The investment arm of major cryptocurrency exchange KuCoin is moving to support new stablecoin initiatives by backing a Chinese yuan-pegged stablecoin issuer.
KuCoin Ventures has led a $10 million investment into stablecoin issuer and blockchain-based payment service provider known as CNHC.
Announcing the news on March 16, KuCoin Ventures said that the funding round included some prominent industry investors, including KuCoin’s investor IDG Capital and Circle Ventures, the investment arm of the USD Coin (USDC) issuer, Circle.
KuCoin chief investment officer and KuCoin Ventures lead Justin Chou told Cointelegraph that the new investment in CNHC is the first time for KuCoin Ventures to invest in a stablecoin-related project.
“KuCoin is always interested in building a stronger infrastructure for the financial system,” Chou said, adding that the world is likely to see more real world asset-backed stablecoins in the near future. He added:
“To ensure stability of the financial market, stablecoin designers need to find a balance between overcollateralization and efficiency. We are happy to see more algorithm-based stablecoins but they need to prove their resiliency.”
The investment into CNHC reflects KuCoin Ventures’ strategy of backing the Web3 infrastructure in the Asia-Pacific region, Chou said. According to the announcement, KuCoin Ventures also invested $10 million in China’s blockchain project Conflux in early 2022. Chou noted that Hong Kong has a well-established traditional finance ecosystem and has a “real opportunity at becoming the new crypto center of the world” with new regulations and policy for digital assets.
CNHC co-founder Joy Cham told Cointelegraph that the platform launched its offshore yuan-pegged stablecoin CNHC about two years ago. He described the stablecoin as a “more akin to a house settlement tool” referring to CNHC’s limited exposure. According to data from CoinMarketCap, the CNHC stablecoin is only listed on one centralized exchange, TruBit Pro Exchange.
“It will be listed in more centralized and decentralized exchanges in the near future,” Cham added.
The exec also noted that CNHC currently supports settlement service in other major stablecoins, including Tether (USDT) and USD Coin (USDC). Cham also noted that the firm has had some impact due to the recent banking crisis involving Silicon Valley Bank and Silvergate. “Some of the banks are our partners that help us to settle USD, but there’s other banking partners so service is still ongoing,” Cham said.
On the other hand, KuCoin has had no impact due to those issues as it has no exposure to SVB, Silvergate or Signature Bank, KuCoin CEO Johnny Lyu told Cointelegraph.
“However, the whole market is exposed at varying degrees to USDC and USDT,” Lyu said, adding that removal of crypto from traditional banking could cause “long-lasting implications on the industry.” The CEO stated:
“Bitcoin was born after ‘Lehman Brothers’ yet still grew to mass adoption with about 420 million global users. The recent shutdowns of financial institutions may be the opportunity for crypto to reach mass adoption.”
The news comes amid KuCoin facing a lawsuit in the United States due to alleged violations of offering crypto trading services in New York. In a complaint filed on March 9, New York state Attorney General Letitia James argued that KuCoin violated securities law due to offering to sell and purchase cryptocurrencies that are “commodities and securities” without registration.