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Crypto Biz: Worldcoin expands, Saudi Aramco considers digital assets, and more

Traditional financial firms are increasingly connecting services, portfolios and operations with digital assets.

Traditional financial firms are increasingly connecting services, portfolios and operations with digital assets, taking advantage of the crypto winter to build and find a market fit for crypto-related solutions.

Recent examples include Deutsche Bank’s asset management arm, DWS, which announced a new venture with Galaxy Digital and Flow Traders to jointly issue a euro-denominated stablecoin. In another development, oil company Saudi Aramco signed an agreement with financial services firm SBI Holdings about a possible collaboration on digital assets and co-investment in SBI’s digital asset portfolios.

Meanwhile, in the United Kingdom, pension fund M&G has invested $20 million in the country’s first regulated Bitcoin (BTC) derivatives exchange, Global Futures & Options Holdings.

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Coinbase rolls out crypto transfers via links sent on WhatsApp, Telegram

Recipients need to download a Coinbase Wallet to receive the funds, but the crypto exchange says they’ve simplified the process for less tech-savvy users.

A new feature from Coinbase Wallet allows for the transfer of crypto through a link that can be sent through some of the most popular social media sites and messaging apps as the crypto exchange looks to make its service accessible to a wider market.

“Users can now send money on any platform that they can share a link,” Coinbase said in a Dec. 5 blog post, naming apps like iMessage, Telegram, WhatsApp, Facebook, Instagram and TikTok.

There’s no payment fee when sending USD Coin (USDC), a U.S. dollar stablecoin Coinbase co-launched in 2018 with its issuer, Circle.

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Tether market cap eyes record high after regaining 65% stablecoin dominance

The market capitalization of Tether is nearly a billion dollars away from reaching a new lifetime peak while rival stablecoins struggle.

Tether has emerged as a clear winner amid the ongoing banking crisis and crypto crackdown in the United States.

On April 17, the U.S. dollar-pegged stablecoin’s circulating market valuation reached nearly $81 billion, just 1.5% below its record high of $82.29 billion from a year ago. It has grown about 20% year-to-date (YTD) already and is now eyeing new all-time highs.

USDT market capitalization monthly chart. Source: TradingView

Tether rivals hit new yearly lows

Tether’s (USDT) growth came as it ate up the market share of its stablecoin rivals, USD Coin (USDC) and Binance USD (BUSD). That is due to crypto traders’ belief that Tether’s operations have no exposure to the potential banking crisis contagion.

For instance, the circulating market capitalization of USD Coin, the second-largest stablecoin, has dropped over 25% YTD to $31.82 billion, its lowest level since October 2021, primarily due to its exposure to the failed Silicon Valley Bank. 

USDC market capitalization monthly chart. Source: TradingView

BUSD, on the other hand, has witnessed a 60% drop in market capitalization in 2023 to $6.68 billion, its lowest since April 2021, as the New York Department of Financial Services ordered Paxos, a regional crypto firm, to stop its mint and issuance. 

Moreover, the U.S. Securities and Exchange Commission asserts that BUSD is a “security.” Conversely, the U.S. Commodity Futures Trading Commission alleges that the stablecoin is a “commodity.”

This capital shift likely helped Tether boost its dominance above 65% in the global stablecoin sector for the first time since May 2021, according to Glassnode data.

Stablecoin supply dominance. Source: Glassnode

On April 16, the U.S. House Financial Services Committee published a draft version of its potential stablecoin bill to create definitions for issuers. It says that non-U.S. firms like Tether must register if they cater to Americans, albeit without mentioning the specific agency that would regulate stablecoins.

Exchange stablecoin supply lowest since June 2021

Despite Tether’s market capitalization growth, its supply across crypto exchanges has been declining in 2023.

Related: BTC price heading under $30K? 5 things to know in Bitcoin this week

As of April 16, cryptocurrency exchanges had 12.94 billion USDT in their reserves compared with 17.89 billion USDT at the year’s beginning. On the whole, the stablecoin supply across exchanges has dropped 42% YTD to $21.53 billion.

Stablecoin supply across exchanges. Source: Glassnode

This dynamic coincides with the 21% YTD increase in the crypto market’s valuation from $1 trillion in January to $1.21 trillion, suggesting that Q1 has seen a trend shift from “safe” stablecoins to risk-on cryptocurrencies.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Tether supply hits $80B for the first time since May 2022 — Stablecoin rivals stumble

The supply of USDT across cryptocurrency exchanges has dropped 28% in 2023, hinting at an overall decline in demand for stablecoins.

