FameEX Hot Topics | USDT Market Share Surges During Economic Uncertainty, While USDC Contracts

Over the past year, there have been notable shifts in the market dominance of stablecoins pegged to the United States dollar. Circle's USD Coin (USDC) has experienced a decline in market share, dropping from 34.88% to 23.05%. On the other hand, Tether's USDT has gained significant ground, with its market dominance increasing from 47.04% to 65.89%. This shift has been attributed to the regulatory crackdown on cryptocurrencies in the United States.

Circle CEO Jeremy Allaire, in an interview with Bloomberg, pointed to the regulatory environment in the United States as a contributing factor to the declining market capitalization of USDC. Conversely, Tether seems to have benefited from the current situation in the US, experiencing a surge in market capitalization to $83.1 billion, while USDC's market cap has fallen from a peak of $55 billion to $29 billion.

USDC faced a challenge in March when it depegged from the dollar due to the US banking crisis. Reserves worth $3.3 billion were trapped at Silicon Valley Bank, which was among three crypto-friendly banks shut down by regulators. Despite reassurances from Circle, the market reacted swiftly to the news.

Stablecoins have gained popularity as they bridge the gap between the crypto space and traditional finance. However, the recent report from the European Systemic Risk Board highlighted the need for increased transparency in the stablecoin market, particularly regarding the reserves backing these digital assets.

Tether, in particular, has faced criticism for its lack of transparency. As a Hong Kong-based company owned by iFinex, it was fined $18.5 million in 2021 by the New York Attorney General's Office for allegedly misrepresenting the fiat backing of its reserves. To address these concerns, Tether has been working towards enhancing financial transparency.

The company aims to reduce its exposure to the banking system following the collapse of Silicon Valley Bank. Tether's latest audit report reveals that it withdrew over $4.5 billion from banks in the first quarter of 2023, resulting in a substantial reduction in counterparty risk. Additionally, Tether has increased its holdings of U.S. Treasury bills to over $53 billion, constituting 64% of its reserves. The report states that USDT is now backed by 85% cash, cash equivalents, and short-term deposits.

Circle has also taken steps to mitigate risks in the face of macroeconomic uncertainty. The stablecoin operator has adjusted its reserves and no longer holds Treasurys maturing beyond early June.

As stablecoins continue to evolve and play a crucial role in the cryptocurrency ecosystem, regulatory scrutiny, transparency, and risk mitigation will remain important factors influencing their market dynamics.

Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.