Circle native stablecoin namely USDC increased recently witnessed a considerable drop in circulating supply. However, at the same time, the trading volume and demand have increased in comparison to last year. A report recently revealed that investors holding $10 worth of USDC incremented their holdings by 59% in 2023.
The statistics were reported by Circle analysts. However, the stablecoin issuer has depleted the total supply by $20 billion. The stablecoin issuer has explained that the token might continue to gain more investors as the market capitalization continues to depreciate.
State of USDC Economy
This report was named State of USDC Economy which presented a broad summary of current USDC utility. On this front, analysts at Circle noted that the circulatory supply of the USDC stablecoin dropped from $45 billion to $25 billion during the first 11 months of 2023. In this manner, the evaluation decrement was calculated to be around 44%.
Analysts further noted that fall to rising interest ratio, regulatory uncertainty, insolvency threats, and straight-up scams. Such that investors were forced to withdraw from USDC holdings citing opportunity cost issues. Therefore, investors were forced to seek refuge in more traditional investment options.
The report has proclaimed that the USDC stablecoin underwent a disheartening year in 2023. During this time, investors converted reserves while USDC also burned or minted $197 billion of Circle coins. It means that the stablecoin paved the way for active communication between traditional and digital asset economies.
Furthermore, the total number of wallets with nominal amount of USDC holdings increased by 2.7 million recording a 59% increment since 2022. 2023 was a disastrous year for the second-largest stablecoin by market cap.
The product also suffered from a temporary de-pegging during the banking crisis. However, the peg was quickly restored with the intervention of the Federal Reserve which reimbursed depositors.
Since the beginning of 2024, Circle opted for an Initial Public Offering (IPO) to raise funds for development of the ecosystem. At the same time, the project has also partnered with Yellow Card to expand the utility and adoption of the USDC coin in Africa.
Regulatory Framework for Stablecoins
Jeremy Allaire, CEO of Circle recently claimed that the blockchain sector in the United States may lead the world in terms of digital dollar currencies. He expressed optimism regarding a stablecoin specific regulatory framework anticipated since 2023.
He further stated that market dynamics are more suitable and therefore the probability of stablecoin legislature added to the law has improved significantly. Allaire was attending the World Economic Forum in Davos, Switzerland when he told CNBC that digitized legal tenders are trending across the globe.
Therefore, the government of the United States may come forward to assert leadership role and introduce policies to warrant consumer protection. He stated that regulators and policymakers are furthering progress in this regard. The House Financial Services Committee approved two important bills on 28th July, 2023.
The first bill is concerned with regulating stablecoin issuers and the second one grants legal clarity for self-custody of digital assets. Before approval, Committee Chairperson Patrick McHenry took an issue with the White House to halt debate regarding disagreements with members regarding provisions added to the Clarity of Payment Stablecoins Act.