Tether (USDT) continues to benefit from the ongoing turmoil in the U.S. dollar-backed stablecoin industry, with its market capitalization growing significantly in Q1 2023 at other stablecoins’ expense.

Tether market cap reaches $80 billion

On April 6, the circulating market capitalization of USDT surpassed $80 billion for the first time since May 2022, with a gain of $15 billion so far in 2023.

USDT circulating market cap 12-month performance. Source: Messari

On the other hand, the market caps of its chief rivals, namely USD Coin (USDC) and Binance USD (BUSD), fell by about $12 billion and $9.4 billion, respectively.

USDC and BUSD circulating market cap year-to-date performance. Source: Messari

Tether benefits from non-U.S. status

Crypto traders opted for Tether given the growing concerns around USD Coin and Binance USD.

Notably, USDC’s market capitalization slipped due to its $3.3 billion exposure to the now-collapsed Silicon Valley Bank and additional exposure to Silvergate Bank, while BUSD suffered after New York regulators ordered Paxos to shut down the stablecoin’s issuance.

USDC weathered the crisis after the Federal Deposit Insurance Corporation’s assurance that it would make depositors at the insolvent banks whole. As a result, the stablecoin recovered its dollar peg after losing it at the peak of the banking crisis in mid-March. 

USDC price performance YTD. Source: Messari

But a growing crypto crackdown in the U.S. has prompted investors to maintain distance from regional firms. For instance, Paxos confirmed that the Securities and Exchange Commission treats BUSD as an unregistered security.

On the other hand, Tether is a non-U.S. firm and has repeatedly assured that it has no exposure to insolvent U.S. banks. Nonetheless, it has faced scrutiny over its reserve assets and lack of proper audits for years, despite such issues becoming less of a concern among traders.

USDT supply drops across exchanges

Interestingly, the growth in the USDT circulating supply has coincided with a drop in its supply across exchanges.

Related: USDT issuer Tether has up to $1.7B in excess reserves, CTO says

Tether’s balance on exchanges has dropped 28% year-to-date to 12.88 billion USDT, according to Glassnode. In comparison, the aggregated stablecoin balance across exchanges has dropped by 41% YTD to $22.31 billion.

USDT vs. rival stablecoin balances across crypto exchanges. Source: Glassnode

The decline in stablecoin reserves coincides with a crypto market rally, suggesting that traders have been converting their crypto dollars to buy Bitcoin (BTC) and Ether (ETH).

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Circle announces USDC launch for Cosmos via Noble network

The stablecoin will be launched on the Noble network, making it available to all 50-plus Cosmos IBC blockchains.

USD Coin (USDC) will soon be available in the Cosmos ecosystem via the Noble network, according to a blog post from the Noble development team. The post was shared on Twitter by USDC issuer Circle.

Neither Circle nor Noble gave out a specific date for USDC’s launch on the network, but both said that readers should “stay tuned.”

In its announcement, the Noble team said that USDC will be the first “native, fiat-backed stablecoin that is highly liquid and fully collateralized” on a Cosmos Inter-Blockchain Communication Protocol-connected network. In its view, the introduction of the fiat-backed stablecoin will solve many of the challenges that Cosmos users currently have when trying to bridge assets from one network to another, explaining:

“This integration will catalyze hundreds of millions of dollars in liquidity over the coming months in Cosmos, and will seek to rectify the challenges that users and appchains face when interacting with bridged assets sourced from other ecosystems. […] Every blockchain needs a canonical and fungible version of USDC, and Noble exists to fulfill this critical need.”

Related: Mastercard to settle transactions for USDC in APAC

According to an explanation on the official Cosmos website, Cosmos is an interconnected web of blockchain networks that use the Tendermint Byzantine fault-tolerant consensus protocol, Application Blockchain Interface and Cosmos Software Development Kit. The networks are connected through the Inter-Blockchain Communication Protocol (IBC), allowing them to move assets between networks within the overall Cosmos ecosystem.

Noble is one of more than 50 networks in the Cosmos IBC ecosystem, according to Mintscan.

