In a recent blog post, the centralized crypto exchange, Coinbase, advised its users to switch from USDT to USDC, hailing the latter stablecoin as a “safe and trustworthy digital dollar.” Coinbase also announced a waiver of conversion fees to encourage its users to make the change.
Centralized crypto exchanges are competing over whose stablecoins are the best. For instance, Binance stopped supporting USDC and started converting clients’ stablecoin holdings into BUSD, its stablecoin.
Now that they are no longer listed on Binance, the groups behind USDC have new strategies to speed up the stablecoin’s growth.
Coinbase Propose The Removal of USDT
In 2018, Coinbase and Circle, a Coinbase subsidiary, collaborated to create USDC. Additionally, one of the US’s largest audit, tax, and advisory firms, Grant Thornton LLP, provided monthly attestations.
On the other hand, Tether has been the subject of discussion, much of which is based on the stablecoin issuer undergoing a thorough audit. The company has consistently maintained that its reserves are appropriately backed while disputing FUDs.
Meanwhile, there aren’t such rumors about its rival, USDC, which has grown in leaps and bounds in the last four years to challenge USDT’s dominance in the stablecoin market. The cryptocurrency market has attracted tremendous attention due to FTX’s insolvency.
The unraveling of FTX’s liquidity issues and the ensuing domino effect led to the testing of some stablecoins’ liquidity. However, Coinbase argues that its users have nothing to worry about regarding USDC’s liquidity, unlike its rival.
Part of the Coinbase announcement read, “as of right now, we are waiving conversion fees for international retail clients who want to switch from USDT to USDC because we believe USD Coin (USDC) is a dependable and trustworthy stablecoin.”
The Coinbase – USDC Relationship
Coinbase’s decision to waive conversion fees is unexpected, given that transaction fees account for most of its revenue. Also, the weak market has caused the exchange’s trading revenue to drop by at least 50% compared to the prior year.
Coinbase CEO Brian Armstrong further confirmed this drop in earnings during a recent appearance on Bloomberg’s David Rubenstein Show.
Armstrong said, “we produced approximately $7 billion in sales and $4 billion in positive EBITDA in 2021. But, this year, with everything slowing down, it’s looking like maybe half that amount or less.”
Days after the FTX crash, Tether’s USDT lost its peg and traded as low as 93 cents. However, most trading pairs involving USDT on exchanges have changed to $1.
Nevertheless, USDT pairs listed on Binance continue to be listed at 99 cents, according to CoinGecko data.