Circle's USD Coin (USDC), a stablecoin issued by Circle, has seen its market cap drop nearly by half over the past six months, thanks to regulatory crackdowns and a banking crisis. Circle CEO Jeremy Allaire recently cited the cryptocurrency crackdown by US regulators as the major reason behind USDC's declining market capitalization. He stated that there is "a tremendous amount of worry about the US banking system" and the "regulatory environment in the US" on a worldwide scale.
USDC depegged in March earlier this year as a result of the US banking crisis. Silicon Valley Bank, one of the three crypto-friendly banks that were shut down by regulators, was where Circle's $3.3 billion in USDC reserves were held. At the time, Circle informed its clients that they had the financial resources to fill the shortfall, but the market responded rapidly to the news, and the value of USDC depreciated against the US dollar.
USDC once had a market cap of $56 billion at its peak and was sitting right behind Tether-issued USDT. However, with the advent of the banking crisis and its depeg, USDC’s market cap has been cut nearly in half and is currently sitting at $30.7 billion.
The lack of regulatory clarity, according to a warning from Coinbase, may lead cryptocurrency businesses to explore business possibilities abroad. With the recent passing of the Markets in Crypto-Assets Act, known as MiCA by the European Parliament, and the push for adoption by Hong Kong, Allaire believes the US will be left behind.
Under the leadership of Gary Gensler, the US Securities and Exchange Commission (SEC) has been actively pursuing enforcement actions against various crypto platforms and exchanges following the FTX collapse incident. However, Gensler has faced resistance from policymakers and crypto enthusiasts alike during oversight hearings on digital assets, with some questioning the legitimacy of the SEC and Gensler's authority.
Allaire has called for Congress to step up at this critical moment in the US. It remains to be seen whether the US will provide the regulatory clarity that crypto companies are looking for or whether they will have to look overseas to grow their businesses.
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