(Bloomberg) – The regulatory crackdown on cryptocurrencies is proving to be a boon for a token located outside of the US and being scrutinized for the transparency of its reserves.
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Tether Holdings Ltd’s USDT — the world’s largest stablecoin — has increased its market share by about $1 billion in the last 24 hours alone, as some traders shifted their holdings from competitors following a series of enforcement actions by financial regulators in the United States.
$2.5 billion has flown into USDT since early February, taking total supply to $69.4 billion from $67.8 billion on Tuesday, according to data site DeFiLama. During the same period, Circle’s USDC saw outflows of $1.45 billion and Paxos’ BUSD lost $710 million. Both operate under the supervision of US authorities.
The new inflows into USDT increased its market share to 51%, according to DeFiLama.
A new wave of regulatory activity is spooking investors. On Monday, the New York Department of Financial Services ordered rival stablecoin issuer Paxos to stop minting new Binance-branded BUSD tokens citing “unresolved issues” in overseeing its relationship with Binance.
The U.S. Securities and Exchange Commission may seek to designate BUSD as an unregistered security, Paxos said, adding that it “categorically disagrees” and will “proceed vigorously if necessary.”
The turmoil surrounding BUSD follows an announcement last week that San Francisco-based exchange Kraken will pay $30 million to settle SEC allegations that its staking product violated agency rules .
US crackdown aims to push crypto back to the fringes of finance (1)
The message for traders is clear: the crackdown is accelerating, prompting some of the larger companies to seek safe havens away from US regulators.
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Nagendra Bharatula’s G20 group is contributing to this shift and was one of the companies that sold their USDC in favor of cash dollars and USDT.
“Amid these regulatory concerns, capital is rotating from USDC to Tether,” the senior portfolio manager and founder of the Zug-based fiat and digital asset trading and technology company said in an interview.
In the last 24 hours alone, USDT’s market cap grew by $1 billion, data from DeFiLama shows. Both USDC and BUSD shrank, losing $280 million and $690 million, respectively.
A spokesman for Circle declined to comment. Tether did not respond to a request for comment. A Paxos spokesman referred to his recent statements on developments surrounding BUSD.
What are stablecoins?
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Digital tokens that aim to maintain a one-to-one value with a less volatile asset like the dollar, typically by holding large reserves as segregated collateral
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They are commonly used by crypto traders to enter and exit positions, making them the most traded digital assets by volume.
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Stablecoins have come under increased regulatory scrutiny following the $40 billion collapse of TerraUSD, which relied on algorithmic incentives with its sister token LUNA to sustain its value.
According to Clara Medalie, head of research at data firm Kaiko, the type of enforcement US regulators are pursuing is often criticized for creating room for regulatory arbitrage by offloading activities to other jurisdictions.
“Essentially we’re sticking with Tether now,” she told Bloomberg TV. “It’s never good to have all risks concentrated in a single, centralized entity, but I’m afraid with Tether we kind of have that now.”
–Assisted by Emily Nicolle.
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