26 Apr 2023 Marsha Tusk
USDC May Soon Leave The United States
According to Circle CEO Jeremy Allaire, the regulatory scrutiny and efforts by regulators to discredit the cryptocurrency market are to blame for the ongoing decline in the market value of the USD Coin (USDC) stablecoin. Due to the absence of regulatory clarity in the US, Allaire claimed that investors are striving to "de-risk out of the US".
In light of regulatory and banking issues, the CEO of USDC Issuer Circle suggests leaving the US soon, USDC stablecoin's market cap plunged to $30.6 billion, following a downward trend that began in mid-2022. While USDC is losing value, other stablecoins like Tether (USDT) have regained over $81 billion throughout this year's market upswing.
“We are seeing a huge amount of concern globally about the US banking system. We are seeing concern about the regulatory environment in the US.” Allaire noted.
The majority of the USDC stablecoin reserves, however, are denominated in US treasuries and cash deposits used to secure the stablecoin`s value. During the financial crisis, the USDC lost its peg to the US dollar as US regulators shut down Silicon Valley Bank, Silvergate, and Signature, three crypto-friendly banks, as part of Operation Choke Point 2.0.
Due to USDC's compliance with OFAC, cryptocurrency exchanges, businesses, and investors are abandoning it. Circle quickly locked USDC in blacklisted wallet addresses when the U.S. Treasury Department's OFAC sanctioned cryptocurrency mixers like Tornado Cash.
Following the Terra-LUNA crash and the FTX meltdown, regulators are now paying closer attention to stablecoins. As a result, a number of American cryptocurrency exchanges and businesses are leaving the country.
Circle Internet Financial has submitted a regulatory application in France, choosing the nation for its European growth. Circle will increase its visibility and interaction with regulators throughout the European market now that the MiCA regulation of the European Union has been passed.
Impact of NY Fed Policy Change on Circle Fund
The criteria for Reverse Repo Counterparties eligibility and the Policy on Counterparties for Market Operations have both been modified by the New York Fed. It will render Circle's USDC reserve fund, the Circle Reserve Fund, managed by BlackRock, ineligible for the reverse buyback program.
Stablecoins were implicitly prohibited by the Fed, limiting program eligibility to conventional financial institutions.
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