In January, Injective Protocol launched a $150 million fund to promote user adoption of the Cosmos ecosystem. It was backed by Kraken Ventures, Pantera Capital, Jump Crypto and other firms known for investing in blockchain projects. In February, the Cosmos Interchain Foundation allocated another $40 million to develop core infrastructure and applications for the ecosystem.

USDT issuer Tether has up to $1.7B in excess reserves, CTO says

Tether chief technology officer Paolo Ardoino believes USDT is becoming the “safest asset to hold in the world” amid the banking crisis.

Cryptocurrency firm Tether — the issuer of stablecoin, Tether (USDT) — expects to make a $700 million profit in the first quarter of 2023, matching the profits of the last quarter of 2022, Tether chief technology officer Paolo Ardoino told Cointelegraph at Paris Blockchain Week 2023.

“I don’t have the final figures yet, but the profit of this quarter will probably match the last quarter of 2022,” Ardoino said, adding that in Q4 2022, Tether generated $700 million of profits. He added that Tether also has an “addition to that $950 million” on Dec. 31, 2022, noting:

“So it means that our company equity will grow to $1.5 billion or $1.7 billion that are on top of the reserves that we have that are backing 100% of the assets.”

The Tether exec went on to say that USDT is becoming the “safest asset to hold in the world” because the company is different from the banks based on the fractional reserve model. He expressly referred to the ongoing crisis in the United States banking system, with banks like Silicon Valley Bank (SVB) collapsing due to problems with the fractional reserve model.

Ardoino also mentioned that he is a fan of the major cryptocurrency Bitcoin (BTC), which is Tether’s hedge, stating:

“I love Bitcoin and that’s our hedge, and that’s why we are in Bitcoin, because we don’t trust those guys that they took so much risk on customer deposits.”

As previously reported, Tether aggressively cut its commercial paper backing last year, eventually reducing it to zero by late 2022. In addition to removing commercial paper from its reserves, Tether was replacing those investments with U.S. treasury bills.

The news comes amid Tether continuing to increase its market dominance, with USDT’s market capitalization adding about $8 billion since Feb. 28. At the time of writing, USDT’s market value stands at $79 billion, which is the highest level since May 2022, according to data from CoinGecko.

USDT market capitalization one-year chart. Source: CoinGecko

While USDT market dominance has risen, Circle’s rival stablecoin USD Coin (USDC) has been losing its market share, with market cap dropping 18% since late February.

Related: Tether CTO on USDC depeg: ‘Bitcoin maxis were right all along’ | PBW 2023

Circle has faced major issues due to its exposure to the collapse of SVB, with the USDC stablecoin briefly losing its 1:1 peg with the U.S. dollar. The stablecoin subsequently repegged amid Circle announcing Cross River as a new banking partner and expanding ties with BNY Mellon.

Magazine: Unstablecoins: Depegging, bank runs and other risks loom

Banking turmoil pushes crypto to ‘no oversight,’ says Circle CEO

Crypto firms that have had the strongest position with United States regulation are now considered “unsafe,” Circle CEO Jeremy Allaire stated.

The ongoing crisis and uncertainty around the global banking system could push the cryptocurrency market into a more gray area in terms of regulation, Circle’s chief executive believes.

Jeremy Allaire, the CEO of the USD Coin (USDC) issuer, took to Twitter on March 23 to share his reflections regarding the market dynamics in the aftermath of the collapse of Silicon Valley Bank.

In the Twitter thread, Allaire highlighted the “deep market anxiety” about general exposure to the financial system of the United States and the risk of a large-scale U.S. banking system failure.

The Circle CEO emphasized that the ongoing banking crisis has a lot more potential to hurt crypto firms regulated in the United States rather than those regulated in other jurisdictions, stating:

“Ironically, the players who have had the strongest position with U.S. regulation and U.S. banking system integration, are considered ‘unsafe’, with fears that assets could be stranded.”

Allaire went on to say that the contagion from SVB could potentially drive the crypto market to a less regulated area, urging U.S. policymakers to think about what happens next. Addressing the White House and Congress, he argued that there has been no situation in the past 10 years where the U.S. so urgently needed a “clear, coherent and pragmatic policy.”

“We are in serious risk of seeing an entire strategic technology arena slip away from US leadership,” Allaire warned, adding:

“Right now, market participants are shifting into platforms with no oversight, totally opaque bank and risk exposures, and histories of lax financial risk/integrity controls. This doesn’t end well.”

