Markets

Stablecoin regulation remains absent as the market recovers

Circle CEO Jeremy Allaire pinned the drop in the USDC stablecoin’s market cap on investors wanting to “de-risk outside the US” due to regulatory and banking sector concerns.

In a recent interview, the CEO acknowledged that the stablecoin has been declining steadily since March, losing nearly $13 billion.

The US dollar fell amid broader market uncertainty

From a peak of nearly $56 billion in 2022, the market capitalization of USDC has fallen to just under $30.7 billion.

March caused a further drop in value after it was revealed that $3.3 billion in reserves used to back the stablecoin at a defunct Silicon Valley bank was lost. USDC temporarily uncoupled when the news broke, losing nearly $13 billion.

Allair maleWe are seeing concern about the regulatory environment in the United States.

After the crash, the regulators vowed to make depositors complete in the collapse of the SVB. Meanwhile, Cercle also offered to cover any shortfalls in reserves.

But, stablecoins can be decoupled from their base currency (usually USD) due to the volatile market environment and need real assets to ensure investor safety.

However, stablecoin regulations are still absent from the regulatory scene.

How do other stablecoins work?

Allaire noted that the United States lags behind in crypto legislation compared to the Middle East, Hong Kong, Singapore and the European Union. In the interview, he explained that it is imperative that Congress take action and address concerns about the survival of the US dollar in light of the development of internet-based currencies and blockchain technology.

On April 15, the US House of Representatives Financial Services Committee released the first draft of stablecoin legislation. The bill includes broad proposals, such as banning stablecoin algorithms and designating the Federal Reserve as regulator of stablecoins issued by non-bank companies.

Despite the expected rules, Binance’s shift to TrueUSD (TUSD) amid its growth has drawn attention. TUSD, which lags behind BUSD and Tether in terms of volume, recently became the largest BTC trading pair on Binance.

Tron founder Justin Sun recently told Bloomberg that there are not many stablecoins in the market, which is contributing to the growth of TUSD.

According to Kaiko to update As of last week, tether pairs account for 80% of all trading volumes on centralized cryptocurrency exchanges. She said TrueUSD is up 9% and will likely outpace the competition soon.

The stablecoin market capitalization is around $131.6 billion. Data from CoinGecko shows that Tether leads the list with $81.1 billion, followed by USDC and BUSD. TrueUSD ranks fifth with a capitalization of $2.04 billion after a spurt of exponential growth in the past two months. MakerDao’s decentralized stablecoin DAI ranks fourth, with a value of $4.7 billion.

3 Month Chart of Stablecoin Market Caps | Queen Gekko

Tether recently crossed the $80 billion mark after its previous supply peak in May 2022. The largest stablecoin is now approaching supply levels seen in the year before the Terra crash which has sent the market back up again.

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