Why USDC Crashing and how it will be going to impact global market
USDC crashed because of regulatory changes in China.
But the brackets were broken when
Terra users questioned the usefulness of the network. They exchange UST for
LUNA, and then dispose of LUNA. As the price of LUNA falls, traders can swap
that token for UST. The result is that the circulation of assets explodes as
their value shrinks
[1].
Over the past year, some of the
biggest cryptocurrency names have exploded in Singapore: Terraform Labs and
cryptocurrency hedge fund Three Arrows Capital, registered in Singapore. By the
end of the year, the Singaporean police had begun investigating Hodlnaut, a
cryptocurrency lender who was one of the victims of the outbreak. These surges
further the already existing trend of prioritizing risk management and closing
gaps in consumer protection
[2].
A common mCBDC platform creates
opportunities to simplify the process. For example, business rules or terms can
be automatically enforced using smart contract functionality on a DLT platform.
This process automation brings efficiencies in terms of cost and transaction time.
Since an mCBDC arrangement involves multiple central banks, each with its own
currency, decentralization could be a constructive feature, and approved DLTs
could play an important role. In addition to the currency of each central bank
on the platform, it can also contain tokens of other currencies, including
international currencies. These platforms share some similarities with those
used in cryptocurrencies and DeFi, such as: B. Smart contracts and
programmability enable PvP or cross-border DvP related to secure transactions
[3].
Impact of the usdc crash on global markets.
When the reckless behavior of an offshore exchange causes giant liquidations that cascade through the market and causes people in the United States to lose huge amounts of value, that's harming people in the United States whether they're using that product or not. They're globally integrated markets
Industry
consolidation, large enterprises dominate the market
[4].
■ Should these issuers become
systemically important, authorities will need to undertake careful analysis and
regulatory adjustments to address new risks and contagion risks from stablecoin
activity to other parts of their financial sectors. They should apply
requirements comparable to those applicable to systemically important banks in
terms of enhanced supervision, security robustness, stress testing, recovery
and resolvability, taking into account differences in business models,
especially where stablecoins do not offer maturity transformation in the case
of. When stablecoins reach system scale, and when commercial banks issue their
own stablecoins or tokenize their deposits, a financial safety net could be
considered, subject to safeguards
[5].
I think that will end up being the
biggest lesson learned from it. We need politics. We need regulation. We need
intermediaries that follow the clear frameworks needed to address the different
types of risks that exist. We need that. We need to be so fast
[6].
I think that's going to be
ultimately the biggest lesson that comes out of this. We need policy. We need
regulation. We need intermediaries to follow the clear frameworks that are
needed to address the different types of risks that exist. We need that. We
need that fast
As UST was headed for zero and USDT
(Tether) was processing billions in redemptions, USDC was padding its market
cap. At the start of the crash on May 8, USD Coin had a market capitalization
between $48 billion and $49 billion. After an almost imperceptible dip, it
began heading upward on May 11 and now sits at $52.26 billion—near its all-time
high of $53.6 billion set in March
USDC was recently dealt a blow from
an effort to “enhance liquidity and capital-efficiency” at Binance. At the
start of September, the world’s largest crypto exchange by volume said that it
would begin automatically converting competing stable coin balances—including
USDC, Pax Dollar and TrueUSD—to its own Binance USD stable coin
[7].
References
1. The Big 'Winner' From the Crypto
Crash? USDC Stablecoin.https://decrypt.co/100812/big-winner-crypto-crash-usdc-stablecoin
Accessed 2023-03-11
2. What You Need to Know About Crypto
Regulation in Hong Kong, Singapore,
Japan.https://www.coindesk.com/consensus-magazine/2023/01/25/asia-crypto-regulation/
Accessed 2023-03-11
3. III. The future monetary
system.https://www.bis.org/publ/arpdf/ar2022e3.htm Accessed 2023-03-11
4. The Regulatory Landscape of Crypto:
Global Developments and
Implications.https://www.financemagnates.com/cryptocurrency/regulation/the-regulatory-landscape-of-crypto-global-developments-and-implications/
Accessed 2023-03-11
5. Regulating the Crypto Ecosystem: The
Case of Stablecoins and Arrangements in: FinTech Notes Volume 2022 Issue 008
(2022).https://www.elibrary.imf.org/view/journals/063/2022/008/article-A001-en.xml
Accessed 2023-03-11
6. FTX bankruptcy: Circle CEO sees crypto
regulations coming -
Protocol.https://www.protocol.com/fintech/circle-ftx-crash-crypto Accessed
2023-03-11
7. Circle’s USDC Stablecoin Has Lost All
Its Post-Terra
Gains.https://decrypt.co/111603/circle-usdc-stablecoin-lost-all-post-terra-gains
Accessed 2023-03-111. The Big
'Winner' From the Crypto Crash? USDC
Stablecoin.https://decrypt.co/100812/big-winner-crypto-crash-usdc-stablecoin
Accessed 2023-03-11
2.
What You Need to Know About Crypto Regulation in Hong Kong, Singapore,
Japan.https://www.coindesk.com/consensus-magazine/2023/01/25/asia-crypto-regulation/
Accessed 2023-03-11
3.
III. The future monetary system.https://www.bis.org/publ/arpdf/ar2022e3.htm
Accessed 2023-03-11
4.
The Regulatory Landscape of Crypto: Global Developments and
Implications.https://www.financemagnates.com/cryptocurrency/regulation/the-regulatory-landscape-of-crypto-global-developments-and-implications/
Accessed 2023-03-11
5.
Regulating the Crypto Ecosystem: The Case of Stablecoins and
Arrangements in: FinTech Notes Volume 2022 Issue 008
(2022).https://www.elibrary.imf.org/view/journals/063/2022/008/article-A001-en.xml
Accessed 2023-03-11
6.
FTX bankruptcy: Circle CEO sees crypto regulations coming -
Protocol.https://www.protocol.com/fintech/circle-ftx-crash-crypto Accessed
2023-03-11
7. Circle’s USDC Stablecoin Has Lost All Its
Post-Terra
Gains.https://decrypt.co/111603/circle-usdc-stablecoin-lost-all-post-terra-gains
Accessed 2023-03-11