After the Hong Kong government passed legislation on the cryptocurrency market, a new stablecoin named FDUSD was issued, meeting the legal framework in this country. What is FDUSD? Why do we need FDUSD? What makes this stablecoin special that it is supported by Binance?
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What is FDUSD?
FDUSD (First Digital USD) is a stablecoin issued by FD121 Limited, a subsidiary of First Digital. FDUSD was launched after Hong Kong enacted the “Guidelines for Virtual Asset Trading Platform Operators” on June 1, 2023.
According to First Digital, FDUSD is pegged 1:1 to the US dollar (USD) or assets of equivalent value. FDUSD reserves are held by financial institutions under the control of First Digital.
FDUSD is programmed to automatically execute transactions, financial contracts, ensure margin operations, and insurance without the need for intermediaries.
What is First Digital?
First Digital (or First Digital Trust) is a financial trust and supervision service provider, established in 2019 in Hong Kong.
First Digital was founded to connect users from traditional markets to the cryptocurrency market using web3 technology for asset tokenization, custody, trading, etc.
Prominent products of First Digital include the First Digital Mastercard, providing features and benefits of a standard credit card. It can be used for online and offline shopping globally, offering safe, flexible, and convenient payment options.
In 2022, the organization was honored as one of the top Emerging Giants in Hong Kong (Source: KPMG and HSBC’s “Emerging Giants in Asia Pacific” report).
The Context of FDUSD’s Launch
Hong Kong is an international financial center, known for its developed banking system and professional financial trusteeship environment.
Additionally, blockchain and cryptocurrency businesses in this country have established a stable technology infrastructure platform.
On June 1, 2023, Hong Kong became one of the first Asian countries to pass the “Guidelines for Virtual Asset Trading Platform Operators” law, legalizing cryptocurrencies. This includes licensing for trading platforms, regulations on asset custody, cybersecurity measures, etc., for cryptocurrency activities in Hong Kong.
In this context of clear legal regulations and a developing stable infrastructure, First Digital launched the stablecoin FDUSD.
According to First Digital Labs, the company worked with regulatory bodies to ensure that FDUSD meets the legal framework of Hong Kong.
Use Cases of FDUSD coin
What is FDUSD? Like other stablecoins, FDUSD was introduced to address the need for stable assets for users, thanks to its 1:1 pegging with the US dollar (USD).
Additionally, FDUSD not only serves as a bridge between traditional and crypto markets but also acts as a currency for storage, value conversion, trading, or interaction with DeFi.
Owners of FDUSD can also increase profits through services like lending, borrowing, farming, etc. Specifically, FDUSD can be used in the following cases:
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Trading and Payments: FDUSD can be used as a payment method in daily transactions or for transferring money between individuals and organizations.
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Value Storage: FDUSD can be used as a means of storing value and hedging against market volatility.
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Value Conversion: FDUSD can be traded and converted into other cryptocurrencies of equivalent value with low transaction fees.
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Participation in TradFi: Some TradFi institutions have accepted stablecoins as payment. In the future, the project expects FDUSD to become an alternative to USD or equivalent fiat currencies for payments to save conversion fees.
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Participation in DeFi Activities: Users can use FDUSD to interact with DeFi activities such as staking, farming, lending, and borrowing.
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Escrow Activities: Users can deposit FDUSD as collateral for escrow activities to limit price volatility and security risks.
Challenges of FDUSD in the Stablecoin Market
Although backed by Binance and meeting the clear legal framework in Hong Kong, FDUSD will still face its own challenges.
One of the biggest problems that stablecoins in general and FDUSD in particular have to face is the ability to maintain the peg. This is mainly determined by the amount of money in the reserve (also known as the Reserve Fund).
Specifically, the reserve needs to have liquidity equivalent to the number of FDUSD minted so users can easily convert the stablecoin into fiat currency.
Additionally, for FDUSD’s reserves, whether the reserve report is published and transparent is also a concern for users.
Binance Supports FDUSD
Although FDUSD is a new stablecoin with a small market cap, it has received quite a bit of support from Binance.
Previously, Binance USD (BUSD) was a stablecoin mainly operating on the BNB Chain and backed by Changpeng Zhao – CEO of Binance.
However, from February 2023, after the SEC continuously brought charges against Paxos – the company issuing BUSD, Binance tried to distance itself from the stablecoin and collaborated with other stablecoins like TUSD, and now FDUSD, which fully complies with the legal framework in Hong Kong.
On the X platform (formerly Twitter), Binance’s CEO (CZ) announced the listing of FDUSD:
First Digital, a Hong Kong licensed trust company, launches a new USD pegged stablecoin (FDUSD), on #BNB Smart Chain.
— CZ ???? BNB (@cz_binance) June 1, 2023
On July 26, 2023, Binance listed FDUSD along with a zero-fee trading program, encouraging users to use this stablecoin.
Some investors believe that Binance’s support could make FDUSD a potential replacement for BUSD, similar to how Binance backed TUSD.
This prediction is based on the fact that BUSD had previously faced issues with maintaining its price, at times dropping to $0.938. Additionally, on February 13, Paxos announced the cessation of minting BUSD.
In the past, Binance’s support for zero-fee trading with TUSD led to a significant increase in the market cap of this stablecoin, from 500 million TUSD to 3 billion TUSD. Therefore, Binance’s support for FDUSD with zero-fee trading is also expected to help this stablecoin grow in the future.
In addition to zero-fee support, Binance also allows users to:
- Use FDUSD to participate in the auto-invest feature.
- Join the launchpool by staking FDUSD. Previously, this feature only allowed BUSD and TUSD.
*Auto-Invest: a product that helps users accumulate assets through staking a determined amount.
FDUSD Token Information
- Token name: First Digital USD
- Ticker: FDUSD
- Blockchain: Ethereum, BNB Chain
- Token Standard: ERC-20, BEP-20
- Token contract:
ERC-20: 0xc5f0f7b66764F6ec8C8Dff7BA683102295E16409
BEP-20: 0xc5f0f7b66764F6ec8C8Dff7BA683102295E16409
- Token type: Stablecoin
- Total Supply: 305,783,747 FDUSD
- Circulating Supply: 305,783,747 FDUSD
Frequently Asked Questions about FDUSD
FDUSD is issued and managed by First Digital.
According to the project, FDUSD is pegged at a 1:1 ratio to USD and is backed by reserves held by financial institutions under the control of First Digital, allowing holders to redeem at any time.
As of now, FDUSD is issued on two chains: BNB Chain and Ethereum Chain, corresponding to the BEP-20 and ERC-20 token standards, respectively.
The transfer speed of FDUSD is not fixed and depends on two factors: (1) – The speed of the blockchain platform on which FDUSD is issued. (2) – The order in which transactions are executed.
As announced, FDUSD is currently being traded in pairs with other tokens/coins as follows: FDUSD/USDT, FDUSD/BUSD, BNB/FDUSD, USDT/FDUSD.
What is FDUSD? FDUSD, a stablecoin backed by Binance and managed by First Digital, meets Hong Kong’s legal requirements and offers a stable solution in the cryptocurrency market. Pegged 1:1 with the USD and supported on multiple blockchains such as Ethereum and BNB Chain, FDUSD opens new opportunities for trading and payments, although it faces significant challenges in maintaining value stability and transparency in reserve management.
