The banking crisis that gripped the United States had a knock-on effect on stablecoins, particularly Circle’s USDC. Investors flocked to rival stablecoin Tether (USDT) as the value of USDC fell below the $1 mark. While the asset has regained its dollar peg, the project’s market cap has fallen significantly.
USDC is not the only stablecoin facing problems. In mid-February 2023, Binance’s BUSD stablecoin was issued by Paxos saw the end of its issuance. The US Securities and Exchanges Commission (SEC) cited Paxos Trust for not declaring the Binance stablecoin as a security. BUSD has been identified by the SEC as an unregistered security, with potential legal ramifications. The New York Department of Financial Services ordered Paxos Trust Co. to stop printing even more BUSD.
With two major players in the stablecoin industry out of the way, Tether (USDT) has managed to attract a significant customer base from both platforms. USDT supply is up more than 10% in the last 30 days to $77.8 billion, according to data from CryptoSlate. Even Binance founder and CEO CZ acknowledged USDT’s growth on Twitter.
#BUSDthe most fiat-backed stablecoin, controlled by big audit firms, regulated by the NYDFS, was forced to shut down (no new coin).
USDC is also shrinking in market cap due to bank closures.
USDT is growing. pic.twitter.com/q5OYQdpAtW
— CZ
Binance (@cz_binance) March 21, 2023
In addition, Tether handled more settlements in 2022 than Visa and MasterCard, two of the largest payment platforms. While Visa and Mastercard settled $7.7 trillion and $14.1 trillion respectively, Tether handled $18.2 trillion. Moreover, Indonesia has announced that the country is going to phase out Visa and Mastercard. In addition, the development is likely to lead to an increase in the use of Bitcoin (BTC) and USDT, as noted by Gabor Gurbacs.
The Downside of Tether (USDT)
While Tether has maintained its popularity among users, there are some aspects that raise criticism. One of the biggest drawbacks of the project is its reluctance to share its proof of reservations. Despite repeated promises, the platform has not been transparent about whether each token is backed 1:1 by the dollar or not.
In February 2023, the company completed its reserve certificate from the well-known international accountancy firm BDO. stablecoin on February 9. According to the CRR, Tether has consolidated assets worth at least $67 billion, more than its liabilities, which total $66 billion, and excess reserves of at least $960 million. However, full coverage of the assets is still owed on the part of the company.