols such as Axelar and Gravity.
Noble was born out of necessity. Previously, the primary stablecoin leveraged by IBC blockchains on Cosmos was Terraform Labs failed Terra USD (UST) token.
The company went hard on its mission to introduce a natively hosted stablecoin on Cosmos as the network began to grow in popularity among crypto users. Once launched, USDC will become the first native, highly liquid, and fully collateralized fiat-backed stablecoin in the IBC ecosystem.
The project’s development accelerated after the Ethereum-based decentralized lending protocol dYdX announced that it will soon be moving to the Cosmos IBC.
USDCs Trouble with the U.S. Banking System and Attempts to Evade Further Crisis
USDC is the second-largest stablecoin by market cap. Recently the token was faced with an unprecedented crisis linked to the collapse of one of Circle’s main banking partners, Silicon Valley Bank. The U.S. bank known to be a popular tech startup incubator was shut down by regulators on March 10 after facing a liquidity crisis followed by a bank run by depositors that drained a quarter of its $119 billion deposits.
Circle reportedly held $3.3 billion in cash reserves backing the USDC token at the bank. SVB’s insolvency, added with confirmation by the stablecoin issuer of its exposure to the failed bank, led to token holders rushing to redeem their investments, which caused the stablecoin to lose its dollar peg and fall as low as $0.87.
USDC reclaimed its parity with the dollar after the company announced it will be moving the funds from SVB to BNY Mellon, one of the 30 Global Systemically Important Financial Institutions (GSIFIs). This will be done once the funds are made available by the U.S. government, which has taken over Silicon Valley Bank’s operations.
In a statement released on March 29, the stablecoin issuer has declared that it will be moving all 20% of USDC’s $33.2 billion reserves held in cash to the bank. The move is seen as a way to reduce Circle’s risk from the banking system.
Circle also touted its intention to work with lawmakers to introduce stablecoin legislation that will allow the company to hold cash potion of USDC reserves directly with the U.S. Federal Reserve. The company currently holds a majority of its stablecoin reserves in short-term U.S. Treasuries.
At the time of writing, ATOM, the native token of the Cosmos Hub, is trading at $11.28 – up 3.3% in the last 24 hours.
