Cardano, the Layer-1 blockchain, has recently introduced USDM, a fully fiat-backed stablecoin, making it the first of its kind on the platform. With a stablecoin market worth $146 billion, dominated by Tether (USDT) and Circle (USDC), the launch of USDM on March 17, founded by Mehen Finance, offers Cardano users the ability to mint or redeem USDM using the United States dollar. Unlike other stablecoins on the Cardano network, such as DJED and iUSD, which are algorithmic and synthetic-based, USDM provides a 1:1 fiat-backed mechanism.
Mehen’s journey to launching USDM on Cardano was not an easy one, as it faced delays due to issues with US banks in 2023. The firm released its white paper in November 2022, stating that a US dollar-backed stablecoin would meet the demands of Cardano users. However, the plans were disrupted when Silicon Valley Bank, Silvergate, and Signature Bank closed down in March 2023. Mehen’s partnership with Cross River, the bank it was working with, ended when the bank teamed up with Circle, the second-largest stablecoin firm, leaving Mehen without a banking partner. As a result, Mehen turned to fintech firm Plaid to mint and burn US dollars for USDM.
Plaid, a payment transfer network, facilitates transactions between large US banks like Bank of America, Chase, and Wells Fargo, supporting fintech and cryptocurrency products. Mehen integrated Plaid’s services in August 2023, allowing users to deposit USD to mint USDM and burn USDM to receive USD. In addition, Mehen is actively pursuing a money transmitter and virtual asset service provider license to expand its services in the UK and Europe.
The launch of USDM has generated optimism within the Cardano community, with members considering it a significant milestone for decentralized finance on the platform. Several institutions, ranging from lending and borrowing protocols to decentralized exchanges, have expressed interest in integrating USDM on their platforms. Mehen expects the onboarding process for these institutions to take one to two days, meaning USDM will gradually become available on-chain starting from the week of the 18th.
To ensure transparency and security, the issuance and management of USDM will be governed by smart contracts and decentralized oracles, according to Mehen. Despite the crowded and competitive stablecoin market, with USDT and USDC holding the largest market caps of $103.1 billion and $30.8 billion, respectively, USDM has a unique advantage on the Cardano network. Currently, other stablecoins cannot be transferred via the Cardano blockchain, giving USDM a shielded position on the platform.