Samson Mow – a popular Bitcoin advocate and developer – recently commented on Binance’s decision to remove USDC trading from its platform.
He called it “the beginning of the end for USDC,” predicting that it will drastically reduce the coin’s usage and market cap.
How Binance Can Steal Circle’s Reserves
In a Twitter thread on Wednesday, Mow dismissed attempts from certain industry leaders to place a “positive spin” latest move.
“You can say it’s good UX for USDC users, but that’s neither here nor there,” he said.
Binance announced on Monday that it will automatically convert all USDC, USDP, and TUSD deposits at its exchange into BUSD.
The exchange will still accept those stablecoins for future deposits, but simply trade them into BUSD upon transfer. Likewise, users can also choose to withdraw their BUSD balance as any of those coins.
Following the announcement, Circle CEO Jeremy Allaire claimed that Binance’s order book consolidation would ultimately benefit USDC adoption.
“It will now be easier and more attractive to move USDC to and from Binance for trading core markets,” he said. Furthermore, given BUSD’s limited usage beyond Binance’s exchange, he predicted it could help USDC evolve into the go-to stablecoin bridge between centralized and decentralized exchanges.
Mow, however, was far less hopeful for the stablecoin provider. He said the change will allow Binance to effectively ‘steal’ Circle’s USDC reserves by exploiting the firm’s zero-fee stablecoin redemptions.
“Because Binance can mint and redeem USDC for free, they can just take USDC reserves for themselves,” he explained. “We’re going to see both a decline in USDC trading volume AND AUM, while BUSD gains on both fronts.”
USDC is currently the second largest stablecoin, with a market cap of $51 billion. BUSD is a distant third, sitting at just $19 billion.
Is Tether Also Vulnerable?
Tether’s USDT – the long-standing king of stablecoins – was notably not included in Binance’s consolidation plan. Circle’s CEO claimed this was because USDT doesn’t qualify as a dollar-equivalent asset due to low-quality reserves.
Once again, Mow has a different hypothesis: Binance won’t pull the same stunt with USDT because its token redemptions cost 10 basis points each. Therefore, attempting to “steal” USDT’s market cap could be highly risky and costly.
Mow concluded that other exchanges that support stablecoins – such as Gemini with GUSD – try a similar strategy.