The financial technology startup, Figure Technologies Inc., founded by former CEO of SoFi Technologies Inc., Mike Cagney, is seeking approval from U.S. regulators to issue an interest-bearing stablecoin.
This initiative represents a novel attempt to create a new class of stablecoins with federal legitimacy. If successful, Figure would be the first to offer a stablecoin regulated as a security in the United States. The company filed a draft registration statement with the Securities and Exchange Commission (SEC) in October under the name of Figure Certificate Co., a subsidiary of Figure.
Figure aims to register the stablecoin as “face-amount certificates,” a type of fixed-income security, and issue it using blockchain technology. If approved, it will be available to both retail and institutional investors in the United States.
Figure’s digital asset subsidiary, Figure Markets, plans to raise $50 million in a funding round with a valuation of $250 million, excluding the amount raised. Jump Crypto could lead the investment. The funds will support the operations of Figure Markets.
Figure Proposes a Stablecoin That Generates Interest, Has High Liquidity, and Credit Quality
Unlike dominant stablecoins in the market, such as Tether Holdings Ltd.’s USDT and Circle Internet Financial’s USD Coin, which do not generate interest, Figure seeks to offer an alternative. The company expects its stablecoin to be used for payments and transaction settlements, attracting those interested in an instrument that generates returns backed by highly liquid and high-quality credit assets.
Figure’s proposal states that its stablecoin will be redeemable at 1 cent per certificate, meaning a $1 payment will require the transfer of 100 certificates. Interest will accrue daily and be paid monthly to the holder. These interest payments will be derived from reserves that include treasury, commercial paper, corporate debt, among other assets.
Approval is not guaranteed, and the application process is likely to intensify debates on how stablecoins should be regulated in the United States. Despite previous attempts by U.S. lawmakers to introduce bills on stablecoins, the regulation of this sector is a priority for President Joe Biden.
Figure is also filing a registration application for another product, called Figure Installment Certificates, designed for investors interested in earning returns while holding assets in digital format. Founded in 2018, Figure uses blockchain technology to develop financial products, including loan origination. Its lending arm, LendCo, has been collaborating with banks on planning an initial public offering (IPO), according to reports from last November.