In the stablecoin market, USDT issued by Tether took the lead in drawing a strong and colorful stroke with its first mover advantage.
However, the frequent occurrence of events such as account funds opacity, mortgage rate issues, and the alleged random additional issuance of USDT has caused the market to question USDT many times, and also allowed the "latecomers" in the stable currency market to find the direction of their efforts. One of the main directions for USDC, which has been the "second place" in stable currency for a long time, is "compliance."
Backed by Coinbase and Circle, USDC in early 2021 has already begun gearing up. The beginning of 2021 is a special time. It coincides with the SEC change and the digital currency market soaring. The stablecoins collectively ushered in a less stable market supervision environment. In the past two weeks, relevant US regulatory agencies have frequently spoken out about stablecoin supervision.
On January 5th, the U.S. Office of the Comptroller of the Currency allowed banks to issue and use stablecoins for payment. On the other hand, debank data shows that the supply of stablecoins on Ethereum increased from US$3.425 billion at the beginning of the year to US$21.092 billion, an increase of 516%. Among them, the supply of USDT ranked first, accounting for 63.29% of the total supply of stablecoins, followed by USDC, accounting for 20.36%.
(Data source: debank)
In the new market environment, the USDT cake is far from what it was a few years ago. Perhaps, it is time to be divided?
USDC's ambitions
Jeremy Allaire, the founder of the USDC issuer, has been speaking on Twitter recently, and it seems that he can't bear it.
On the evening of January 4, the United States’ largest banking regulator, the Office of the Comptroller of the Currency (OCC) of the U.S. Department of the Treasury, announced on its official website that U.S. banks are allowed to use chains and USD stablecoins as the settlement infrastructure in the U.S. financial system.
The document stated that banks may use stablecoins to facilitate customers' payment transactions on the independent node verification network, including the ability to issue stablecoins and exchange the stablecoins for legal tender. This news is widely regarded by the community as "an important step for the public chain to replace SWIFT (a global financial communication network between banks)."
In response to this, Jeremy Allaire, CEO of Circle, the issuer of the stable currency USDC, posted 9 consecutive tweets, praising the "great victory" of this digital currency and stable currency. His main points include:
1. Breaking news from the U.S. Office of the Comptroller of the Currency, the largest banking regulatory agency (OCC) in the United States. Under the guidance of the new policy, U.S. banks can use public chains and USD stablecoins as the settlement infrastructure of the U.S. financial system.
2. The new interpretation letter stipulates that banks can treat public chains as infrastructures similar to SWIFT, ACH and FedWire, and treat stable currencies such as USDC as electronic value storage tools. This is of great significance and should not be underestimated.
3. Decentralized, license-free, open source, and network-based software is gradually becoming the foundation of the US financial system and the global economy.
4. This paves the way for the use of advanced dollar digital currencies, such as USDC, as the mainstream payment medium for all payments and settlements, and helps the United States take the lead in embracing the power of public chains.
5. It also provides a basis for financial institutions to run blockchain nodes. These institutions can even become verification nodes but subject to supervision.
As early as the second half of last month, the US President’s Financial Markets Working Group once again reiterated its position on stablecoins. The relevant statement issued by it stated:
The United States encourages payment innovations that include USD secured payment systems and related stablecoins, but stablecoins must comply with applicable U.S. laws, regulations and regulatory requirements.
These regulatory requirements mainly include that stablecoins must comply with anti-money laundering, anti-terrorist financing, and one-to-one redemption regulations. There are indications that the US authorities' regulatory framework for stablecoins seems to be still tightening. As a compliant USD stablecoin jointly issued by Coinbase and Circle, USDC is considered a beneficiary under the new regulatory framework. This second-ranked stablecoin has only been launched for more than two years, and it has recently expanded its market share again, and its issuer's payment ambitions in digital assets have been revealed.
(Active Circle CEO Jeremy Allaire)
Circle Development History: Survival with Broken Arm 2019, Institutional Year 2020
Currently, USDC is second only to USDT among stable currencies.
In September 2018, USDC was launched as a "fully collateralized USD stablecoin", which is a compliant USD stablecoin jointly issued by Circle and Coinbase, which meets most of the regulatory requirements.
Among them, Circle is a digital currency-based startup under Goldman Sachs, and Coinbase is the first bitcoin exchange in the United States with a formal license. This background has allowed USDC to gain the recognition of the first batch of digital currency exchanges.
In response to the fact that "USDT’s issuer, Tether, does not have a third-party audit of its 100% reserve ratio", Circle’s CEO bluntly stated long before launching the stablecoin: The company only makes sense to create a stablecoin that is trusted globally."
