Blockchain startup Codex has raised $15.8 million to build a layer-2 network specifically for stablecoins, signaling that more builders are rushing to capitalize on the growing industry and regulatory alignment around fiat-backed stable assets. 

The seed round was led by Dragonfly Capital, with additional participation from Coinbase, Circle, Cumberland Labs, Wintermute Ventures and others, Codex told Fortune.

The funding will be used to help Codex build its stablecoin-only platform from the ground up, said co-founder and CEO Haonan Li.

Source: Victor Yaw

Codex has disavowed “general-purpose blockchains” because of their inefficiencies in meeting real-world use cases, said Li. Instead, Codex is building a stablecoin-only chain on top of Optimism, an Ethereum layer-2 scaling solution that uses rollup technology to boost transaction speeds and lower costs.

Although details about the Codex chain were sparse, Li said the stablecoin solution aims to create a predictable fee structure that isn’t influenced by volatile blockchain activity. 

Codex is also aiming to build stablecoin off-ramps with existing cryptocurrency exchanges and local brokers, which would allow users to cash out their onchain assets for fiat. 

Related: Stablecoin adoption grows with new US bills, Japan’s open approach

The stablecoin “hunch” 

In 2023, Li had a “hunch” that stablecoins would be the next major blockchain growth story, which at the time “was a pretty contrarian view among these core crypto people,” he told Fortune. 

Codex co-founder Victor Yaw said the stablecoin market has grown 60 times in the last six years, but still only accounts for less than 2% of offshore US dollar deposits. 

“We haven’t even scratched the surface,” he said.

Stablecoin demand has shown signs of resilience, growing in the face of adverse crypto market conditions. Although crypto markets plunged in the first quarter, stablecoin supplies increased by $30 billion during that period, according to crypto intelligence firm IntoTheBlock. 

The total stablecoin market capitalization now sits at nearly $230 billion. The vast majority of stable assets are backed by US dollars. 

The stablecoin circulating supply has grown by nearly 3% over the past 30 days. Source: RWA.xyz

Codex isn’t the only stablecoin network to emerge from stealth this year. In January, a layer-1 network called 1Money raised $20 million to further develop its stablecoin payment platform. 

1Money’s founder and former Binance.US chief Brian Shroder told Cointelegraph that the future of stablecoins will be “multicurrency,” with stable assets extending beyond the dominant US dollar. 

Growth beyond the US dollar will likely be fueled by “demand for localized stablecoin financial solutions and use cases,” said Shroder.

Related: ‘We’re bullish on stablecoins,’ next-gen DeFi — Coinbase Ventures head