Cardano, the Layer-1 blockchain, has recently introduced its first fully fiat-backed stablecoin, USDM, joining the $146 billion stablecoin market dominated by Tether (USDT) and Circle (USDC).
USDM, launched on March 17 by Mehen Finance, allows users to mint or redeem the stablecoin using the US dollar. Unlike other stablecoins on Cardano such as DJED and iUSD, which are algorithmic and synthetic-based, USDM is fully fiat-backed.
The launch of USDM on Cardano was not without its challenges. Mehen founding partner Matthew Plomin explained that there were delays due to issues with US banks in 2023. The white paper for the stablecoin was released in November 2022, with the aim of providing a much-needed service to Cardano users. However, the closure of Silicon Valley Bank, Silvergate, and Signature Bank in March 2023 caused disruptions. Additionally, Mehen’s banking partner, Cross River, ended its collaboration with the company when it teamed up with Circle, a major stablecoin firm.
To overcome these obstacles, Mehen now utilizes the services of fintech firm Plaid to mint and burn US dollars for USDM. Plaid acts as a payment transfer network between major US banks, such as Bank of America, Chase, and Wells Fargo, facilitating transactions for fintech and cryptocurrency products.
Mehen is also actively pursuing licenses as a money transmitter and virtual asset service provider in the UK and Europe to expand its services. The company has garnered support from over 2,000 partners who plan to integrate USDM on their platforms, ranging from lending and borrowing protocols to decentralized exchanges.
The issuance and management of USDM will be governed by smart contracts and decentralized oracles, ensuring transparency and security, according to Mehen.
The launch of USDM has been well-received by the Cardano community, with members considering it a significant milestone for decentralized finance on the network.
USDM enters a competitive market for stablecoins, with USDT and USDC holding the largest market caps of $103.1 billion and $30.8 billion, respectively. However, on the Cardano network, USDM faces no direct competition from these stablecoins as they are not currently transferable via the Cardano blockchain.