Huobi, the Singapore-based cryptocurrency exchange, has just launched a new solution that enables users to switch between different types of fiat currency-pegged cryptocurrencies, or stablecoins, in event of market fluctuations.
Announcing the solution, called HUSD, at a press conference on Friday, the firm said Paxos’ PAX, TrustToken’s TUSD, Circle’s USDC and the Gemini exchange’s GUSD tokens are being supported initially.
Previously, users that deposited, say, GUSD, were limited to taking out GUSD or converting it to a non-pegged cryptocurrency such as bitcoin. Using HUSD, though, they can deposit one of the four stablecoins and withdraw a different stablecoin of their own choice.
Huobi’s chief operating officer, Robin Zhu, further explained that HUSD is not itself a stablecoin or protocol, but rather, a medium that facilitates exchange between the different stablecoins.
For instance, if a user deposits 10 PAX to the exchange, the user’s account will be credited with 10 HUSD. When withdrawing these assets after trading, the user can choose to withdraw, say, 10 GUSD, which will be drawn from the pool of GUSD that other users have deposited to the platform.
However, whether the user can withdraw all their assets in a single stablecoin depends on there being sufficient supply in the pool.
Zhu said he expects the platform could potentially run into a situation where a stablecoin may not have a big enough pool to cover all withdrawal requests. “In those circumstances, we will buy back these stablecoins from their issuers into the pool,” he said.
As such, Huobi will not list trading pairs for every stablecoin it supports against major crypto assets such as bitcoin and ethereum. Instead, the company will open trading pairs for HUSD against those cryptos in the coming weeks.
Notably, the most established stablecoin to date, tether (USDT) – one that has been at the center of rumors over the reliability of its U.S.-dollar peg – is not included in the pool. Instead, Huobi will open a trading pair for HUSD against USDT on Oct. 22.
Zhu explained that the primary reason for that is due to concerns over whether USDT can meet its compliance requirements.
“Tether doesn’t have a reliable and regularly released auditing report to prove its U.S. dollar reserve.”
As CoinDesk reported in June, Tether did release a document aimed to prove its U.S. dollar reserves, but it was prepared by a law firm not an independent auditing company.
According to Zhu, HUSD allows users to withdraw the stablecoin asset they consider is most stable, since the market has recently seen several assets wavering from their pegged fiat currency’s value.
“The market could see over hundreds of stablecoins in the future,” he noted. “While we welcome the integration of more regulated stablecoins, we hope the use of HUSD could help maintain the stability of this market.”
Huobi started accepting PAX, TUSD, USDC, GUSD from 8:00 UTC on Friday, having announced the move earlier this week.