In June 2023, the stablecoin market saw the introduction of a new coin - FD121 Limited, a Hong Kong-based financial organization and subsidiary of First Digital Limited, released the cryptocurrency First Digital (FDUSD). In this new material, we explore its attractiveness to investors, prospects, and the key features of this new digital asset.
What is FDUSD?
Launching a stablecoin in 2023 to impress the crypto market isn't as simple as it may seem. Recall that the first stable cryptocurrency, Tether (USDT), backed by the U.S. dollar, emerged back in 2015. Eight years ago, this blockchain asset, with a value unaffected by daily fluctuations, marked a significant breakthrough for the crypto industry.
Similar to Tether, First Digital USD is a dollar-backed stablecoin. This means that the liquidity of this asset is tied to the U.S. dollar, a relatively stable element in the traditional financial market.
Currently, the FDUSD stablecoin is available on the Ethereum and BNB Chain networks.
FDUSD can be purchased or exchanged on various cryptocurrency trading platforms. For example, on the SimpleSwap crypto exchange, it can be exchanged for more popular cryptocurrencies like BTC or ETH (or any of the other 1000 available options). This aggregator platform has gained popularity over the years for its user-friendly interface, a wide selection of cryptocurrencies for exchange, security, and fast transactions.
Where can FDUSD be used?
When a new cryptocurrency emerges, entrepreneurs naturally wonder how and where to use it. We've identified several use cases for the new FDUSD stablecoin:
- As a payment method for cross-border transfers.
Conducting financial transactions with stablecoins is advantageous because they generally incur lower transfer fees compared to traditional fiat currencies. The backing of FDUSD by the highly liquid U.S. dollar makes it a convenient tool for long-term investments.
- In the De-Fi sector.
The decentralized application space requires investment for stable operation and development, and stablecoins are well-suited for this role.
- As a hedge against volatility.
Hedging or insuring one's assets is a crucial step in entrepreneurial activities, especially when dealing with cryptocurrencies. FDUSD can already be used as a hedge against market fluctuations.
FDUSD as a link between fiat and crypto
Cryptocurrencies were originally created for faster, more convenient, and secure (due to the open system) money transfers directly from one person to another. When the traditional financial system ceased to fully satisfy users (regulatory bodies increased service fees, imposed sanctions limiting service operations, etc.), people sought an alternative solution - and Satoshi Nakamoto provided it.
Since cryptocurrency funds couldn't achieve perfection (primarily due to increased volatility and extreme instability of new systems), complete abandonment of fiat was not possible. The idea emerged to create a product that incorporates the best features of both cryptocurrencies and fiat. Stablecoins became that product, quickly gaining the love of investors.
New stablecoins like FDUSD demonstrate updated security systems and functionality. All FDUSD reserves are stored in separate accounts. Users acquiring this new asset are offered new tools for diversification (smart capital distribution).
The largest cryptocurrency exchange, Binance, is actively encouraging its users to convert their assets into FDUSD and supplement their cryptocurrency portfolios with it. Crypto analysts predict a bright future for this new stable coin.
The future of FDUSD
The Binance platform plans to cease supporting its native token BUSD in February 2024. FDUSD is being considered as its replacement.
According to official data, one of the most reliable stablecoins with a total capitalization of over $23 billion will indeed leave the cryptocurrency market this winter. This decision is linked to the "destructive actions" of the issuing company, pressuring the exchange's clients and urging them to mandatory convert part of their assets into BUSD in 2022. Technical errors in the company's financial management were also discovered, leading to the overall decision to discontinue BUSD.
Risks of using FDUSD
Certainly, the FDUSD stablecoin is not a perfect solution to all cryptocurrency issues. Its usage, especially in the early stages, comes with the following risks:
- Risk of stability loss
The stability of such coins is ensured by adhering to storage conditions and using reserves. If the issuer cannot redeem FDUSD at face value at some point, the use and liquidity of the coin will be in question.
- Security risks
FDUSD does not provide 100% protection against hacking attacks or technical failures. It is more secure due to its connection to a stable asset (protection against price fluctuations) but is still vulnerable like any other crypto asset.
- Risk of regulatory issues
Currently, regulatory issues regarding stablecoins remain unresolved. The legislation of many countries has not reached a consensus on how to approach and control the activities of such organizations. Currently, all FDUSD operations are conducted without hindrance, but there are no guarantees that laws restricting this activity won't be enacted.
In conclusion, the successful entry of the new stablecoin FDUSD into the crypto market has taken place. The new cryptocurrency has great potential, has already gained support from the largest crypto exchange, and is rapidly building its audience.
If you want to learn more interesting facts about crypto then check out our blog! You might like our articles “How to Pick the Blockchain When Buying a Stablecoin” and “Stablecoin War”.
The easiest way to buy, sell or exchange coins is to use SimpleSwap services.
SimpleSwap reminds you that this article is provided for informational purposes only and does not provide investment advice. All purchases and cryptocurrency investments are your own responsibility.
