Investors Ditch .6 Billion in USDC for USDT Amid Regulatory Crackdown

Investors Ditch $1.6 Billion in USDC for USDT Amid Regulatory Crackdown

Investors Ditch .6 Billion in USDC for USDT Amid Regulatory Crackdown

Investors have moved about $1.6 billion from USDC to its stablecoin rival USDT over the past month as US regulators crack down on cryptocurrency firms.

A large sum was moved to USDT after August 10, when USDC issuer Circle froze $75,000 USDC belonging to users linked to Tornado Cash, the crypto mixer sanctioned by the US government over allegations money laundering.

Circle said it froze the money to comply with US sanctions law. But the decision has drawn widespread criticism from crypto fundamentalists, fearing that the corporate intrusion has eroded the ethos of cryptocurrency privacy and decentralization.

Investors are fleeing the USDC

According to Coinmarketcap, the total market capitalization of Tether’s eponymous USDT stablecoin increased by around $1 billion to $67.43 billion within five days of Circle blacklisting Tornado Cash-linked wallet addresses. .

The total market value of USDC fell by more than $500 million over the same period, the data showed, suggesting that the outstanding balance of transfers to USDT may have come from elsewhere.

Over the past four weeks, USDC’s market capitalization has fallen 2.3%, or $1.3 billion, to $53.5 billion at press time. This compares to a 2.4%, or $1.57 billion, increase in total USDT market capitalization over the same period.

“After the recent regulatory push in the US against crypto companies and tokens, I wouldn’t be surprised if institutions and big players felt safer with their money outside of the US,” tweeted Gabor Gurbacs, strategy advisor at asset manager VanEck.

USDC and USDT are pegged to the dollar. While Hong Kong-based Tether has often been accused of a lack of transparency about the reserves backing its USDT stablecoin, Center, the US consortium behind USDC, is being criticized for siding with government authorities.

Since the launch of USDC in September 2018, Center has now banned 81 wallet addresses in accordance with US government sanctions against crypto businesses, individuals, or groups.

Tether had its own problems in May when panicked investors withdrew around $7 billion from USDT in a matter of days after the spectacular collapse of the Terra blockchain.

“Crypto needs truly decentralized stables”

Ego Huang, CEO of crypto derivatives trading platform Deepcoin, told Be[In]Crypto that the USDC is crippled by the assumptions of its “tight reliance on the US government’s regulatory regime.”

“[This makes] it is very likely to be seized by US authorities,” he said. “The thing is, investors are not sentimental about a stablecoin issuer. Instead, they are interested in the security of their funds and avoid the intervention of centralized authorities.

Huang added that the lack of defined regulation was “particularly difficult and no matter how Circle spins the situation to prevent an outflow of cash from USDC, investors will always need insurance or a safety net, they can find in the USDT”.

Circle CEO Jeremy Allaire recently pledged to do more to address the privacy concerns that have obsessed the company.

He said “Tornado Cash’s regulatory intervention was flawed.” Allaire is committed to intensifying its actions on political engagement to better protect user privacy in accordance with the fundamental principles of cryptography.

Iakov Levin, founder and CEO of crypto investment platform Midas Investments, said that “the situation with Tornado Cash shows that no one is immune from the influence of regulators”.

“So if they want to interfere with any part of the developing decentralized economy, then absolutely any protocol can end up in Tornado’s place,” Levin told Be[In]Crypto. Continuing, he says:

“The switch of users from USDC to USDT is just a switch from one centralized stablecoin to another. No one can guarantee that USDT will not issue similar sanctions and start blocking wallets. This is why the crypto market needs overcollateralized algorithmic stablecoins like FRAX and LUSD.


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