Circle’s USDC Loses Market Share as PayPal and Others Enter Stablecoin Race
Circle prepares $1 billion war chest to tackle market risks from PayPal and others. In the beginning of 2023, Circle’s stablecoin USDC has dropped from $45 billion in circulation to just $26 billion amid the summer winds and market volatility. CEO Jeremy Allaire said that Circle, the issuer of stablecoin USDC, has set aside a $1 billion cash reserve as insurance against the increasing competition from traditional financial and tech industries, including organizations like PayPal.
In an interview with Bloomberg, Allaire revealed the war chest and shared his thoughts on the heightened competition from entities like PayPal, which are new to the stablecoin space:
“I hope you’ll see not just internet payment firms, but all kinds of financial services companies and others getting into this. It’s a great thing to have this new competition. I think it’s going to bring more and more companies into this space.”
Circle is best known for its USDC The USDC ticker, which pegs the stablecoin at $1.00, is a digital token designed to function much like regular cryptocurrencies but is fully backed by fiat – in this case, the United States Dollar.
However, at least since 2021, the company’s primary source of revenue has come from interest on its cash holdings and its treasury services. For the first half of 2023, Circle reported a revenue of $779 million, surpassing its total 2022 revenue of $772 million.
Despite this, the company’s market share in the stablecoin sector has dropped from $45 billion at the beginning of 2023 to just $26 billion within a span of seven months. Allaire attributes this decline to the cryptocurrency exchange Binance’s USDC, its own token’s depreciation, and unfavorable events in the market. “The Terra crash helped us; Binance’s forced conversion hurt us,” Circle’s CEO told Bloomberg, “FTX’s crash helped us, and then the failure of regional banks hurt us.”
In related news, as recently reported by CoinTelegraph, Circle has launched a wallet-as-a-service API for developers as part of its ongoing Web3 initiative. According to an announcement on August 8, the new API will enable developers to build custom multi-party computation wallets for their customers.