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Stablecoin War

Jan 11, 2023
4 min read

This blog post will cover:

  • Binance delists USDC
  • Coinbase encourages to switch from USDT to USDC
  • What is destabilizing stablecoins?
  • Conclusion

Stablecoins are a type of cryptocurrency the value of which is pegged to a reserve asset, for example, the US dollar or gold. They are supposed to be the source of stability in the crypto sphere. The biggest stablecoins by market capitalization as of December 2022 are Tether (USDT), USD Coin (USDC), and Binance USD (BUSD). The actions of the issuers of these coins in the last few months have been called the stablecoin war, which we will talk about in this article.

Binance delists USDC

In September 2022, one of the largest crypto exchanges, Binance, announced that they are going to delist a number of stablecoins, including USDC, and automatically convert them into the platform’s own currency, BUSD. Other than Binance’s token, the controversial move also favored USDC’s main competitor which stayed put in the exchange USDT.

Even though initially Circle (the issuer of USDC) thought this decision was going to benefit the token, later on, the company admitted $3 billion in losses in the aftermath of Binance’s move.

Not long before that, another large market player, Bybit cryptocurrency exchange, announced its partnership with Circle. The company started to offer USDC spot pairs and by doing so supported the token. The idea was to speed up Bybit’s growth by creating a gateway for different USDC-settled products. 

Coinbase encourages to switch from USDT to USDC

Coinbase, another large cryptocurrency exchange, which co-founded USDC, decided to join the so-called “war” recently. The company invited its customers to switch their USDT into the Circle’s token. To incentivize the users, the exchange made the transfer zero-fee.

According to Coinbase, the latest events (meaning the FTX collapse) made people search for the most reliable and safe ways to invest, and the stablecoin that can actually be trusted is USDC. The announcement does its best to convince customers that the token is completely backed by fiat currency and U.S. treasuries and that holders can exchange them 1:1 for U.S. dollars.

Despite the fact that the statement did not make any direct comments in regard to the Tether coin itself, the overall statement is pretty clear nonetheless. In response, the company behind USDT called the actions of Coinbase inappropriate, desperate, and “not an honest competitive rivalry”. 

What is destabilizing stablecoins?

The reason why Coinbase went out of its way to underline the fact that USDC is 100% backed by liquid assets is because of the controversy which followed the news about FTX in November. It was suspected that the largest stablecoin by market capitalization, USDT, could have suffered from the FTX’s bankruptcy, so they carried out an attestation. The results stated that 82% of the company’s reserves were held in cash, its equivalents, and other short-term deposits. Also, the same audit showed that their total assets exceed liabilities. Still, some users continued doubting the stablecoin and accusing it of a lack of transparency.

Other factors that influenced USDT were an $18 million fine that the issuer had to pay to the US regulator SEC following a 2019 US antitrust lawsuit as well as it being reviewed by the US Department of Justice for bank fraud. The authorities also claimed that the company was providing false information about the collateral.

When it comes to USDC, as Tether’s representative mentioned in the response, the company has experienced considerable losses lately. In addition to the financial problems which followed Binance’s delisting we mentioned above, the stablecoin was also influenced by the bankruptcies of a number of companies, including FTX and those that followed it. 


The actions of the large crypto market players deemed “stablecoin war” have divided the community into several groups supporting different participants of the events. 

However, the reality is that keeping the currencies stable should be a priority given their huge capitalization. In the present conditions of extreme volatility and uncertainty that are worsened by the recent negative events and crypto winter, no one will profit from one of the stablecoins having problems. 

SimpleSwap reminds you that this article is provided for informational purposes only and does not provide investment advice. All purchases and cryptocurrency investments are your own responsibility.

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