Binance exchanged USDC for a different stablecoin, according to the CEO of Coinbase.

Comments made by Coinbase CEO Brian Armstrong regarding the USD Coin (USDC) stablecoin during the company’s second-quarter earnings call attracted attention.

In discussing the market capitalization of USDC, Armstrong noted that Binance had shifted some of its assets from USDC to another stablecoin; however, he pointed out that the market cap of USDC has remained stable.

“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 favored stablecoin on Coinbase, and the crypto exchange is part of the consortium that governs USDC. Binance previously held a considerable amount of USDC reserves; however, based on Armstrong’s remarks, it appears that the exchange has converted a portion of its holdings to other stablecoins.

Cointelegraph reached out to both Coinbase and Binance for confirmation of this information but did not receive a response by the time of publication.

On-chain data indicates that Binance has been redeeming USDC for U.S. dollars recently, with many market analysts suggesting that these funds are being directed toward its newly preferred stablecoin, First Digital USD (FDUSD).

CZ + Sun have been exiting $USDT via $USDC to get USD. Tether can't redeem billions.
New stablecoins emerge. $TUSD denominated volumes went from 0% to 20% in just a few months. #Binance controls 90% of $TUSD supply. This is very simple.
The cartel is turning. Please advise. https://t.co/T8PLDNfu2n

— Not Tiger Global (@NotChaseColeman) August 4, 2023

This is not the first instance of Binance converting USDC to other stablecoins. In September 2022, the exchange announced it would automatically convert all user-held USDC on its platform to Binance USD (BUSD), the Binance-branded stablecoin issued by Paxos Trust Company. At that time, the exchange did not disclose whether it intended to sell or convert its reserves to other stablecoins.

Binance has been actively seeking new stablecoins following the directive from the New York Department of Financial Services that required Paxos to cease issuing the dollar-pegged BUSD stablecoin. Subsequently, Binance turned to TrueUSD (TUSD) to address its stablecoin requirements; however, TUSD lost its peg, and its issuance was suspended by June 10.

Since then, Binance has shifted its focus to another relatively lesser-known stablecoin — FDUSD. This new stablecoin, issued by a Hong Kong-based firm, has gained popularity in recent weeks after Binance introduced several trading pairs for it, along with offers of zero trading fees.

Related: USD-backed stablecoin pilot project launched by Pacific island nation of Palau

The emergence of FDUSD has even caught the attention of Tether’s chief technology officer, Paolo Ardoino, who remarked that Tether (USDT) was experiencing downward pressure and that USDC, its primary competitor, was also being 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 ranks as the second-largest stablecoin by market share and was once regarded as a significant rival to the market leader, USDT. However, over the past year, USDC’s market capitalization has decreased by nearly 50%, dropping from $44.5 billion at the beginning of the year to $26 billion at the time of writing.

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