Binance's upcoming changes could help make USDC the standard stablecoin rail between CEXs and DEXs
Jeremy Allaire explains how Binance's upcoming changes could help make USDC the standard stablecoin rail between centralized exchanges (CEXs) and decentralized exchanges (DEXs).
Jeremy Allaire, CEO and co-founder of Circle, is unfazed by Binance's recent decision to stop supporting trades for USD Coin (USDC). Allaire believes that the move by Binance is not indicative of the overall health of the USDC or the digital currency markets.
Allaire's comments come as Binance prepares to launch its own USDC stablecoin on its platform. The move is seen as a way to increase the utility and adoption of the USDC stablecoin, and Allaire believes it is a positive development for both Binance and the USDC.
Binance Launches BUSD, a Stablecoin Backed by the US Dollar
The move by Binance to convert all customer funds held in USDC, USDP, and TUSD into its own native stablecoin, BUSD, on September 29th is a smart one. By doing so, it becomes the third largest stablecoin by market cap, behind only USDC and Tether's USDT. This move will no doubt please Binance customers, who will now have a more streamlined and efficient way to store and use their funds on the exchange.
The move is meant to “enhance liquidity and capital-efficiency” at the exchange by consolidating multiple dollar-equivalent cryptocurrencies around one asset. The move will help the exchange to run more smoothly and efficiently, while also reducing the amount of money that is tied up in different cryptocurrencies.
The change will eliminate trading of USDC at Binance, and cause all future USDC deposits to the exchange to be converted into BUSD. However, users can still choose to withdraw their BUSD account balance from the exchange in either USDC, USDP, or TUSD if they so choose. This change could cause some disruptions for users of Binance who are used to trading in USDC, but it could also provide more stability for the exchange overall.
In his tweet, Allaire claimed that the forced conversion of USDC to Binance will likely lead to more USDC flowing to Binance. This is good news for Binance, as it means that more people are using the platform and that the company is continuing to grow.
“With consolidated dollar books, it will now be easier and more attractive to move USDC to and from Binance for trading core markets,” he explained.
Looking at the current state of the cryptocurrency market, it is evident that there is a great need for stablecoins. Among the various stablecoins available, USDC appears to be one of the most promising. Unlike other stablecoins, USDC sees great volume and usage outside of Binance's exchange. This means that USDC has the potential to become the market's preferred stablecoin for moving funds between centralized and decentralized exchanges. With the support of Binance, it is highly likely that USDC will achieve this goal.
“I am very confident in the long game we have played and are playing w USDC, and with Circle’s role as a NEUTRAL market infrastructure player,” concluded the CEO.
What About Tether?
It is interesting to see that Binance has excluded USDT from its consolidation plans. USDT is still the world's largest stablecoin, so it will be interesting to see how this affects trading at the exchange.
I believe that the USDT is not close to qualifying as a cash-equivalent asset and that a transition to BUSD would be too disruptive. I think that Binance is doing the right thing by keeping USDT as a liquidity option.
It is clear that Tether faces some serious criticisms concerning the reliability of its reserve assets. This is in part due to its reliance on commercial paper, which is not as secure as cash or treasuries. However, it is important to remember that Tether is still the largest and most popular stablecoin in the market, and it has shown itself to be a reliable platform thus far.
Tether has defended itself against allegations that it is not a stablecoin. The company clarified that it plans to eliminate its commercial paper holdings by the end of the year and that its business remains profitable. This shows that Tether is committed to being a stablecoin and remaining profitable.
I believe that Binance's decision to exit the USDC market is a good thing. Circle's CEO, Jeremy Allaire, believes that this move will help to stabilize the market and bring more legitimacy to the cryptocurrency space.