EU regulations shift the balance of Tether (USDT) and Circle USD (USDC)

The EU regulations Markets in Crypto-Asset Regulation (MiCA) led to immediate effects for trading products on centralized exchanges. Exchanges targeting EU traders changed their available products, to avoid USDT and several other stablecoins like DAI.

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Europe is a relatively active market for crypto, with users making up more than 17% of transactions . However, the spread of USDC may also affect the US markets, due to the more prominent regulated status of Circle’s token. 

USDC issuance becomes more active since June

The long-running dominance of USDT means the shift is subtle. In the past month, the supply of USDT remained unchanged, while there is an uptick in USDC issued. The supply of USDT remained around 112B tokens. At the same time, USDC expanded by 1.7B tokens in the past two weeks. 

The growth of USDC also comes from usage on the Base blockchain by Coinbase. More than $2.9B of the supply of USDC is now on Base, flowing into its DEX, DeFi and gaming ecosystem. The Base blockchain supports bridged USDC, but also a native version of the token since September 2023. 

USDC can also work as a fintech tool for payments. The token will remain represented on Algorand, which was recently abandoned by Tether. USDC grew its balance on Algorand in June, rising by more than 450% after several mints.

Tether’s USDT is still protected by having a significant presence on the TRON blockchain. More than 50% of the supply of USDT is spreading to the TRON chain. The majority of tokens are still on Ethereum. Bridging also means around $5B of USDT is flowing into L2 scaling chains. Additionally, USDT is offering native solutions for growing the Telegram ecosystem, with nearly $600M in tokens issued in Q2.

Binance shifts to USDC for futures trading products

For Tether, the most significant changes have affected futures-trading products . For regular users, storing, exchanging and spot trading with USDT is still possible. USDT trading volumes remained relatively unchanged, stabilizing around $53B in 24 hours. USDC volumes started to pick up at the end of June, rising to a peak of $10B in 24 hours, while usually ranging at $5B in 24 hours. 

Binance has now started the process of shifting to USDC. The Circle team also continues to point out its asset is the only stablecoin with regulatory approval. USDT products on Binance relaunched in USDC pairings, while tokens that were not MiCA compliant were only available for spot trading. 

USDC still carries around 33% of the supply of USDT, and Binance may be key in popularizing the token. USDC is also spreading to decentralized exchanges, where it offers slightly higher security due to the ability of Circle to freeze tokens in case of exploits. 

On Binance, the latest-listed trading pairs make the most use of USDC. Most recently, Binance added LayerZero’s airdrop token, in a new ZRO/USDC pairing. Additionally, Binance encouraged the usage of USDC with a period of zero fee trades.

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OKX has the second-largest share of new USDC listings. Additionally, in April, Binance shifted its Secure Assets Fund to USDC for safer storage. The real shift to using a regulated stablecoin may be slow, as USDT can still exist on global markets with less strict regulations. 

The biggest concern of MiCA is that “asset-referenced tokens” have a reliable, liquid and separate storage. This regulation aims to avoid unreliable collaterals, as well as reusing the same collateral to back new stablecoins. USDC is the only token backed by provable funds, unlike Tether’s approach of using US government bonds. In the case of EU regulations, the reserves of Tether do not satisfy the conditions for an officially approved token.

Cryptopolitan reporting by Hristina Vasileva