Binance Dumps USDC Or New Stablecoin, Says Coinbase CEO

Binance, the world’s largest cryptocurrency exchange in terms of trading volume, has recently begun shifting its holdings of stablecoins from USDC to a lesser-known stablecoin. This transition was reported by Coinbase CEO Brian Armstrong.

During the second-quarter earnings calls of the company, someone asked Armstrong about the market cap of USDC. This remark came as USDC, the second-largest stablecoin by market share and the preferred choice on Coinbase, gained prominence. Armstrong said:

“Binance moved some of their funds from USDC into another stablecoin. Our data in the last six or seven weeks shows that the USDC market cap is up net of that. And so that’s an important data point.”

Coinbase is part of the consortium that owns USDC, which includes Circle and other cryptocurrency companies. Additionally, Binance previously held a substantial amount of USDC reserves but appears to be diversifying its stablecoin portfolio.

Isn't it interesting that USDt is being pressured down (slightly, within 10bps, just to push market makers to react), and USDc, the main competitor that you would expect being gaining from the situation, is redeemed heavily nevertheless, while suddenly a competitor born 2 days…
— Paolo Ardoino 🍐 (@paoloardoino) August 3, 2023

Binance Stablecoin Experiment

Coinbase and Binance to verify the news; unfortunately, no response was received before publication.

Binance has recently been observed redeeming USDC (United States dollars) through on-chain data. This activity has led some analysts to speculate that Binance may be directing these redemptions towards its newly preferred stablecoin called First Digital USD (FDUSD).

Binance has converted its USDC holdings to other stablecoins on multiple occasions. In September 2022, the crypto exchange stated it would convert held USDC to Binance USD (BUSD) automatically. The conversion involves Binance-branded stablecoin issued by Paxos Trust Company.

In the wake of the New York Department of Financial Services’ order to halt BUSD issuance by Paxos, Binance has been looking for alternative stablecoins. As a result, Binance turned to TrueUSD (TUSD) to fulfill its stablecoin requirements. However, TUSD faced a peg loss and ceased producing new tokens before June 10th.

The rise of FDUSD has captured the attention of Paolo Ardoino, Tether’s chief technology officer. In a recent tweet, he expressed that Tether (USDT), as the leading stablecoin in the market, faced downward pressure while its main competitor, USDC, also experienced significant redemptions.

USDC remains the second-largest stablecoin in terms of market share. However, its market capitalization has recently declined significantly, plummeting from $44.5 billion to $26 billion since the beginning of this year.

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