According to reports, crypto investors have converted their USDC stablecoin worth over $1.6 billion to another stablecoin, USDT. This is due to the ripple effect of the latest US sanction on Tornado Cash. Crypto platforms are now freezing funds linked to the crypto mixer.
Investors Flee From USDC After Circle Freezes Accounts Linked To Tornado Cash
In the last month, investors have converted their USDC worth about $1.6 billion to USDT. This switch is due to the intense regulation of the US on crypto firms.
A large number of investors switched to USDT after August 10th. This was after the issuer of USDC, Circle, froze over $75,000 USDC connected to Tornado Cash, a crypto mixer.
Recall that the US government recently sanctioned and banned Americans from using the mixer. The government alleged that most fraudsters had used the tool to launder millions of dollars.
The stablecoin issuer, Circle, stated that it seized the funds to comply with the US sanction. However, this decision did not go down well with the crypto community.
Several users voiced their displeasure on the matter. They said the firm is neglecting the crypto ethics of decentralization and privacy.
As per CoinMarketCap, the market valuation of Tether’s USDT is currently $67.43 billion. It has increased by over $1 billion in the last five days after Circle’s latest action on USDC wallets linked to Tornado Cash.
VanEck’s Strategy Advisor Says Investors Might Go Outside The US
Meanwhile, the market valuation of USDC has dropped by over $500 million within the same timeframe. This suggests that the other part of transfers to the USDT might be from another source.
Furthermore, in the past month, USDC’s marker valuation has dipped by $1.3 billion (2.3%) to over $53.5 billion as of writing. That of USDT has increased by $1.57 billion (2.4%) within the same timeframe.
According to Gabor Gurbacs, VanEck’s strategy advisor, the recent regulatory action by the US against crypto firms and tokens might push investors to go outside the country. Gurbacs believes they might feel their funds are safer elsewhere.
Both the USDT and the USDC are pegged to the USD. Both Tether and Circle have come under criticism in recent times.
Critics have attacked Tether for its inadequate transparency on the assets backing its stablecoin. Also, many have accused Circle of bowing down to government agencies.
Since the launch of the USDC in 2018, Circle has blacklisted over 81 crypto wallet addresses as part of compliance with US sanctions on individuals, crypto firms, or groups.
Investors Looking for a Safe Haven for Their Assets
In May, Tether faced a similar issue as Circle after the fall of Terra. Investors withdrew over $7 billion USDT for fear that the stablecoin would face a similar fate as Terra’s stablecoin.
According to Be[In]Crypto, the CEO of the Deepcoin platform, Ego Huang, stated that Circle is dependent on the regulatory regime of the US government.
Huang noted that investors are only looking for how to protect their funds and escape the scrutiny of centralized agencies.
Hence, they do not favor any platform over the other, except it provides them with the services they need. According to Huang, even if Circle tries to change the situation to prevent the outflow from the USDC, investors still need a safety net. This safety is what Tether’s USDT has provided them.