Circle's former growth lead is launching a crypto exchange for its USDC stablecoin. It chooses to settle trades with PayPal's emerging stablecoin over other, more established options.
A former Coinbase executive who was once the growth lead of stablecoin giant Circle is launching a new crypto exchange.
Exchange launches are not uncommon. But it's made an unusual choice: it exclusively settles trades using PayPal's PYUSD stablecoin, a market underdog.
“By making PYUSD the default stablecoin on our exchange, we are becoming a key part of the PYUSD ecosystem,” said Vishal Gupta, founder of TrueX, a new exchange. DL News.
PayPal's dominant position in the payments space outside of crypto was a key factor in choosing the dollar-pegged stablecoin over other options, Gupta said.
Stablecoin-Native
TrueX's launch comes after more than a year of behind-the-scenes development.
It's a “stablecoin-native” exchange, meaning all trades will eventually settle to stablecoins instead of US dollars or other fiat currencies held in bank accounts.
This contrasts with US market leader Coinbase. It has grown into a $40 billion business settling crypto trades in US dollars or Circle's USDC, which are interchangeable on exchanges.
Coinbase's model minimizes the risks that plague other crypto exchanges by allowing traders to pool several stablecoins for collateral or pool their trades with volatile assets like bitcoin, Gupta said.
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“We are taking this evolution a step further,” Gupta said. “We use the multi-legged orders settled by PYUSD as the core.”
To facilitate this system, TrueX has partnered with Paxos, a New York-based firm that issues PYUSD on behalf of PayPal.
The arrangement comes after the US Securities and Exchange Commission ended Trial of Paxos in June. The regulator said it will not pursue enforcement action against Paxos over the issuance of Binance's BUSD stablecoin.
But choosing PYUSD can be risky – especially for a new exchange looking to create a highly competitive market.
PYUSD, the seventh-largest stablecoin, has a supply of just over $730 million.
Market leader Tether's USDT commands a supply of more than $118 billion. Circle's stablecoin is also 47 times PYUSD, with Gupta leading the company's stablecoin growth for over a year.
Choosing a small stablecoin means less liquidity – which leads to worse prices for traders. PYUSD also has fewer DeFi integrations compared to other stablecoins.
Investors beware
Gupta said that settling trades in a single stablecoin increases the security of the exchange by separating asset custody and trade execution.
But there is no guarantee that users will prefer the TrueX system over more established exchanges.
Crypto investors are often wary of smaller exchanges and prefer those with a proven track record. In the wake of FTX's 2022 collapse, consumers and capital Integrated On Binance, the largest crypto exchange worldwide.
However, there are those willing to take a chance on TrueX.
The exchange has already secured $9 million in seed funding. Investors include RRE Ventures, Reciprocal Ventures, Paxos, Acapplice Blockchain, Hack VC, Solana Foundation and Aptos.
Gupta's experience Potential clients can also be turned away. In addition to holding executive roles at Coinbase and Circle, he spent eight years at Goldman Sachs.
TrueX plans to kickstart the exchange using incentives such as discounted trading fees to attract institutional clients.
It will also give top volume traders $1 million in company equity, similar to how DeFi Protocols incentivize users by awarding governance tokens.
There is Tim Craig DL News' Edinburgh-based DeFi correspondent. Reach out with tips at [email protected].
Related TopicsPAYPALSTABLECOIN
