Tag: USDC

US Crypto Crackdown Hurts USD Coin

by Blockchain News

In an interview with Bloomberg TV, Circle CEO Jeremy Allaire stated that the US regulatory crackdown on cryptocurrencies has been a significant factor behind the decreasing market capitalization of USD Coin (USDC). The regulatory scrutiny on USDC comes after the collapse of the FTX exchange, a banking crisis, and USDC’s depegging.

The USDC depegged in March due to the US banking crisis, which caused Circle’s $3.3 billion worth of USDC reserves to be stuck with Silicon Valley Bank, one of the three crypto-friendly banks that were shut down by regulators. Although Circle had assured its customers that it had the backing from investors to fill the gap, the news caused the market to react quickly, and USDC depegged from the US dollar.

At its peak, USDC had a market cap of $56 billion, placing it right behind Tether-issued USDT. However, since the banking crisis and USDC’s depeg, the stablecoin’s market cap has been reduced nearly by half, currently sitting at $30.7 billion.

Circle CEO Allaire has also raised concerns that the lack of regulatory clarity in the US may force crypto companies to seek opportunities overseas. With the recent passing of the Markets in Crypto-Assets Act (MiCA) by the European Parliament and the push for adoption by Hong Kong, Allaire believes that the US will be left behind.

Allaire has called for Congress to step up, stating that it is a critical moment for the US. The US Securities and Exchange Commission (SEC) led by Gary Gensler has been on an enforcement spree since the FTX collapse saga. The SEC has threatened regulatory action against multiple crypto platforms and exchanges.

During the oversight hearing on digital assets, Gensler faced pushback from policymakers, and many crypto proponents have also questioned the authority of the SEC and Gensler. The regulatory environment in the US has caused uncertainty and concern, leading to a decline in the market capitalization of USDC.

In conclusion, the regulatory crackdown on cryptocurrencies by US regulators has been a significant factor behind the decreasing market capitalization of USDC. Circle CEO Jeremy Allaire has raised concerns about the lack of regulatory clarity and the US banking system’s global reputation. The passing of the Markets in Crypto-Assets Act (MiCA) by the European Parliament and the push for adoption by Hong Kong have put the US at risk of being left behind in the crypto industry. Congress needs to step up and provide regulatory clarity for the US to remain competitive in the evolving crypto landscape.

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Circle Launches Cross-Chain Transfer Protocol for USDC

by Blockchain News

Users are now able to move US Dollar Coin (USDC) between Ethereum and Avalanche thanks to the implementation of a new mainnet protocol by Circle, the company that created the US Dollar Coin (USDC). The Cross-Chain Transfer Protocol (CCTP), which was introduced on April 26, intends to lessen the amount of fragmentation that exists within the Web3 ecosystem and do away with the need for USDC bridges.

Prior to this update, customers who owned USDC on Ethereum and wished to move it to Avalanche were required to either deposit their coins with a Circle partner or utilize a third-party bridge to complete the transfer. Nevertheless, customers are now able to transfer their USDC straight across the two networks thanks to the newly developed CCTP.

The new protocol operates in a manner that is distinct from that of a conventional bridge. Instead of putting a lock on tokens that are submitted to its contract, it will entirely destroy them and then issue fresh tokens on the network that is receiving them. Users have the ability to immediately convert these newly issued tokens into bank deposits by depositing them with Circle or one of its partners.

The Circle team anticipates that the CCTP will remedy the problem of fragmentation that exists within the Web3 ecosystem. At the moment, there are a number of unauthorised versions of USDC that are circulating on other networks. The majority of these versions are the consequence of tokens on one network being bridged to another network. The development team anticipates that the usage of unauthorised copies will gradually decrease now that there is an official means to move coins across networks. This will result in the token being easier to understand and utilize.

A significant number of the most prominent cross-chain protocols, such as Celer, Hyperlane, LayerZero, LI.FI, MetaMask, and Wormhole, as well as others, have already committed to making use of CCTP in the future. It is anticipated that the new protocol will get widespread adoption as a result of this support, which will further reduce the need for USDC bridges and facilitate the use of the token across other networks.

