USDC on Cardano: Weighing Up Growth vs. Decentralization

• There are growing calls to bring USDC to the Cardano chain.
• Proponents of USDC integration argue that it would supercharge the Cardano ecosystem.
• USDC integration is costly and would require major protocol and philosophical changes. 

Stablecoins have become a crucial pillar of the cryptocurrency industry, offering users a way to circumvent volatility seamlessly on and off-ramp. Yet, with no major USD-backed stablecoins available on Cardano, calls for USDC integration grow progressively louder, even if that poses potential conflicts with Cardano’s guiding principles around decentralization.

The Argument for USDC on Cardano

Despite potentially sacrificing elements of decentralization, some Cardano advocates point to the benefits of USDC integration. Dan Gambardello, the founder of Crypto Capital Venture, firmly endorsed USDC integration on the basis that it “would supercharge Cardano.”

Gambardello argued his case by highlighting the many advantages USDC integration could bring, such as easier on-ramping and widening Cardano’s accessibility to “the masses,” greater interoperability with other chains, new DeFi innovations, and the increased market confidence that comes with deploying a well-known stablecoin.

In July 2023, Charles Hoskinson stated that the Cardano Foundation had tabled talks with USDC operator Circle regarding the deployment of USDC on Cardano. However, Hoskinson mentioned that the protocol in its current guise could not facilitate the functions that Circle wanted around freezing and reversing funds. Additionally, the Foundation was unwilling to pay the “eight-figure” pay-to-play fee being asked by Circle.

“A) It’s difficult to deploy on UXTO and give all the things that they [Circle] want to do like freezing and reversibility. So it requires extra development effort and time to reason through. And B) the Foundation didn’t want to do pay-to-play,” explained Hoskinson. 

Although Hoskinson is unwilling to pursue USDC deployment further, Gambardello suggested that it could still happen by using the Catalyst program to fund a USDC proposal. Rather than hinder decentralization, Gambardello argued that such a proposal would advance decentralization as Catalyst’s voting mechanism equates to users deciding on the future direction of the chain. 

The Case Against

As much as Gambardello’s proposal encourages a decentralized grassroots response, the ability to censor transactions remains the antithesis of decentralization. Moreover, given that Cardano native tokens have the same properties as ADA, it’s unclear how USDC could be accommodated on Cardano without significant protocol changes.

Cardano staking pool operator “St₳kΣ with Pride” and Cardano Yoda endorse the idea of USDC integration. Still, both maintain that Circle would have to compromise and forgo their demands for freezing and reversal functionality. However, some, including MyUSD operator Mynth, doubt that Circle would accommodate a censorship-resistant USDC on Cardano.

Good luck to those negotiators. There have been discussions in the past and Circle has been very firm about their requirements for integration.

— Mynth (@_mynth_) January 15, 2024

During the previous Catalyst Fund 10 round, 1,467 projects pitched their ideas for a share of 46.6 million ADA, with the community voting to approve 192 projects. Although the funding for Catalyst Fund 11 was increased to 50 million ADA (US$ 27 million), it’s unknown whether this is sufficient to cover Circle’s “eight-figure” demand or if spending the entire treasury on a single proposal is justified. 

On the Flipside

• USD-backed Cardano native stablecoin Mehen is scheduled to launch in March 2024 but does not have the brand recognition or liquidity of USDC or USDT.
• Hoskinson prefers crypto-backed algorithmic stablecoins, as he envisions a future without fiat money.
• USDC is already widely deployed on 15 different blockchains, including Algorand, Base, and TRON.

Why This Matters

The calls for USDC integration underscore the Cardano community’s desire for growth and more mainstream appeal. However, onboarding USDC could force compromises around decentralization principles. This tension between ideology and pragmatism reveals a diversion in community aspirations for Cardano’s future direction.

Read about what’s happening next for Cardano here:
Cardano Roadmap: What’s Next for ADA?

Find out more on the fight for fairer compensation by FTX creditors here:
FTX Creditors Turn Up Heat in Fight For Fairer Payout