Cryptocurrency company Circle is becoming the first issuer of USDC, a new crypto "stablecoin" it helped develop.

"Stablecoins" are cryptocurrencies pegged to real-world assets to give them price stability. USDC is pegged to the dollar.

USDC is one of a number of stablecoins that have been created recently. There are now over 50 projects building stablecoins.

Circle, the crypto company backed by Goldman Sachs, on Wednesday became the first official issuer of a new cryptocurrency pegged to the dollar.

Circle will allow people to "tokenize" dollars by depositing them through an online gateway. Depositors will be given USDC — US dollar coins — in exchange. The goal is to create a digital currency that has the price stability and confidence of the dollar but can "move at the speed of crypto," Circle CEO Jeremy Allaire told Business Insider.

USDC is a new cryptocurrency developed by Centre.io, a startup funded and spun out of Circle. USDC is open source and Circle will follow the standards developed by Centre.io.

'Stablecoins' are booming

USDC is one of a number of so-called "stablecoins" — cryptos pegged to a currency or asset — that have sprung up in the last few years.

A report on the stablecoin market also released on Wednesday by crypto wallet provider Blockchain said there are now over 50 projects in development. Around 20 have launched and have a market value of around $3 billion. Perhaps the most high-profile recent project is Gemini dollar, backed by the Winklevoss twins.

"We’ve had a bit of a Cambrian explosion over the last 12-18 months," Garrick Hileman, the report's author, told Business Insider. The number of stablecoins in development has boomed over the last 18 months. Blockchain Allaire told BI by phone this week: "So much of the promise of blockchain infrastructure really requires that there is a fiat token model.

"Everything from tokenized debt and lending, to securities and investment contracts, to tokenized property — all of these things that are so powerful. If you don’t have the ability to denominate and collateralize transactions in fiat then it makes the use cases for those much more difficult. It’s really a fundamental building block for all of the excitement that exists around crypto."

Hileman said: "If you’re lending in a volatile cryptocurrency like bitcoin you’re really putting yourself in a very vulnerable position.

"For savings, for lending, for payments — and these are categories worth trillions of dollars — stablecoins could make some real headway where bitcoin has struggled to gain a significant foothold."

A 'trustworthy' Tether

Circle, which operates a range of crypto services, has raised over $200 million from backers including Goldman Sachs and IDG Capital. The Boston-based startup isn't investing any of its own money in printing USDC but Allaire said he expects to see "very significant demand" from third parties.

30 industry partners have agreed to support USDC, Circle said in a blog post on Wednesday. They include crypto exchanges such as OKCoin and CoinEx, crypto lending startups such as BlockFi and MoneyToken, and wallets such as Coinbase.

Allaire also pointed to the success of Tether as evidence for stablecoin demand in the market. Tether is a stablecoin developed by a company closely associated with major crypto exchange Bitfinex. It is pegged to the dollar and has become a key mechanism for offering dollar liquidity to customers of crypto exchanges worldwide. Blockchain's report on Wednesday said Tether currently represents 98% of all stablecoin trading value and 93% of all market value.

"There already exists a dollar-backed stablecoin in the market that is one of the highest liquidity crypto assets in the world, which is Tether," Allaire said. "It has a daily trading velocity of around $3 billion. This is already something that’s critical."

However, Tether has faced repeated criticism of the auditing of its dollar reserves, as well as claims of manipulation. Allaire called Tether "problematic" and said: "From an industry perspective, there’s an enormous amount of interest in a trustworthy stablecoin that the ecosystem can use."

Circle acquired Poloniex, a top 30 crypto exchange globally, earlier this year. Poloniex uses Tether to offer dollar exposure to customers. Allaire said he expected the platform to transition to only using USDC for this function in future.

"Obviously we want to see an orderly transition in the market," Allaire said, declining to give a timeframe for the transition.

'We can rebuild the global economic system on top of this infrastructure'

"The starting use case it people who are effectively using fiat stable coins as a kind of mechanism in the crypto capital markets," Allaire said of USDC.

"But I think the next layer, and so much of what we’re excited about, is how this becomes part of the broader market infrastructure that’s needed to rebuild the financial system on top of crypto, which is what so many of us are here for. We genuinely see that we can rebuild the global economic system on top of this infrastructure.

"Really the opportunity is to move from paper-based, English language contracts to codified contracts that allow us to represent all forms of assets. As we like to say, the tokenization of everything."

Centre.io requires USDC issuers meet certain compliance standards, aiming to ensure trust in the system. As part of this, Circle will work with four banking partners who will hold the dollar reserves customers deposit. These reserves will be audited monthly by Grant Thornton to make sure all USDC is backed one-to-one by dollars. Allaire said Circle is only naming one of its banking partners for now, US Bancorp Asset Management.