Stablecoin company Cap has raised $11 million in seed funding from asset manager Franklin Templeton, trading firm Susquehanna, and investment firm Triton Capital.
Other investors include market makers Flow Traders, Nomura’s Laser Digital, GSR, and IMC Trading. Cap’s valuation in the round was not disclosed.
Cap plans to launch an interest-bearing stablecoin and accompanying lending market in the coming months, CEO and founder Benjamin Sarquis Peillard told Fortune. Stablecoins are a type of cryptocurrency designed to maintain a value in line with a fiat-currency like the U.S. dollar. Unlike most stablecoins, however, Cap’s is designed to earn interest.
As companies begin to adopt stablecoins as a way to settle payments, asset managers, market makers and other financial institutions need quick, short-term access to liquidity. Cap provides this liquidity by letting financial institutions like Franklin Templeton borrow stablecoins from users with interest. “We have these institutions that come into our marketplace and take the collateral that users deposited and borrow from them,” Sarquis Peillard said.
The first interest-bearing stablecoin, YLDS from digital assets firm Figure Markets, was approved by the Securities and Exchange Commission (SEC) in February. However, Sarquis Peillard says Cap’s stablecoin will differ from others because the company will not take custody of users’ assets. “We don’t hold users’ money,” he said.
Instead, the lending market will operate off of smart contracts—digital agreements that automatically disperse funds when predetermined requirements are met—to protect users from mismanagement of funds, Sarquis Peillard said. Cap will also require borrowers to take out loan insurance to ensure that all users are repaid on-time and in-full, even if a borrower defaults, he says.
The rate at which users earn interest will fluctuate based on market conditions. Cap will charge a 10% fee on the yield users earn.
Cap’s technology is still in the testing phase but is planned to launch publicly in May.
Cap plans to spend the money raised in this round on security to ensure that its stablecoin technology is reliable and resistant to hacking, Sarquis Peillard said. The company will also use the money to hire more workers.
