Circle Rolls Out Open-Source Protocol to Help Build Tokenized Credit Markets

Stablecoin issuer Circle Internet Financial on Friday rolled out a smart contract codebase called Perimeter Protocol that aims to serve as an open-source foundation to build tokenized credit markets.

The company said in a blog post that Perimeter can support a variety of credit use cases, including invoice factoring, payroll advances, instant settlement for merchants and credit trading for institutional investors. Its white paper is publicly available and developers can freely copy the codebase and build products on top of it.

The protocol also marks the first release of Circle Research, the company’s new division dedicated to open-source development.

The release came as bringing traditional financial instruments such as credit to blockchain-based applications – often referred to as tokenization of real-world assets (RWA) – is gaining steam. Tokenization could disrupt the existing financial plumbing by creating a more efficient and transparent system, a Bank of America (BAC) report said. Bernstein forecasted that tokenized assets could grow to a 5 trillion market in the next five years.

Stablecoins are a key piece of plumbing for blockchain-based lending markets to settle transactions. Facilitating tokenization efforts and the development of decentralized finance (DeFi) credit platforms could help Circle grow the utility of its $26 billion USDC and euro-pegged token EURC.

“We’ve seen the great utility stablecoins and USDC have brought to developers, corporations, end-users and more across an array of use cases, including for global lending markets within DeFi,” the company said in a blog post. “However, for new entrants to participate in these markets, the ability to securely unlock credit on-chain through safe standards and underwriting, represents a significant barrier to entry.”

Institutional DeFi platform OpenTrade’s yield-generating tokenized U.S. Treasury pool was the first offering to be developed using Perimeter.