Circle CEO Jeremy Allaire has recently revealed to Bloomberg TV that the increased US regulatory scrutiny of cryptocurrencies has significantly impacted the market capitalization of the USD Coin (USDC). This crackdown comes in the wake of the FTX exchange collapse, a major banking crisis, and the depegging of the USDC.
USDC, a popular stablecoin, was depegged in March due to the US banking crisis, leaving Circle’s $3.3 billion worth of USDC reserves trapped in Silicon Valley Bank. This institution was one of the three crypto-friendly banks shuttered by regulators during the banking crisis. Despite Circle’s assurances that investor backing was available to bridge the gap, the market swiftly reacted to the news, and USDC depegged from the US dollar.
USDC, at its peak, had a market cap of $56 billion, making it second only to Tether-issued USDT among stablecoins. However, the aftermath of the banking crisis and USDC’s depegging saw the stablecoin’s market cap nearly halve, standing at $30.7 billion today.
Allaire expressed his concern that the ambiguous regulatory environment in the US might push crypto businesses to seek greener pastures abroad. With the recent enactment of the Markets in Crypto-Assets Act (MiCA) by the European Parliament, and the Hong Kong government’s enthusiastic push for crypto adoption, Allaire fears the US may be left trailing in the digital dust.
Allaire has made a plea for Congress to step up to the plate, describing the current scenario as a critical juncture for the US. Under the leadership of Gary Gensler, the US Securities and Exchange Commission (SEC) has been relentless in its enforcement measures following the FTX debacle. The SEC has even threatened regulatory action against multiple crypto exchanges and platforms.
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During a recent oversight hearing on digital assets, Gensler faced resistance from policymakers. Numerous crypto advocates have also questioned the SEC’s authority and Gensler’s role. This uncertain regulatory landscape has stirred concern and instigated a reduction in USDC’s market capitalization.
In summary, the intensified scrutiny and regulatory actions targeting cryptocurrencies by US regulators have been pivotal in the declining market capitalization of USDC. Allaire’s comments underscore concerns regarding regulatory clarity and the global standing of the US banking system. As the European Parliament moves forward with the Markets in Crypto-Assets Act (MiCA) and Hong Kong advances its crypto adoption drive, the US runs the risk of lagging in the rapidly evolving crypto sector. It is now crucial for Congress to bring about clear regulatory directives to keep the US competitive in the expanding crypto industry.
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