After introducing fees last February on USDC redemption, Circle added new ones this week. Which actors are affected by this new measure, and in what proportion?
Circle introduces new fees on USDC
Like many collateralized and centralized stablecoins, the promise of Circle's USDC lies in its ability to be exchangeable for dollars at any time if necessary. For this, businesses can use the Circle Mint module, which was initially free.
However, a fee of 0.1% was introduced last February, regarding transactions over $15 million. Now, Bloomberg reports that a new level has been reached regarding “near instantaneous” trading. And for good reason, these are now paying in turn, when USDC redemption exceeds $2 million. In this regard, a new progressive fee scale starts at 0.03% of the order amount.
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In a press release, a company spokesperson mentioned a measure intended to promote the availability of liquidity:
Circle Mint's redemption options support the availability of instant liquidity globally, similar to banks and other financial institutions that charge for speed and service.
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Thus, 2 lines of thought could explain this new policy. The first lies in the reduction in key rates initiated by the Federal Reserve (Fed) last month. A significant portion of USDC being collateralized by American bonds, rate cuts could ultimately lead to a drop in revenue for Circle. As a result, new costs could then play a compensatory role.
Another area of study can also be found in the liquidity of USDC, as the spokesperson rightly explains. We observed it in March 2023 with the banking crisis in the United States and the bankruptcy of Silicon Valley Bank (SVB), a movement of panic in the market can threaten, at least in the short term, the stability of an asset like USDC.
With fees on rapid withdrawals, it is then possible that the scenario of a bank run could be mitigated by allowing Circle to optimize the turnover of its liquidity. For now, however, standard withdrawals remain free, with an average wait of 2 working days.
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To date, USDC has a capitalization of $35 billionor 3.4 times less than the USDT of Tether, its main competitor.
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Source : Bloomberg
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Since 2021, I have devoted my free time to seriously educating myself on cryptocurrencies in order to acquire maximum knowledge and credibility. I often have the opportunity to conduct interviews with influential figures in the blockchain industry. I also conduct in-depth analyzes on Web3 themes to offer exclusive content to Cryptoast readers.
Vincent Maire
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