TrustToken Seeks To Bring Stability To Cryptocurrency Through TrueUSD Coinbr>
TrustToken, a platform for tokenizing fiat currencies and real-world assets, has created TrueUSD, a fiat-backed stablecoin that offers token-holders legally protected certificates of ownership of US dollars.
TrueUSD offers full collateral, regular auditing and legal protection for token-holders to redeem TrueUSD for fiat currency. TrueUSD aims to displace Tether as the industry-standard stablecoin.
“Today’s investors and traders need a non-volatile medium of exchange that’s credible and trustworthy,” said Rafael Cosman, Co-Founder of TrustToken. “TrueUSD enables investors to put large sums of money into crypto without immediate Bitcoin exposure and quickly hedge against volatility.”
TrueUSD is the first token on TrustToken’s TrueCoin service and uses modern custodial and escrow agreements to provide security for token-holders. This means that any institutional token-holders who pass a KYC/AML check can always redeem one TrueUSD token for one USD directly from a TrueUSD partner bank. TrueUSD connects users directly with its partner banks, and never touches the funds directly. TrueUSD will offer a series of stable cryptocurrency products, starting with TrueUSD and other traditional currencies and financial assets.
Block Tribune talked with Cosman about the new token.
BLOCK TRIBUNE: Okay, so let me start with a fundamental question: what was the origin of this idea to tie up a token with actual fiat currency?
RAFAEL COSMAN: We originally started thinking about this a while ago. I originally got into cryptocurrencies when I was studying at Stanford. I majored in computer science, focused on AI and cryptography, had a chance to work at Palantir doing AI research for crime prediction. And then later got recruited by Google Brain, which is Google’s AI research division. And then at the end of 2016, I left Google Brain, which is Google’s AI research lab and founded a company with my good friends Danny and Stephen.
And we’d had a lot of late night conversations and they had also been in the cryptocurrency space for a while. And we had a lot of late night conversations thinking about and trying to understand what was going on. And the way that we thought about it was an open source global financial system that was emerging for the first time. And it was a financial system that was more liquid than any that has ever been created before, partly because it was so … anyone can play on an exchange, anyone can create an asset. And our perspective was that one of the most valuable pieces of infrastructure of these problems that we could tackle was connecting real-world assets within emerging financial tools. And so that’s where the idea of TrustToken came from.
BLOCK TRIBUNE: Why are stable coins important?
RAFAEL COSMAN: Our perspective is that there are many applications for which cryptocurrencies are a great fit. But volatile cryptocurrencies like bitcoin and ethereum are not and that stable cryptocurrencies like TrueUSD could be the key to unlocking widespread adoption to cryptocurrencies. An example, remittances. A person in California being able to send funds to their family overseas with a bank wire can take several days, all the banks in-between charge unpredictable fees, inflated exchange rates, and with something like TrueUSD, it’s about ten times faster and a thousand times cheaper. Additionally, there are about two billion people right now that don’t have bank accounts and those people should be able to, using any laptop or any phone, they should be able to save money, send money, receive money, and that’s the promise that cryptocurrencies like bitcoin hold. But because they’re so volatile, it’s not really a great store of value because you could lose half of your savings in a week.
You need something that has all the advantages of cryptocurrencies in terms of security and portability, but isn’t as volatile as pretty much all cryptocurrencies are today. And especially when the market is doing badly as it is right now, there’s a lot of interest and a lot of need for stable cryptocurrencies like TrueUSD.
BLOCK TRIBUNE: Okay. So you decided to peg it to the US dollar. Was there any discussion about doing it with the Euro or the renminbi or anything like that?
RAFAEL COSMAN: Yeah, absolutely. What we’re working on at TrustToken is an asset tokenization platform. That means that we can connect real world assets to tokens and those assets can be currencies, commodities, equities, real estate. The first major product that we’re scaling on this platform is TrueUSD, which is a tokenized US dollar and that’s a product where there’s a lot of demand right now for and a lot of interest. But after that we have the opportunity to tokenize Euros, we could do gold, bonds, lots of different kinds of assets.
BLOCK TRIBUNE: So how does it work? Is this an app, or is there going to be a website platform, and what happens when you arrive there?
RAFAEL COSMAN: The way TrueUSD works is it’s an app, a web app. You can wire $10,000 US dollars to one of our partner banks and you’ll get 10,000 newly minted TrueUSD tokens. At any time you can send back your 10,000 tokens and get a $10,000 wire from one of our partner banks. There’s always the same number of dollars in the bank as there are tokens in circulation. And before anyone’s allowed to create or redeem TrueUSD, they need to go through a KYC process on our web app. That helps to make sure that bad actors aren’t using TrueUSD.
BLOCK TRIBUNE: Okay, again, how does it work? You go to a website and what happens?
RAFAEL COSMAN: Yeah, you go to a website, create an account, go through the KYC process and then you can wire in $10,000, get back 10,000 tokens, send in 10,000 tokens, get $10,000.
