USDC Trading Volume Soars to $23 Billion Amid Rising Demand for Regulated Stablecoins

USDC Trading Volume Soars to $23 Billion Amid Rising Demand for Regulated Stablecoins

USDC, a stablecoin issued by Circle, has seen its trading volume skyrocket to $23 billion annually. This surge reflects a growing demand for transparency and a shift towards regulated stablecoin options among traders.

The introduction of the Markets in Crypto-Assets (MiCA) framework has been a pivotal development, providing qualified stablecoin issuers with an updated manual to navigate the regulatory landscape.

USDC Dominates the Regulated Stablecoin Market with $23 Billion in Trading Volume

A recent report from Kaiko highlights a significant increase in weekly trading volume for USDC in 2024, which has more than doubled from $9 billion last year and is nearly five times the $5 billion recorded in 2022.

This substantial growth has enabled USDC to challenge the market share of the reserve-backed stablecoin First Digital USD (FDUSD), which holds a 14% share. The report indicates that centralized exchanges (CEXs) are driving the majority of these volumes, overshadowing decentralized exchanges (DEXs).

According to the report, USDC and its Euro-denominated counterpart, EURC, have experienced the highest daily trading volumes since June 30, coinciding with the implementation of the first phase of the MiCA framework in the European Union.

SocGen’s Euro CoinVertible (EURCV) stablecoin also saw notable volume increases, although not as pronounced as EURC, since it is only available on the Bitstamp exchange.

The rising trading volumes and the prominent role of CEXs suggest an increasing interest in compliant stablecoins. These compliant alternatives are beginning to gain ground against non-compliant stablecoins, which currently dominate 88% of the total stablecoin market volume. The Kaiko report hints that MiCA could potentially shift the balance in favor of compliant stablecoins.

“The share of compliant stablecoins has increased over the past year, reflecting a heightened demand for transparency and regulated options. So far, this trend has predominantly benefited USDC,” stated an excerpt from Kaiko Research.

MiCA Framework Poised to Boost Compliant Stablecoins

The implementation of the MiCA framework on June 30 marked a significant milestone in the stablecoin market. The new regulations provide a comprehensive manual for stablecoin issuers, including requirements for whitepaper publication, governance, reserve management, and prudential standards.

On July 1, Circle secured an Electronic Money Institution (EMI) license, essential for offering dollar- and euro-pegged crypto tokens in the EU. This license allows Circle to “onshore” its Euro-denominated EURC stablecoin to customers within the European bloc.

MiCA compliance is enhancing the appeal of USDC, offering a stamp of trust that encourages its use in perpetual futures settlements. Kaiko Research noted that institutional investors, who have their own compliance requirements in derivatives markets, might favor regulated stablecoins like USDC.

“USDC’s market share in perpetual markets remains a fraction of USDT’s, but its growing usage for perpetual settlement reflects shifting investor preferences as stablecoin regulations take hold.”

A recent webinar by SOLIDUS LABS revealed that the second phase of the MiCA framework, addressing market abuse prevention and prohibition, will be fully applicable by December 30, 2024. To successfully navigate these regulatory changes, proactive preparation, strong internal policies, and advanced surveillance systems will be crucial.

Circle CEO Jeremy Allaire emphasized that the company’s track record of compliance positions USDC and EURC for continued success under the new regulatory framework.

In contrast, Tether’s USDT, a key competitor, lacks an EMI license. Tether CEO Paolo Ardoino remains skeptical of MiCA’s requirement for 60% backing in bank cash.