Coinbase CEO Brian Armstrong’s comments to a question about the USD Coin (USDC) stablecoin during the company’s second-quarter earning calls raised some eyebrows.
While commenting on the market cap of USDC, Armstrong quipped that Binance moved some of its funds from USDC into another stablecoin, but despite that, the market cap of USDC has held up.
“Binance actually moved some of their funds from USDC into another stablecoin. I think the data we have in the last six or seven weeks, I believe, that the USDC market cap is up net of that. And so that’s an important data point.”
USDC is the preferred choice of stablecoin on Coinbase, and the crypto exchange is a member of the consortium that owns USDC. Binance crypto exchange once also held a significant amount of USDC reserves; however, based on Armstrong’s comments, it seems the crypto exchange has converted a chunk of its holdings to other stablecoins.
Cointelegraph reached out to Coinbase and Binance to confirm the news but did not receive a response by publication.
According to on-chain data, Binance has been redeeming USDC for United States dollars recently, with many market observers believing it is going toward its new stablecoin of choice called First Digital USD (FDUSD).
The cartel is turning. Please advise. https://t.co/T8PLDNfu2n
— Not Tiger Global (@NotChaseColeman) August 4, 2023
However, this isn’t Binance’s first conversion of USDC to other stablecoins. In September 2022, the crypto exchange announced it would auto-convert all user-held USDC on the platform to Binance USD (BUSD), the Binance-branded stablecoin issued by Paxos Trust Company. At the time, the exchange didn’t reveal whether it planned to sell or convert its reserves to other stablecoins
Binance has long been looking for new stablecoins after the New York Department of Financial Services ordered Paxos to stop issuing the dollar-pegged BUSD stablecoin. Binance later turned to TrueUSD (TUSD) to mitigate its stablecoin needs; however, TUSD depegged, and its issuance was halted by June 10.
Binance has since turned to another relatively unknown stablecoin — FDUSD. The new stablecoin issued by a Hong Kong-based company has gained traction over the past few weeks after Binance launched several trading pairs for the stablecoin, along with zero trading fee offers.
Related: USD-backed stablecoin pilot project launched by Pacific island nation of Palau
The rise of FDUSD even garnered attention from Tether chief technology officer Paolo Adriono, who noted that Tether (USDT) was pressured down and USDC, its main competitor, was also heavily redeemed.
Isn’t it interesting that USDt is being pressured down (slightly, within 10bps, just to push market makers to react), and USDc, the main competitor that you would expect being gaining from the situation, is redeemed heavily nevertheless, while suddenly a competitor born 2 days…
— Paolo Ardoino (@paoloardoino) August 3, 2023
USDC is the second-largest stablecoin by market share and was once seen as the true competitor to the market leader, USDT. However, in the past year, USDC’s market cap has shrunk by nearly half, falling from $44.5 billion at the start of the year to $26 billion at the time of writing.
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