On July 26, Binance announced the listing of First Digital USD (FDUSD). For most people, this is probably the first time they have heard of this stablecoin project. FDUSD is a centralized stablecoin similar to USDT and USDC, so there is no room for speculation about the appreciation of governance tokens. In this article, we will briefly introduce FDUSD.

What is FDUSD?

FDUSD is a stablecoin pegged 1:1 to the U.S. dollar by FD121 Limited (brand name First Digital Labs), a subsidiary of Hong Kong custody company First Digital Limited.

First Digital Trust was once the digital asset custody institution of Legacy Trust, a Hong Kong financial services company. It was spun off into a fully independent public trust in 2019. In May 2022, it announced the completion of US$20 million in financing, led by Telegram investors Nogle and Kenetic Capital.

According to First Digital, FDUSD is a programmable stablecoin that can execute financial contracts, custody services and insurance without the involvement of third parties.

FDUSD was established to reduce volatility in the cryptocurrency market, reduce transaction costs, increase financial efficiency, and provide faster and more secure transactions.

The release of FDUSD also “coincidentally” coincides with the launch of Hong Kong’s new virtual asset service provider licensing system on June 1. On June 1 this year, Binance founder CZ announced that First Digital will issue stablecoins on the BNB smart chain.

Therefore, FDUSD may have a strong "Hong Kong" label behind it, and may also be supported by Binance. There was even news that FDUSD might be listed on major exchanges.

FDUSD Reserves and Audits

According to the description in the white paper, the advantages of FDUSD include: transferable, redeemable, programmable, low fees, and running on a decentralized network.​

According to the white paper, FDUSD’s reserves are held by the designated custody company First Digital Trust Limited. The reserve account and operating account of the escrow company are separate.

Even if the custodian company goes bankrupt, the FDUSD reserves will be protected independently of the custodian company's other assets. The project was audited by security firm PeckShield.

First Digital Labs said each FDUSD issued is backed by $1 or its equivalent, which is held by a qualified custodian in an account at a regulated depository institution.

FDUSD regularly releases reserve account reports. The information displayed on the official website is the reserve report released by Prescient Assurance on June 23 and June 30.

The report shows that a total of 532.52 FDUSD was issued on the Ethereum and BNB smart chains on June 23, and a total of 1070.8 FDUSD was issued on the Ethereum and BNB smart chains on June 30.

On those two dates, reserve account balances were at least equal to or greater than $532.52 and $1,070.8, respectively, the report said, without disclosing the exact amount of the reserves.

FDUSD purchase and redemption

First Digital Labs only sells stablecoins to key industry players, financial intermediaries or professional investors with a certain status and must meet necessary conditions.

For retail investors, they can only buy directly from the secondary market. After being listed on Binance, FDUSD should have sufficient liquidity under non-special circumstances.

In addition, according to previous reports, although the company is headquartered in Hong Kong, FDUSD is temporarily unable to be opened to Hong Kong retail investors because the Hong Kong Stable Currency Act has not yet been officially launched.

To redeem FDUSD, you first need to register as a First Digital Labs customer, meet certain requirements, including anti-money laundering (AML) and counter-terrorism financing (CTF) checks, and then convert the FDUSD to the equivalent value in fiat currency.

In the document describing the risk factors, it was also stated that due to various uncontrollable factors, the price of the stablecoin may fluctuate around $1, and there is no guarantee that the price of the stablecoin will always be equivalent to $1.

Data on the chain: The circulation is 10.11 million, almost all of which are held by Binance addresses. FDUSD has been issued on Ethereum and BNB smart chains.

As can be seen from the blockchain browser, as of 13:00 on July 26, the total circulation of FDUSD on Ethereum and BNB smart chains is approximately 10.11 million.

The circulation of FDUSD on Ethereum is 1.114 million, and there are 4 currency-holding addresses, of which Binance 14 currency-holding address accounts for 99.8565%; the circulation on the BNB smart chain is 8.996 million, and there are only 4 currency-holding addresses, of which Binance Hot Wallet 6 holds 99.9992% of the circulating supply. It can be seen that almost all FDUSD is currently held by Binance wallet.

Binance launched the FDUSD zero-fee event and launched three trading pairs: BNB/FDUSD, FDUSD/BUSD, and FDUSD/USDT for the first time.

To sum up, FDUSD may be a stable currency pegged to the US dollar issued by a subsidiary of First Digital, a traditional custodian, after Hong Kong’s new virtual asset service provider licensing system comes into effect.

Considering Binance’s support for FDUSD and on-chain data, this could be an alternative to the centralized stablecoin that Binance chooses to support after BUSD was banned from being issued by regulators.​

Summarize

FDUSD is a stablecoin pegged 1:1 to the U.S. dollar by First Digital Labs, a subsidiary of Hong Kong custody company First Digital Group. It was issued on Ethereum and BNB smart chains on June 1, 2023.

FDUSD is a programmable stablecoin that can execute financial contracts, custody services and insurance without third-party involvement. FDUSD’s reserves are kept by First Digital Trust, a digital asset custodian regulated by the Hong Kong Trust Ordinance, and are separated from other assets of the company or customers. FDUSD can be converted into U.S. dollars and can also be traded on the secondary market.

FDUSD has the following significance to Hong Kong:

1) FDUSD is the first stable currency issued by a traditional custody institution after Hong Kong’s new virtual asset service provider licensing system comes into effect. This shows that Hong Kong has a leading edge in promoting digital currency innovation and regulation, and also provides a reference model for other virtual asset service providers.

2) FDUSD is a stable currency for the Asian market that can meet the needs of Asian users for stable, low-cost, efficient, fast and secure cross-border payments and financial services. FDUSD can increase financial inclusion and interconnectivity in Asia, and can also promote Hong Kong's status as an international financial center.

3) FDUSD is a programmable stable currency that can realize smart contracts, disintermediation and automated financial functions on a decentralized network. FDUSD can provide more possibilities for financial innovation and digitalization in Hong Kong.

To sum up, FDUSD is an innovative and forward-looking stable currency project that has a positive impact on Hong Kong’s digital currency development and financial competitiveness.