Allaire stated that Circle will continue operating within a regulatory perimeter and will keep working to add “more transit and settlement banking partners.” He also stressed that USDC “has not missed a beat” and has never failed to mint or redeem USDC for $1, including “during the past week’s stress test.”

As previously reported by Cointelegraph, Circle has experienced major issues due to its exposure to the collapse of Silicon Valley Bank, with its USDC stablecoin briefly losing its 1:1 peg with the U.S. dollar. The stablecoin subsequently re-pegged amid Circle announcing Cross River as a new banking partner and expanding ties with BNY Mellon.

Related: Tether CTO on USDC depeg: ‘Bitcoin maxis were right all along’ | PBW 2023

Allaire’s remarks have echoed some observations in the cryptocurrency community, with some crypto enthusiasts expressing perplexity over how U.S.-regulated firms like Circle were affected by the crisis, while competitor “chads” like Tether (USDT) issuer Tether Holdings had experienced no issues so far.

As previously reported, Tether was one of the first companies to deny exposure to SVB and other troubled U.S. banks in mid-March. According to Tether chief technology officer Paolo Ardoino, the stablecoin issuer has no exposure to SVB, Signature Bank or Silvergate.

Magazine: Unstablecoins: Depegging, bank runs and other risks loom

Xapo Bank to enable USDC deposits and withdrawals

According to the Bitcoin custodian, utilizing the USDC stablecoin will allow members to deposit and withdraw funds without fees.

Bitcoin custodian and licensed private bank Xapo Bank has partnered with financial technology company Circle to integrate USD Coin (USDC) payment rails as an alternative to SWIFT. Payment rails refer to the infrastructure and technology used to facilitate the movement of funds between parties in a financial transaction. Payment rails come in many forms, including traditional bank wires, credit card networks, and blockchain-based platforms.

Xapo Bank says that the new feature allows its members to bypass the cumbersome and expensive SWIFT payment system through “outrails” added to its existing USDC on-ramps. By utilizing the USDC stablecoin, members can deposit and withdraw funds from Xapo without fees and benefit from a one-to-one conversion rate from USDC to the U.S. dollar. In addition, all USDC deposits are automatically converted to the dollar, enabling members to earn an annual interest rate return of up to 4.1%.

According to the announcement, Xapo Bank is a fully licensed and regulated bank and a member of the Gibraltar Deposit Guarantee Scheme (GDGS), which protects depositors’ dollar deposits up to $100,000. Additionally, Xapo Bank shared that it does not engage in the staking of any cryptocurrency deposits, and all deposits are automatically converted to the dollar upon receipt by the bank. Xapo claims this reduces exposure to any risks associated with the fluctuating crypto markets.

Xapo claims its business model differs from traditional banks as it does not engage in lending activities and does not rely on fractional reserve banking to generate profits. Instead, the private bank maintains all customer funds in reserve and invests them in “short-term, highly liquid assets” to pass on the earned interest to its customers.

Related: Traditional banks rely on ‘tiny buffer’: Paris Blockchain Week 2023

As previously reported by Cointelegraph, Moody’s Investors Service haswarned that USDC’s depeg could negatively impact the adoption of stablecoins and lead to increased regulatory scrutiny. The credit rating agency argued that the traditional banking sector’s recent turmoil and the depegging of USDC could increase resistance to fiat-backed stablecoins.

USDC’S depeg occurred following the sudden collapse of Silicon Valley Bank on March 10. The collapse of SVB was a significant risk event for USDC issuer Circle Internet Financial, which had $3.3 billion in assets tied up in the bank. 

Mastercard to settle transactions for stablecoin wallet in APAC

Mastercard has entered a collaboration that would allow retail customers in the APAC region to spend their stablecoins anywhere Mastercard is accepted.

Global payment provider Mastercard is launching a stablecoin digital wallet integration with the Australian stablecoin platform Stables.

Mastercard and Stables on March 20 announced a collaboration to allow retail customers in the Asia-Pacific (APAC) region to spend their stablecoins anywhere Mastercard is accepted.

The collaboration involves a stablecoin-only wallet built by Stables, coming with a payment card supported by Mastercard. The payment card enables users to save and spend the USD Coin (USDC) stablecoin by converting the digital currency into fiat and settling on Mastercard’s network. The card will be accessible through the Stables digital application via mobile wallets.

