UMA Leverages Dai Stablecoin For Access To US Stock Market

On March 27, decentralized financial contracts platform Universal Market Access (UMA) announced that USStocks, UMA’s new ERC20 token, went live on the Ethereum mainnet.

USStocks, which UMA says is the first decentralized and uncensored path users of digital currency can use to access the US stock market, is the result of a collaboration between UMA and MakerDAO. USStocks can be bought with MakerDAO’s stablecoin, Dai. UMA co-founder Hart Lambur said:

“USStocks is an ERC20 token representing synthetic ownership of an index of the 500 largest exchange-listed US stocks. This means that anybody with access to the internet and digital money can participate in the US stock market.”

Here’s how it works. A liquidity provider can create USStocks by depositing Dai into UMA’s tokenization EDCC (smart contract) on the DDEX blockchain platform. That token is changed into a USStocks token and begins to track the indexes from the 500 most significant entities listed on the New York Stock Exchange and NASDAQ. If the value of the index rises, liquidity providers are obligated to add more Dai coins to the smart contract, “enforcing a total collateralization ratio of > 108.5% at all times.” The USStocks will be free to trade until May 15 of this year. At that time, investors will be able to trade their USStocks tokens back to Dai at its final settlement value.

UMA says it plans to add more tokens in the future for “other assets, inverse exposures, and leverage.” Surprisingly, especially considering the token’s name, the USStocks coin will not be available for sale or trade to US investors or companies.

UMA is not the first to introduce cryptocurrency and blockchain technology to the stock market, though the stablecoin aspect is novel. In August 2018, the Jamaican stock exchange (JSE) collaborated with Toronto-based FinTech company Blockstation to allow the trading of virtual currency and digital assets on the JSE. In March of this year, investment management firm Invesco partnered with digital asset investment firm Elwood Asset Management to list a blockchain-backed exchange-traded fund on the London stock exchange. Just this week, Germany’s second-largest stock exchange, Börse Stuttgart, announced plans to develop a blockchain-powered trading platform for virtual currency. 

Nathan Graham is a full-time staff writer for ETHNews. He lives in Sparks, Nevada, with his wife, Beth, and dog, Kyia. Nathan has a passion for new technology, grant writing, and short stories. He spends his time rafting the American River, playing video games, and writing.

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