Coinbase CEO Brian Armstrong made a noteworthy comment about the stablecoin USD Coin (USDC) during the company’s second-quarter earnings call. Armstrong mentioned that Binance, a major crypto exchange, had moved some of its funds from USDC to another stablecoin. Despite this, the market cap of USDC remained stable, which he considered an important data point.
USDC is Coinbase’s preferred choice of stablecoin, and the crypto exchange is a member of the consortium that owns USDC. It was also revealed that Binance, at one point, held a significant amount of USDC reserves but has since converted a portion of it to other stablecoins.
Cointelegraph reached out to both Coinbase and Binance for confirmation but did not receive a response at the time of publication. However, on-chain data suggests that Binance has recently been redeeming USDC for United States dollars, leading many market observers to believe that the funds are being directed towards its new stablecoin called First Digital USD (FDUSD).
This isn’t the first time Binance has converted USDC to other stablecoins. In September 2022, the crypto exchange announced that it would auto-convert all user-held USDC on the platform to Binance USD (BUSD), the stablecoin issued by Paxos Trust Company. At that time, Binance did not disclose whether it planned to sell or convert its reserves to other stablecoins.
Binance has been exploring alternative stablecoins since the New York Department of Financial Services ordered Paxos to stop issuing the dollar-pegged BUSD stablecoin. Binance initially turned to TrueUSD (TUSD) to address its stablecoin needs, but TUSD’s issuance was halted due to depegging. As a result, Binance has recently adopted FDUSD, a relatively unknown stablecoin issued by a Hong Kong-based company.
FDUSD has gained traction in recent weeks, particularly after Binance launched several trading pairs for the stablecoin and offered zero trading fees. The rise of FDUSD even caught the attention of Tether’s chief technology officer, Paolo Ardoino, who noted that Tether was facing pressure and that USDC was also being heavily redeemed.
USDC, once seen as the main competitor to Tether, has seen a significant decline in its market cap over the past year. Starting at $44.5 billion at the beginning of the year, USDC’s market cap has fallen nearly in half, currently standing at $26 billion.
In conclusion, the comments made by Coinbase CEO Brian Armstrong regarding Binance’s movement of funds from USDC to another stablecoin have raised questions about the stability and market share of USDC. The increasing adoption of FDUSD by Binance further highlights the evolving landscape of stablecoins and the competition between them.