Over the past year, the market dominance of dollar-pegged stablecoins has experienced significant shifts. While most have witnessed a downturn, Tether‘s USDT has returned to its all-time high. According to data from CoinGecko, Circle‘s USD Coin (USDC) has seen its market share dwindle from 34.88% to 23.05% at the time of writing. Binance USD’s (BUSD) market share also plunged from 11.68% to 4.18% in the same period, while Dai’s (DAI) participation remained steady at 3.66%, down slightly from 4.05% in May 2022.
Contrarily, USDT’s market dominance currently stands at 65.89%, up from 47.04% a year ago. Its market capitalization reached an impressive $83.1 billion, while USDC’s market cap shrank to $29 billion from its peak of $55 billion. Circle CEO Jeremy Allaire attributes USDC’s declining market capitalization to the US regulators’ crackdown on the crypto industry, asserting that the current US climate is more favorable for Tether.
The adaptation of stablecoins to the connection between the crypto space and traditional finance only continues to grow in popularity. Despite this, a report by the European Systemic Risk Board emphasizes the need for increased transparency in the digital assets market, specifically for stablecoin reserves.
Tether has faced heavy scrutiny and criticism over its lack of transparency in recent years. In 2021, the Hong Kong-based iFinex-owned crypto firm was fined $18.5 million by the New York Attorney General’s Office for supposedly deceiving users about the fiat reserves backing its stablecoin. As part of the settlement, Tether was required to provide greater financial transparency. In response to these allegations, Tether’s leadership has staunchly defended itself on social media.
In light of Silicon Valley Bank’s collapse and the economic uncertainty it has caused, both Tether and Circle have sought to reduce their exposure to the banking system. Tether’s latest audit shows that it moved over $4.5 billion out of banks in Q1 2023, significantly reducing counterparty risk. Furthermore, Tether increased its holdings of US Treasury bills to a new record of over $53 billion, or 64% of its reserves. Alongside other assets, USDT is now backed by 85% cash, cash equivalents, and short-term deposits.
Circle has made similar moves to mitigate risk in the face of macroeconomic uncertainty. The company has reportedly adjusted its reserves, and it no longer holds Treasuries with maturities beyond early June. As the crypto landscape continues to develop and face scrutiny, the contest for stablecoin market dominance remains an ongoing, ever-evolving affair.
Source: Cointelegraph
