First Digital USD
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About First Digital USD
First Digital USD (FDUSD) is a new regulated stablecoin backed 1:1 by US Dollars and issued by FD121 Limited. It combines the convenience and speed of cryptocurrency with the stability and trust of traditional fiat. FDUSD aims to enable faster, cheaper, and more accessible financial services.
What are Digital Dollars and Stablecoins
The concept of a “digital dollar” that exists purely electronically has gained significant interest in recent years. Stablecoins attempt to address the volatility seen in cryptocurrencies like Bitcoin by pegging to fiat currency. Tether’s USDT became the first widely used stablecoin.
However, regulatory uncertainty and questions around reserves have led some to call for increased oversight of stablecoins. FDUSD seeks to establish trust by obtaining federal approval and providing transparency into its dollar reserves.
Launch of First Digital USD
On June 1, 2023, FD121 Limited, a branch of the Hong Kong-based finance company First Digital Limited, introduced the First Digital USD (FDUSD). This introduction happened soon after Hong Kong adopted the “Guiding Principles for Virtual Asset Trading Platform Operators.”
In response to ending support for its own stablecoin, BUSD, Binance recommended its users to switch their holdings to FDUSD. This advice was part of a notice released on September 1, 2023. Binance’s decision is a step towards phasing out BUSD by February 2024.
FDUSD was made available on the Ethereum and BNB Chain, adhering to the ERC20 and BEP20 protocols, respectively. These platforms ensure transaction validation and record integrity through proof of stake (PoS) or proof of staked authority (PoSA) methods, offering a secure and transparent environment for users.
First Digital Limited promotes FDUSD as a versatile stablecoin that facilitates the implementation of financial agreements, custodial services, and insurance operations directly, without the need for third-party intermediaries.
FDUSD Reserve
The FDUSD cryptocurrency is pegged to the United States dollar, ensuring each FDUSD coin is equivalent to one USD or assets equal in value to the USD. Its backing includes secure investments like U.S. treasury bills that are short-term, alongside cash and similar assets in U.S. dollars. These assets are safeguarded by First Digital Trust Ltd., a recognized trust company based in Hong Kong, and are also stored with banking entities in Switzerland, Australia, and Hong Kong.
Every month, First Digital Labs issues a detailed report on the reserve’s composition, providing insights into the assets held. Furthermore, an independent auditing firm conducts monthly verifications and validations of these assets, offering a layer of transparency and assurance to those who own FDUSD by keeping them informed about the state of the stablecoin’s reserves.
Use Cases
As a regulated stablecoin, FDUSD provides a bridge between traditional finance and decentralized crypto networks.
Potential uses include faster cross-border payments, blockchain-based financial apps requiring dollar-pegged liquidity, investing without volatility, merchant payments, and transferring funds between centralized and decentralized exchanges.
FDUSD is designed for usability by fintech companies, banks, businesses, and ordinary consumers alike thanks to oversight by U.S. regulators.
FDUSD vs Other Stablecoins
Unlike Tether’s USDT, FDUSD’s dollar reserves are segregated from corporate assets and transparently verifiable. And as a true stablecoin, it avoids the volatility seen in algorithmic options like TerraUSD.
FDUSD balances oversight with accessibility, unlike fiat-backed coins like Binance USD that are still crypto-native. Stablecoins that rely on crypto collateral introduce vulnerabilities not present with FDUSD.
Future Outlook
The First Digital USD (FDUSD) stablecoin, bolstered by Binance—one of the crypto world’s titans—demonstrates a robust trustworthiness. This is further highlighted by its striking capital growth, ballooning 90-fold from $20 million to $1.8 billion in under half a year, including a nearly threefold increase in the past month alone.
Yet, its reliance on regulatory compliance and Binance’s endorsement positions it as a centralized entity, fully managed by its creators who adhere closely to regulatory directives. Some retail investors view this centralized control as a potential risk, preferring the decentralized ethos traditionally associated with cryptocurrencies. Conversely, these same characteristics may appeal to institutional investors, potentially fuelling significant growth for both FDUSD and the broader cryptocurrency landscape.
A notable concern is FDUSD’s relatively brief history in the market, less than six months, making its long-term reliability still a question mark. Unlike its predecessors such as USDT, USDC, DAI, and even BUSD, FDUSD has not been through major market turbulences, keeping the risk of deviating from its dollar peg somewhat elevated.
Despite these challenges, FDUSD’s liquidity is impressive, outperforming others like DAI and TrueUSD. Its trading volume has hit over $3.5 billion, half that of the USDC, the second-largest by capitalization, indicating a strong market presence despite its short existence.