In the realm of decentralized finance (DeFi), the introduction of Circle’s new Cross-Chain Transfer Protocol represents an important step forward overall. This demonstrates both the rising desire for smooth interoperability across multiple blockchain networks as well as the willingness of prominent companies in the industry to cooperate in order to enhance the user experience for everyone. The future of DeFi is expected to become more linked and available to a larger audience as the number of projects that embrace cross-chain protocols like CCTP increases.

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US Draft Bill Proposes Framework for Stablecoins

by Blockchain News

A new draft bill published in the United States aims to provide a regulatory framework for stablecoins. The bill proposes that the Federal Reserve oversee non-bank stablecoin issuers such as Tether and Circle, which respectively issue USDT and USDC. Insured depository institutions seeking to issue stablecoins would fall under federal banking agency supervision.

The bill also establishes criteria for approval of stablecoin issuers, including the ability to maintain reserves backing the stablecoins with U.S. dollars or Federal Reserve notes, Treasury bills with a maturity of 90 days or less, repurchase agreements with a maturity of seven days or less backed by Treasury bills with a maturity of 90 days or less, and central bank reserve deposits. Issuers must also demonstrate technical expertise and established governance, as well as the benefits of offering financial inclusion and innovation through stablecoins.

Additionally, the bill proposes a two-year ban on issuing, creating or originating stablecoins not backed by tangible assets. It also mandates that the U.S. Department of the Treasury conduct a study on “endogenously collateralized stablecoins.” These are stablecoins that rely solely on the value of another digital asset created or maintained by the same originator to maintain the fixed price.

The bill also allows the U.S. government to establish standards for interoperability between stablecoins. It further determines that Congress and the White House would support a Federal Reserve study on issuing a digital dollar.

Stablecoins are a class of cryptocurrencies that attempt to offer investors price stability by being backed by specific assets or using algorithms to adjust their supply based on demand. The draft bill defines stablecoins and proposes a regulatory framework that could potentially provide greater stability and protection for investors. It also aims to prevent the use of stablecoins for illegal activities, such as money laundering and terrorist financing. If enacted, the bill would require stablecoin issuers to register and could result in up to five years in prison and a fine of $1 million for failure to do so.

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MakerDAO Keeps USDC as Primary Collateral for Dai

by Blockchain News

Since there is a possibility of hazards being linked with USDC, the MakerDAO Risk Core Unit recently proposed the notion of diversifying the collateral for Dai. This suggestion was made as a response to the proposal. Nonetheless, MKR holders voted decisively in support of maintaining USDC as the major collateral for Dai. With a vote of 79.02% in favor of expanding the USDC-to-DAI minting capacity and decreasing the cost to 0%, MKR holders voted in favor of retaining USDC as the primary collateral for Dai.

Due to USDC’s “possibly more dangerous exposure to uninsured bank deposits” and “a weaker legal framework” in comparison to its rivals, the suggestion advised diversifying collateral into GUSD and USDP. Nevertheless, according to the Risk Core Unit, the risks that are connected with utilizing USDC as collateral have dramatically diminished from the previous week. This information was provided by the Risk Core Unit.

When a string of failed banks forced the USDC to briefly lose its $1 peg, the decision was made to maintain USDC as the principal collateral for Dai transactions. In response to this, MakerDAO has introduced efforts to prevent Dai from being undercollateralized. These actions include increasing the charge to mint Dai using USDC as collateral from 0% to 1%, as well as lowering the daily minting cap for this procedure.

A vote of confidence in the stability of the USDC stablecoin and its capacity to retain its $1 peg can be inferred from the fact that USDC will continue to serve as the principal collateral for the Dai cryptocurrency. Yet, this does bring up concerns about the possible hazards that are connected with placing a significant amount of reliance on a single collateral item.

It is quite possible that new discussions and disputes around collateral diversification will continue to emerge inside decentralized autonomous organizations such as MakerDAO as the cryptocurrency market continues to expand and stablecoins become more widely used.

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Mastercard Enables USDC Spending in Asia

by Blockchain News

However, the blending of traditional and decentralized finance (DeFi) continues to strengthen despite the challenges. In Nigeria, crypto wallet MetaMask has partnered with crypto fintech MoonPay to enable users to purchase crypto via instant bank transfers without requiring a credit or debit card. This integration is estimated to reduce the decline rate for direct crypto purchases in Nigeria from 90% to 30%. Nigeria is a major market for MetaMask, ranking third in mobile monthly active users, and is also ranked by Chainalysis as one of the top 20 countries in cryptocurrency adoption.

