Cardano, the Layer-1 blockchain, has introduced its first fully fiat-backed stablecoin, USDM, which aims to enter the highly competitive stablecoin market dominated by Tether (USDT) and Circle (USDC), with a total market value of $146 billion.
USDM, founded by Mehen Finance, was launched on March 17 and allows users to mint or redeem the stablecoin using the United States dollar. It differentiates itself from other Cardano-based stablecoins like DJED and iUSD, which are algorithmic and synthetic-based.
The launch of USDM on Cardano was not without challenges. Mehen founding partner Matthew Plomin revealed that the process was delayed due to issues with U.S. banks in 2023. Mehen released its white paper in November 2022, stating that a U.S. dollar-backed stablecoin would fulfill a crucial need for Cardano users. The original plan was to launch USDM in 2023, but the closure of Silicon Valley Bank, Silvergate, and Signature Bank in March 2023 caused unexpected setbacks.
Plomin disclosed that Mehen had initially partnered with Cross River, but when the bank teamed up with Circle, they cut ties with Mehen. This turn of events forced Mehen to find an alternative solution, leading them to utilize fintech firm Plaid’s services for minting and burning U.S. dollars for USDM. Plaid acts as a payment transfer network between major U.S. banks like Bank of America, Chase, and Wells Fargo, facilitating transactions in the fintech and cryptocurrency sectors.
Mehen is now actively pursuing a money transmitter and virtual asset service provider license to expand its services in the United Kingdom and Europe. Additionally, they have received interest from two dozen firms that plan to integrate USDM on their platforms, including lending and borrowing protocols and decentralized exchanges.
The launch of USDM on Cardano has been met with enthusiasm by the Cardano community, with Jaromir Tesar describing it as a “major milestone” for decentralized finance on the network.
In the stablecoin market, USDM faces fierce competition from established players like USDT and USDC, which have market caps of $103.1 billion and $30.8 billion, respectively. However, on the Cardano network, USDM doesn’t currently have to contend with these stablecoins as they are not transferable via the Cardano blockchain.