Indeed, Circle has always emphasized at the beginning of the USDC issuance that the company’s operations are transparent, and regular and credible reports from third-party auditing companies can be used to prove that the issuance of these stablecoins is based on the full amount deposited in third-party banks U.S. dollars are reserved. At the same time, USDC's assets are under bank custody, and banks have higher regulatory requirements, and funds are relatively safer.
In terms of compliance, Circle has already prepared payment licenses in the United States, the United Kingdom, and the European Union, and has a compliance channel for U.S. dollars, pounds, and euros to enter and exit digital assets. Circle was once known as the company with the largest number of licenses in the crypto asset industry in the world. In addition, partners who subsequently joined its system and issued USDC must also hold a local digital asset industry license.
Time to return to the beginning of USDC issuance, September 2018, the timing did not seem so good. Looking at the development of the digital currency market, after this point in time, the market has gradually turned from a bull market to a bear market.
In the face of the slow bear market in 2019, Circle's choice is to cut off the side branches and focus on "stable coins".
At the end of 2018, Circle first sold its cryptocurrency exchange Poloniex, and then sold its over-the-counter (OTC). In April 2019, Circle again focused its retail digital asset business Circle Invest on USDC-related businesses.
By 2020, Circle's main line layout is still "payment".
In cooperation within the blockchain industry, the issuance of USDC is increasing. Last year, Circle successively cooperated with faster computing public chains such as Stellar, Solana and Algorand, and released the corresponding version of USDC on the chain.
In August 2020, in the face of the raging DeFi, Circle introduced the concept of "transaction without gas" and launched USDC 2.0.
On the other hand, cooperation with traditional payment institutions is also an important direction for Circle to expand.
In March 2020, Circle launched the stable currency business API and USDC business accounts to allow more companies to accept USDC as a payment method. The number of such accounts soon exceeded 1,000. Jeremy Allaire publicly stated that most of these new users come from Internet companies. Judging from feedback from Asian market participants, these growing demands are mainly from small and medium-sized enterprises, their demand for a safe and practical digital dollar.
At the end of July of the same year, Circle and Genesis reached a strategic cooperation and won the investment. Public information shows that the main purpose of funding this time is still to promote USDC's global adoption.
Just one month ago, Circle released its heavy news in the direction of payment at the end of the year: On December 2, 2020, payment giant Visa will reach a cooperation with Circle to connect its payment network with 60 million merchants to the future The stable currency USDC issued by the author is integrated.
The cooperation with Visa has made digital currency payment a big step forward. At this stage, the cooperation between the two is mainly to integrate USDC into the platform of selected Visa credit card issuers to support USDC payments. Previously, companies that have signed a digital asset service with Visa can try to integrate USDC.
(The cooperation between Visa and Circle has attracted widespread attention)
USDC also won some special titles during the global outbreak last year. Last year, USDC was used to distribute aid funds to the Venezuelan people. The donor used the original funds to mint the USD stablecoin USDC and transferred it through the USD-denominated payment platform based on blockchain technology. For this reason, some foreign media commented on USDC as "a new weapon for the United States to penetrate other countries."
All kinds of "penetration" feedback on real data is the rapid rise of USDC circulation value. Jeremy Allaire stated at the beginning of this year that USDC circulation increased by 1 billion in December last year, and the increase will reach 800% in 2020. At present, USDC circulation has reached 4.36 billion.
Although it is still far from the circulation of USDT, the second-ranked USDC is paying off.
2021: Stability and Instability of Stable Coins
In addition to USDC, a compliant stablecoin with a large institutional background is advancing, the decentralized autonomous organization on Ethereum Maker DAO's stable currency, DAI, suddenly emerged, standing on the second line of stable currency. From the perspective of liquidity and transaction volume, although Tether still maintains its leading position in the near term, other stablecoins may still catch up.
While innovative products continue to emerge, supervision is gradually becoming stricter. In November 2020, members of the US Congress jointly proposed a draft of the "STABLE" stable currency regulation of intent. The draft requires stable currency issuers to hold a bank license and must be approved by the competent authority before issuing the currency. This instantly ignited the industry Many dissatisfaction within. Subsequently, when the US White House Financial Markets Working Group issued comments on the draft, although its attitude was moderate, it still did not further clarify the legal status of stablecoins.
The dispute continues, and some uncertainties still exist.
However, many people remain optimistic about this. Huang Tianwei, founder and chairman of BitTimes Group, mentioned in his market expectations for 2021: "USDT is being challenged. Second-tier stable currencies such as USDC and DAI have risen on a large scale. Multi-country stable currencies such as EUR/KRW/JPY come out and DCEP begins. Commercial use for overseas trade settlement.” With the maturity of blockchain technology and the birth of more applications, the stablecoin market has gradually matured. If encrypted assets are finally used for international payments and global remittances on a large scale, then stablecoins will naturally become a real cryptocurrency transaction medium. Since stablecoins are a new entrance adopted by cryptocurrency users, its importance is self-evident.