Circle CEO Jeremy Allaire says that a cryptocurrency crackdown by the United States regulators has been a major factor behind the declining market capitalization of its stablecoin, USD Coin (USDC).
Circle chief’s comments on the U.S. crackdown come amid heavy regulatory scrutiny following the collapse of the FTX exchange, a banking crisis and USDC’s momentary depegging. During an interview with Bloomberg TV, Allaire noted that there is a “huge amount of concern globally about the U.S. banking system,” and the “regulatory environment in the U.S..”
USDC depegged in March, a direct result of the U.S. banking crisis. Circle’s $3.3 billion worth of USDC reserves was stuck with Silicon Valley Bank, which was one of the three crypto-friendly banks shut down by regulators. At the time, Circle had assured its customers that it had the backing from investors to fill the gap, but the market reacted quickly to the news, and USDC depegged from the U.S. dollar.
USDC once had a market cap of $56 billion at the peak and was sitting right behind Tether-issued USDT. However, since the banking crisis and USDC’s depeg, the stablecoin’s market cap has been cut nearly in half, currently sitting at $30.7 billion.
Coinbase had also warned that the lack of regulatory clarity may force crypto companies to look for opportunities overseas. With the recent passing of the Markets in Crypto-Assets Act (MiCA) by the European Parliament and the push for adoption by Hong Kong, Allaire believes the U.S., will be left behind.
“It’s a critical moment here in the U.S., and, as I like to say, it’s really a moment for Congress to step up.”
The U.S. Securities and Exchange Commission led by Gary Gensler has been on an enforcement spree since the FTX collapse saga. The SEC has threatened regulatory action against multiple crypto platforms and exchanges.
Gensler faced a lot of pushback from policymakers during the oversight hearing on digital assets. Apart from policymakers, many crypto proponents have also questioned the authority of SEC and Gensler.