BLOCK TRIBUNE: I see. And you envision these tokens being traded as though people were trading dollars through a wire.
RAFAEL COSMAN: That’s exactly right. So the tokens are now 1:1 backed by US dollars in our bank account, but they are much more liquid than normal US Dollars. You could take the tokens and you could, for example, send them to your family overseas and that could be way more convenient than an international wire. You’d end up paying a tenth of the fee and the money would get there about a thousand times faster. Once you have the US dollar in this token form, they become more liquid and more useful.
BLOCK TRIBUNE: Who is your target audience for this at launch?
RAFAEL COSMAN: At launch, the target audience is cryptocurrency traders and funds. And they want to choose something like TrueUSD so they have a stable coin, which won’t crash when all the other cryptocurrencies are going down. And that’s important for them in terms of being able to hedge, being able to quickly drop in and out and that’s one of the main uses of Tether right now.
BLOCK TRIBUNE: Okay. How are you monitoring your customers? You mentioned the anti-money laundering in KYC. What sort of tripwires do you have here that flags transactions that seem to be going overseas that may be suspicious?
RAFAEL COSMAN: There are several ways to prevent any suspicious or malicious uses of TrueUSD, one is that everyone who creates or redeems TrueUSD needs to go through the KYC process on our website. Second one is that all the transactions are public and on the blockchain for anyone to inspect and so one can … if you were to mint 10,000 tokens and then you send them to someone else, using KYC we can see that you sent it to someone else. That path is all traceable on the blockchain. And the last factor is that we have the ability to blacklist addresses at the request of a court of confidential restriction or relevant law enforcement agency if there’s reason to believe that a particular address is involved in any sort of illegal activity for TrueUSD. And so, our goal is to make TrueUSD as trustworthy of a coin as possible. And if bad actors want to use some sort of cryptocurrency for their operations, they can use Bitcoin, they can use Ethereum, but TrueUSD is specifically designed to be one of the worst possible currencies for that usage.
BLOCK TRIBUNE: Okay. You’re starting off with $100,000 per month minimum for using this. How soon do you see it moving on from there and moving into smaller customers?
BLOCK TRIBUNE: Do you ever foresee getting down to the lowest level users where it’s almost like a remittance program?
RAFAEL COSMAN: Yeah, absolutely. But one thing to note is that that’s where the actual creation and redemption of TrueUSD, which can often-times just be done by larger traders or larger institutional funds. But many smaller users, they can acquire TrueUSD easily, for example, off of exchanges that list TrueUSD.
BLOCK TRIBUNE: How does the Tether investigation affect you? Or does it?
RAFAEL COSMAN: Yeah. There’s obviously a lot of interest in stable coins right now and in having a stable coin that you can trust. There’s two many differences between TrueUSD and Tether, one is who holds the money? Tether has a centralized model where they as a privately held technology company hold all the money. That’s about $2.2 billion, TrueUSD has a model where our network of banking partners and fiduciary partners hold all the money and we hold none of it. And the second difference between TrueUSD and Tether is the legal structure. With TrueUSD all the funds are held in Escrow accounts governed by Escrow agreements, which specifically designate the TrueUSD token holders as the beneficiaries of the account. And that means that if we, the company, tried to take those funds, the fiduciaries wouldn’t let us and if they did they would be breaking the law.
And all the fiduciaries and banking partners that we’re working with, these are regulated and certified financial institutions. So those are two of the features that help to make the coin as trustworthy as possible.
BLOCK TRIBUNE: How does your company make money?
RAFAEL COSMAN: We charge a couple of fees. The ten basis point fee when TrueUSD is created and a ten basis point fee when TrueUSD is redeemed. There’s also a seven basis point fee for all on-chain TrueUSD transactions and that fee goes to pay for the TrueUSD insurance, which is part of how the TrustToken platform works.
BLOCK TRIBUNE: Are you planning an ICO for this?
RAFAEL COSMAN: There’s no ICO for TrueUSD. It’s a stable coin so it’s 1:1 backed by US Dollars. We are doing a pre-sale right now for TrustToken, which is the token that powers our asset tokenization platform and the TrustToken platform is what provides the technical and the legal standards for TrueUSD, which is a tokenized US Dollar product and the TrustToken platform will also be used by us and by many external partners for other tokenization projects: tokenized Euros, gold, bonds. Some of the partners we’re working with include Neighborly, which is a startup here in San Francisco, they raised about $30 million, they’re a municipal bonds marketplace. They’re interested in partnering with us to tokenize municipal bonds because that’s a billion dollar a day market but it’s so relatively illiquid and difficult for many investors to access and by putting municipal bonds in a token form there’s the opportunity to open up access a lot.
BLOCK TRIBUNE: All right.
RAFAEL COSMAN: Partners like those are also working with us and tokenizing assets on our platform.
BLOCK TRIBUNE: When’s the ICO for that going to kick off?
RAFAEL COSMAN: The ICO’s going to be later in 2018.