On the other hand, OKX, a major crypto exchange, announced that it will no longer provide services or allow new accounts for Canadian users starting on March 24, 2023, citing “new regulations.” Customers in the country must close open options, margins, perpetuals, and futures positions by June 22 and withdraw their fiat or tokens by that date. In February, The Canadian Securities Administrators required crypto exchanges to sign new, legally binding undertakings while they await registration with regulators.

Despite these challenges, Bitcoin’s value proposition continues to attract attention as its price continues to climb following the collapses of Silvergate, Silicon Valley Bank, and Signature Bank. Cathie Wood, the CEO of ARK Invest, believes that Bitcoin’s current decoupling from the equity markets may attract more institutional investors into Bitcoin over time. Wood expects that most firms would allocate between 2.5% to 6.5% of their investment portfolios to BTC by 2030, taking the leading cryptocurrency’s price to $1–1.5 million.

Finally, crypto analyst Marcel Pechman explains the relationship between banking valuation and cryptocurrencies, specifically Bitcoin’s ethos, and provides insight on how to analyze banks and avoid inaccurate market capitalization indicators.

In conclusion, Mastercard’s partnership with Stables is a significant move in the adoption of stablecoins in the Asia-Pacific region, while challenges in the banking and regulatory sectors have not slowed down the blending of traditional and decentralized finance (DeFi). As the world continues to grapple with a global banking crisis, Bitcoin’s value proposition remains on full display, and its price continues to climb, attracting attention from institutional investors.

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Banking crisis could push cryptocurrency regulation into gray area

by Blockchain News

The world has been facing a banking crisis that has caused a great deal of uncertainty and market anxiety. According to Circle CEO Jeremy Allaire, this could lead to increased regulatory ambiguity in the cryptocurrency market. Allaire expressed his concerns in a Twitter thread on March 23, discussing the aftermath of the collapse of the Silicon Valley Bank (SVB) and the general exposure of the financial system in the United States.

Allaire’s concerns are not unfounded, as the US banking system has faced several challenges in recent years, including the 2008 financial crisis and the COVID-19 pandemic. The collapse of SVB, a bank that primarily serves the technology sector, has only added to the worries about the stability of the financial system in the country.

As a result of the ongoing banking crisis, investors and businesses are becoming increasingly interested in cryptocurrencies as an alternative to traditional banking. However, the lack of clear regulation in the cryptocurrency market can lead to further uncertainty and risk.

Allaire believes that the current market dynamics could push the cryptocurrency market into a gray area in terms of regulation, as governments and financial regulators struggle to keep up with the rapid growth of cryptocurrencies. This could potentially lead to greater regulatory ambiguity and more risk for investors and businesses.

Circle is a cryptocurrency company that issues the USD Coin (USDC), a stablecoin that is pegged to the US dollar. The company has been actively advocating for more regulatory clarity in the cryptocurrency market to help promote growth and adoption.

In conclusion, the ongoing global banking crisis could have a significant impact on the regulation of cryptocurrencies. The lack of clear regulatory guidelines could create more uncertainty and risk for investors and businesses, making it essential for governments and financial regulators to act quickly to provide clarity and stability to the market.

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USD Coin Chief Strategy Officer Twitter Account Hacked

by Blockchain News

In a security breach, the Twitter account of Circle’s USD Coin (USDC) stablecoin chief strategy officer Dante Disparte has been compromised. The hack resulted in the promotion of fake loyalty rewards for long-time USDC users, which was tweeted from Disparte’s account and later deleted. Prior to the incident, the account had been tweeting about the regulatory developments of the firm and its participation in Paris Blockchain Week.

The security breach comes less than a month after the USDC briefly depegged due to reserve deposits left in the custody of defunct American tech bank Silicon Valley Bank. However, the incident was resolved, and the USDC has repegged, although there is still a slight variance with the stablecoin’s peg at the time of publication.

