Regulation
USDC Hits $23 Billion in Trading Volume: Here’s How
Trading volume for USDC stable currency has risen to $23 billion annually. This growth comes amid growing demand for transparency, as traders gravitate toward regulated stablecoin alternatives.
The implementation of the MiCA framework was a major development, as qualified stablecoin issuers received a completely revamped handbook.
USDC Drives Demand for Regulated Stablecoins with $23 Billion in Trading Volume
A report from Kaiko indicates that weekly trading volume for Circle’s USDC stablecoin has increased in 2024. This is more than double the $9 billion seen last year and nearly five times the $5 billion seen in 2022.
The growth in trading volume has pushed USDC to challenge the 14% market share of the stablecoin First Digital USD (FDUSD) boasts. Based on the relationship, centralized exchanges (CEX) account for the majority of these volumes, compared to decentralized systems (DEX) alternatives.
According to the report, USDC and its twin, the euro-denominated stablecoin EURC, witnessed the strongest daily trading volume since June 30, when the first part of the Not framework has entered into force in the European Union.
Euro CoinVertible by SocGen (EURCV) the stablecoin also saw significant volume. However, it was not as much as EURC, as it is only available on the Bitstamp exchange.
MiCA Compliant EUR Stablecoin, Source: Kaiko Report
The significant increases in volume, coupled with the role of CEXs in driving interest, suggest growing interest in compliant stablecoins. This is compared to their non-compliant counterparts, which currently dominate the market with 88% of total stablecoin volume. However, the report hints at the possibility of MiCA tipping the scales in favor of compliant stablecoins.
“The share of compliant stablecoins has increased over the past year, suggesting greater demand for transparency and regulated alternatives. So far, this trend has primarily benefited USDC,” an excerpt from Kaiko Research Light.
Read also: What are Crypto-Asset Markets (MiCA)? Everything You Need to Know
MiCA Framework Could Shift the Balance in Favor of Compliant Stablecoins
The implementation of the MiCA framework in Europe on June 30 was a landmark development in the stablecoin market. With its implementation, stablecoin issuers received a completely revamped manual with specific requirements such as “whitepaper publication, governance, reserve management, and prudential standards.”
Circle has been granted an Electronic Money Institution (EMI) license on July 1, one day after MiCA was implemented. The EMI license is a requirement for any issuer that wants to offer crypto tokens pegged to the dollar and euro in the EU. It allows the company to “onshore” its euro-denominated EURC stablecoin to customers within the bloc.
In fact, MiCA compliance is driving the popularity of the USDC stablecoin. The stamp of trust provides more tailwinds for greater usage of the stablecoin for future regulation, Kaiko Research noted. Institutional investors, for example, who have their own compliance requirements when participating in derivatives markets, may want to consider such thresholds when exploring stablecoin options.
“USDC’s market share in these perpetual markets is only a fraction of that of USDT. Its growing use for perpetual settlement is a testament to the changing preferences of investors as stablecoin regulations take effect.”
A Web seminar hosted by SOLIDUS LABS indicated that the second part of the framework will address the prevention and prohibition of market abuse. It will be fully applicable by 30 December 2024. To successfully manage these regulatory changes, it will be essential to engage in proactive preparation, establish robust internal policies and implement sophisticated surveillance systems.
Jeremy Allaire She said The two stablecoins are poised to thrive under the new framework based on the company’s compliant track record. According to Circle’s CEO, this track record positions both stablecoins for greater success in the stablecoin market.
To know more: Cryptocurrency Regulation: What Are the Pros and Cons?
USDC’s main competitor in the stablecoin market, USDT by Tetherdoes not have an EMI license. Its CEO, Paolo Ardoino, is not yet convinced based on MiCA’s expectations of 60% bank liquidity coverage.
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