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Circle CEO attributes shrinking USDC market capitalization to US cryptocurrency regulations.
Circle CEO Jeremy Allaire states that a crackdown on cryptocurrencies by U.S. regulators has significantly contributed to the decreasing market capitalization of its stablecoin, USD Coin (USDC).
Allaire’s remarks regarding the U.S. regulatory actions arise amid intense scrutiny following the downfall of the FTX exchange, a banking crisis, and the temporary depegging of USDC. In an interview with Bloomberg TV, Allaire emphasized that there is a “huge amount of concern globally about the U.S. banking system,” as well as the “regulatory environment in the U.S..”
USDC experienced a depegging in March, directly linked to the U.S. banking crisis. Circle’s reserves of $3.3 billion in USDC were tied up with Silicon Valley Bank, one of the three crypto-friendly banks that regulators closed. At that time, Circle reassured its customers that it had sufficient backing from investors to cover the shortfall, but the market reacted swiftly to the news, leading to USDC’s depegging from the U.S. dollar.
USDC market capitalization fell by 32% in 2023. Source: CoinMarketCap
USDC previously reached a market cap of $56 billion at its peak, ranking just behind Tether’s USDT. However, following the banking crisis and the depegging of USDC, the stablecoin’s market cap has been nearly halved, now standing at $30.7 billion.
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Coinbase has also cautioned that the absence of regulatory clarity might compel crypto firms to seek opportunities abroad. With the recent approval of the Markets in Crypto-Assets Act (MiCA) by the European Parliament and the push for adoption in Hong Kong, Allaire believes the U.S. risks falling behind.
“It’s a critical moment here in the U.S., and, as I like to say, it’s really a moment for Congress to step up.”
The U.S. Securities and Exchange Commission, led by Gary Gensler, has been actively enforcing regulations since the FTX collapse. The SEC has signaled potential regulatory actions against various crypto platforms and exchanges.
Gensler has encountered significant resistance from lawmakers during the oversight hearing on digital assets. In addition to policymakers, numerous crypto advocates have also questioned the SEC’s authority and Gensler’s role.
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