Circle’s USDC stablecoin is a regulated cryptocurrency that is backed by US dollars on a one-to-one basis. The stablecoin has been gaining popularity as a means of conducting transactions on cryptocurrency exchanges due to its stability compared to other cryptocurrencies, which are known for their volatility.

Hacking incidents have been prevalent in the cryptocurrency industry, with high-profile cases including the 2014 Mt. Gox hack, which resulted in the loss of around 850,000 bitcoins. In response to the incident, Circle has not provided any further details about the security breach or the steps it has taken to mitigate the damage caused by the hack. However, it is likely that the company will conduct a thorough investigation to determine the extent of the breach and prevent similar incidents from occurring in the future.

The security of cryptocurrencies and their related infrastructure is a pressing concern for regulators and market participants alike. In response to these concerns, regulatory bodies around the world have been implementing new measures to safeguard cryptocurrency exchanges and other digital asset platforms. The recent hack of Circle’s USDC stablecoin chief strategy officer’s Twitter account highlights the need for increased security measures and greater vigilance in the cryptocurrency industry.

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Former Coinbase CTO Bets $1 Million on Bitcoin Reaching $1 Million in 90 Days

by Blockchain News

Srinivasan, a well-known Bitcoin enthusiast and entrepreneur, is betting that the United States will experience hyperinflation, leading to a deflation of the U.S. dollar and a surge in the value of Bitcoin. Medlock, on the other hand, is bearish about hyperinflation in the country. The bet has been set up as a smart contract, and if Srinivasan loses, he will pay $1 million worth of the dollar-pegged stablecoin USD Coin (USDC) and one BTC to Medlock. If Bitcoin’s price reaches $1 million by the deadline, Srinivasan will keep the 1 BTC and the $1 million in USDC.

Srinivasan has also disclosed that he will move another $1 million in USDC for another wager on the same topic, with Medlock and one other person. The bet comes at a time when Bitcoin’s price has already reached $27,387, with its market capitalization adding over $194 billion year-to-date to a 66% growth in 2023. It has also outperformed Wall Street bank stocks amid fears of a global banking crisis.

Srinivasan’s bet is based on his belief that the U.S. economy is facing an impending crisis that will lead to the deflation of the U.S. dollar, which will result in a hyperinflation scenario that will drive Bitcoin’s price up to $1 million. This view is shared by many other Bitcoin proponents, who argue that Bitcoin’s finite supply and decentralization make it a safe-haven asset in times of economic uncertainty.

However, the mainstream financial industry and economists have largely dismissed these claims, arguing that Bitcoin’s price is driven mainly by speculative trading and that it has no intrinsic value. Despite these criticisms, Bitcoin’s popularity and adoption continue to grow, with major companies and institutions like Tesla, MicroStrategy, and PayPal investing in the cryptocurrency.

In conclusion, Balaji Srinivasan’s $1 million bet on Bitcoin’s price reaching $1 million in 90 days is a bold move that reflects the growing optimism among Bitcoin proponents about the cryptocurrency’s future. While it remains to be seen whether Srinivasan will win the bet, the ongoing debate over Bitcoin’s value and role in the global economy is likely to continue for some time.

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Moody warns of stablecoin adoption risk

by Blockchain News

In its latest report, Moody’s Investors Service has warned that the recent instability in the traditional banking sector could have a negative impact on the adoption of stablecoins. The credit rating agency has highlighted the risks that fiat-backed stablecoins like USDC face, stating that the reliance of stablecoin issuers on a small set of off-chain financial institutions limits their stability. The depegging of USDC on March 10, which was caused by the sudden collapse of Silicon Valley Bank, has highlighted this risk.

Circle Internet Financial, the issuer of USDC, had $3.3 billion in assets tied up in the bank, and over the span of three days, the company cleared roughly $3 billion in USDC redemptions as the value of its stablecoin plunged to a low of around $0.87. However, USDC quickly regained its peg after the Federal Deposit Insurance Corporation announced that it would backstop all deposits held at Silicon Valley Bank.

Moody’s analysts believe that regulators are likely to pursue more stringent oversight of the stablecoin sector moving forward, given the recent market volatility and the potential risks associated with stablecoins. The credit rating agency has also warned that if USDC had not regained its peg, it could have suffered from a run and been forced to liquidate its assets. Such a scenario could have caused more runs on banks holding Circle’s assets, which could have led to the depegging of other stablecoins.

