The creator of the U.S. dollar-pegged stablecoin USDC, Circle, has stated that increased competition in the stablecoin market is likely to put pressure on Circle stablecoins, slowing their growth and affecting the company’s financial outlook.
Circle claimed that the automatic conversion of USDC held in Binance wallets into BUSD has decreased the circulation of USDC in the three months ending September 30 in a filing to the U.S. Securities and Exchange Commission on November 14.
The second-largest stablecoin in the world, Circle, calculates that Binance’s automatic conversion was responsible for up to US$3 billion of the US$8.3 billion fall in USDC in circulation from June 30 to September 30.
Circle cites a number of additional factors for the decline in USDC in circulation, including lower cryptocurrency prices, the failure of significant cryptocurrency companies like FTX, Voyager Digital, and Celsius, as well as higher interest rates that have caused stablecoins to transfer into U.S. Treasuries, money market funds, and other conventional investment products.
The third-largest stablecoin in the world, BUSD, is issued by Binance, the largest cryptocurrency exchange in the world. In September, Binance announced that it would convert customer holdings in three competing stablecoins, USDC, Pax Dollar (USDP), and True USD (TUSD), to BUSD.
According to Circle’s filing, the recent collapse of FTX exposes the risks of market contagion as well.
“If Circle stablecoins do not grow as we expect, our business, operating results, and financial condition could be adversely affected,” the company said.