Source: Stables

According to Mastercard Australasia’s head of fintech, Kallan Hogan, the company’s collaboration with Stables is a significant development in terms of Web3 adoption.

“Mastercard is committed to powering innovative payment solutions that give cardholders the freedom to spend their assets where, how, and when they want,” Hogan said, adding:

“Stables is building a solution for the Web3 sector leveraging Mastercard’s global network and cyber and intelligence tools, including CipherTrace and Ekata, with trust and security at the core.”

The Mastercard-enabled wallet integration will become available for users in the second quarter of 2023, Stables co-founder and chief operating officer Daniel Li told Cointelegraph. The stablecoin digital Mastercard will be initially available for users based in Australia and is then planned to enter Europe, the United States, the United Kingdom and most of Asia Pacific.

The payment solution deploys Stables’ proprietary settlement engine that processes all payments using USDC and works directly with Mastercard to enable settlement, Li stated. At the same time, the wallet will accept deposits in a number of stablecoins, including rival stablecoin Tether (USDT) and Binance USD (BUSD), but all the deposits will be automatically converted into USDC at no cost.

Related: Circle taps Cross River as banking partner, expands ties with BNY Mellon

According to Li, Stables is confident in USDC’s future despite the recent issues involving the collapse of Silvergate Bank. The COO stated:

“Stablecoins will play a pivotal role in the new financial system and will be core to bridging the worlds of traditional and decentralized finance. Stables will continue to work with USDC and Circle as a pivotal part of that ecosystem.”

In addition to crypto, users can also top up their balances using bank transfers, direct debit and other modes of payment, Li said. At launch, Stables supports deposits and withdrawals in the Australian dollar, with soon-to-come integrations including the U.S. dollar, euro, the British pound, as well as currencies frothe APAC, Latin America and Africa.

Update March 21, 7:00 UTC: the article has been updated  to reflect that Daniel Li is chief operating officer (not CEO) at Stables.

USDC depeg will hinder stablecoins’ growth, increase regulatory scrutiny — Moody’s

“Financial institutions may reconsider adopting stablecoins to settle agreements involving tokenized securities out of concern over the coins’ potential volatility,” Moody’s said.

Recent turmoil in the traditional banking sector, culminating in USD Coin (USDC) losing its peg, could negatively affect stablecoin adoption and potentially increase calls for regulation, argued credit rating agency Moody’s Investors Service. 

In its latest “Sector Comment” report published on March 16, Moody’s says fiat-backed stablecoins could face new resistance following USDC’s depegging on March 10.

“Until now, large fiat-backed stablecoins had shown remarkable resilience, having emerged unscathed from past scandals such as the collapse of FTX,” wrote analysts Cristiano Ventricelli, Vincent Gusdorf, Rajeev Bamra and Fabian Astic. “However, recent events have shown that the reliance of stablecoin issuers on a relatively small set of off-chain financial institutions limits their stability.”

The sudden collapse of Silicon Valley Bank on March 10 was a significant risk event for USDC issuer Circle Internet Financial, which had $3.3 billion in assets tied up in the bank. Over the span of three days, Circle cleared roughly $3 billion in USDC redemptions as the value of its stablecoin plunged to a low of around $0.87.

By end of U.S. banking operations on March 15, Circle had “cleared substantially all of the backlog of minting and redemption requests for USDC,” the company said.

USDC quickly regained its peg after the Federal Deposit Insurance Corporation announced that it would backstop all deposits held at Silicon Valley Bank. Circle CEO Jeremy Allaire told Bloomberg on March 14 that his firm could now fully access its $3.3 billion reserves.

Related: Crypto Biz: SVB collapses, USDC depegs, Bitcoin still up

Although calls to regulate stablecoins have grown louder following the collapse of Terra, fiat-backed stablecoins like the one issued by Circle operate differently than Terra’s algorithmic token that failed in May 2022. Nevertheless, Moody’s believes that regulators are likely to pursue more stringent oversight of the sector moving forward.

The credit rating agency said that USDC was able to regain its peg only once U.S. regulators decided to repay Silicon Valley Bank’s unsecured deposits. “Otherwise, USDC could have suffered from a run and been forced to liquidate its assets,” Moody’s analysts said, adding:

“Given the current market volatility, such a scenario could, in turn, have caused more runs on banks holding Circle’s assets, which could have led to the depegging of other stablecoins.”