Despite the collapse of Terra, which led to calls for the regulation of stablecoins, Moody’s believes that fiat-backed stablecoins like USDC operate differently from algorithmic tokens and are less likely to fail. Nevertheless, the credit rating agency warns that stablecoin issuers must take steps to reduce their reliance on a small set of off-chain financial institutions to improve their stability.

In conclusion, the recent instability in the traditional banking sector and the depegging of USDC have highlighted the potential risks associated with stablecoins. While Moody’s believes that fiat-backed stablecoins are less likely to fail than algorithmic tokens, the credit rating agency warns that stablecoin issuers must take steps to reduce their reliance on a small set of off-chain financial institutions. With regulators likely to pursue more stringent oversight of the stablecoin sector moving forward, stablecoin adoption could be negatively impacted.

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Circle’s Stablecoin USDC Affected by Collapsed Bank

by Blockchain News

Circle CEO and co-founder Jeremy Allaire revealed that the stablecoin issuer had been able to access its $3.3 billion in funds held with Silicon Valley Bank since March 13. Allaire stated that he believed that almost everything was able to clear from the failed lender. However, USDC briefly de-pegged following news of the temporarily locked funds, leading to a drop in the stablecoin’s market cap by almost 10% since March 11.

USDC’s dollar peg has since recovered, but mass redemptions have affected its market cap. In contrast, USDC’s peer, Tether, has recorded a slight increase in its market cap since March 11, climbing over 1% to $73.03 billion. Although the temporarily locked funds represented less than 8% of the token’s reserves, it had a significant effect on USDC.

The January reserve report released on March 2 asserted that USDC was over 100% collateralized, with over 80% of the reserve consisting of short-dated United States Treasury Bills, which are highly liquid assets that are direct obligations of the U.S. government and considered one of the safest investments globally. Despite the impact of the collapsed bank, the reserve report provides assurance that USDC remains backed by highly liquid assets and overcollateralized.

USDC is one of the most widely used stablecoins in the cryptocurrency market, with a market cap of over $10 billion as of March 2023. Stablecoins are a type of cryptocurrency that is pegged to the value of a fiat currency, usually the U.S. dollar, and are designed to provide a stable store of value that can be used for transactions without the volatility typically associated with other cryptocurrencies like Bitcoin.

The news of the temporarily locked funds at Silicon Valley Bank highlights the potential risks associated with stablecoins, which are often seen as a safer alternative to other cryptocurrencies due to their stable value. However, the fact that these coins are backed by fiat currency reserves means that they are only as safe as the financial institutions that hold those reserves.

In recent years, there have been several high-profile cases of stablecoin issuers facing regulatory scrutiny or experiencing issues with their banking partners. For example, in 2018, Tether, the largest stablecoin issuer at the time, faced allegations that its reserves were not fully backed by U.S. dollars as it had previously claimed. Similarly, in 2021, the stablecoin issuer Centre, which is backed by Coinbase and Circle, faced a lawsuit alleging that it had violated securities laws by failing to register its USDC stablecoin with the U.S. Securities and Exchange Commission.

Despite these challenges, stablecoins have become an essential part of the cryptocurrency ecosystem, providing a way for traders and investors to move funds between exchanges and participate in decentralized finance (DeFi) applications without the risks associated with traditional fiat currencies.

In response to the risks associated with stablecoins, regulators around the world are increasingly taking steps to provide more oversight and regulation of these assets. For example, in the U.S., the SEC has signaled that it may consider stablecoins to be securities, which would subject them to greater regulatory scrutiny. Similarly, in the EU, regulators have proposed new rules for stablecoins that would require issuers to be authorized and subject to ongoing supervision.

In conclusion, the news of Circle’s temporarily locked funds at Silicon Valley Bank highlights the potential risks associated with stablecoins, but the fact that USDC remains overcollateralized with highly liquid assets provides some reassurance to investors. As stablecoins continue to play a critical role in the cryptocurrency ecosystem, it is likely that regulators will continue to scrutinize these assets and develop new rules to ensure their safety and stability.

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