Fidelity Digital Assets is launching a stablecoin, FIDD, on the Ethereum blockchain in February, backed 1:1 by the US dollar.
Fidelity Digital Assets, a subsidiary of Fidelity Investments, is set to introduce its own stablecoin, dubbed FIDD, on the Ethereum blockchain in early February. This move, reported by Bloomberg, aims to meet increasing client demand and enhance the utility of blockchain financial instruments.
The FIDD stablecoin will be pegged 1:1 to the US dollar, allowing users to convert it at par on Fidelity's platforms, including Fidelity Digital Assets and Fidelity Crypto, as well as on major cryptocurrency exchanges.
Mike O'Reilly, president of Fidelity Digital Assets, stated, "This is truly the next step in the evolution of our digital asset platform." The stablecoin is designed for both institutional trading settlements and retail on-chain payments, enabling seamless transfers across the Ethereum mainnet and integration with the DeFi ecosystem.
Fidelity will back FIDD with cash, cash equivalents, and short-term US Treasury bonds, in compliance with the Genius Act passed in July, which O'Reilly noted provided a clear regulatory framework for stablecoin reserves.
Growing Interest in Stablecoins
The launch of FIDD comes amid a surge in interest in stablecoins, as highlighted by the Financial Times which referred to it as a "stablecoin race" among banks and fintechs. The passage of the Genius Act has accelerated activity in this sector, with Circle's USDC dominating the market and Tether introducing its USAT token for American users.
Industry experts predict that the number of fiat-pegged assets could reach 100,000 by 2029, indicating the onset of a "supercycle" for stablecoins. However, this trend poses risks for traditional banks, with an increasing likelihood of billions shifting from conventional deposits to stablecoins.
The discussion around yields on stablecoins has intensified among US lawmakers, particularly regarding the Clarity Act, which seeks to prohibit interest payments on stablecoins, a move opposed by cryptocurrency leaders. Coinbase CEO Brian Armstrong criticized the revised proposal, while SkyBridge Capital's Anthony Scaramucci warned that such restrictions could disadvantage the US dollar against the digital yuan.
Despite the challenges, McKinsey and Artemis Analytics project that stablecoin transaction volumes could soar to $35 trillion by 2025, although only approximately $390 billion is currently tied to actual payments, representing a mere 0.02% of the global transaction volume.
