Tether approaches $70B market cap, as stablecoin competitors struggle under SEC scrutiny

As the SEC instructed Paxos to halt the issuance of BUSD, the market capitalization of Tether's USDT has surged to almost $70 billion

crypto.ro•February 16, 2023

The Securities and Exchange Commission (SEC) in the United States is reportedly planning to take legal action against Paxos, a digital asset platform, over the issuance and listing of Binance USD. The market capitalization of Binance USD has recently reached its highest level in several months.

The market capitalization of BUSD has reportedly declined by $2 billion

According to the SEC, BUSD, which is a stablecoin backed by the U.S. dollar, is being considered a security. The SEC has alleged that Paxos violated investor protection laws by white-labeling the stablecoin.

Paxos, the company responsible for the BUSD stablecoin, has confirmed that it will halt the production of new units of the token as of next week, in accordance with the directives of the New York Department of Financial Services (NYDFS).

Following the news of Paxos receiving a Wells notice from the SEC for the issuance of BUSD, the stablecoin's market capitalization has seen a significant decline.

As of February 16, BUSD's market cap has dropped by approximately $2 billion, down to around $14 billion, which is the lowest it has been since January 2022.

According to a previous report by Cointelegraph, Binance has experienced a surge in withdrawals and BUSD redemptions following the regulatory crackdown on Paxos.

The market capitalization of USD Coin (USDC) has continued its downtrend

Following the news of the SEC crackdown on stablecoins, USDC, the second-largest stablecoin by market capitalization, has seen capital outflows. The supply of USDC declined from $41.29 billion on February 12 to as low as $40.99 billion on February 14.

The supply of USDC rebounded to $41.30 billion on February 15, following Circle's announcement that it had not received any threat of a lawsuit from the SEC. Circle is the issuer of USDC stablecoin.

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Although USDC has seen recent inflows, its market capitalization has been generally declining since its peak of $56 billion in June 2022, resulting in a 25% decline over the past eight months.

Tether's market cap has surged past $69 billion

The ongoing regulatory crackdown on U.S.-based stablecoin firms appears to have benefited Tether significantly, as its market capitalization has surged to over $69 billion, making it the dominant player in the stablecoin market.

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Recent data indicates that Tether has seen inflows of nearly $890 million since February 12, which has helped to push its market dominance to 51.25% as of February 15.

The increase in Tether's market dominance is likely an indication that investors have been spooked by the regulatory crackdown on BUSD and have turned to Tether USDT as a safe haven. Tether is owned by Hong Kong-based iFinex, which also owns the Bitfinex cryptocurrency exchange.

For some time, investigators have been trying to uncover Tether's accounting practices to determine whether the circulating supply of USDT is fully backed by the US dollar, as Tether claims, or if it is backed by a combination of other cryptocurrencies, treasury bills, money market funds, and other assets.

Tether has consistently denied the accusations that its USDT stablecoin is not fully backed by the US dollar, and it has provided regular assurance opinions signed by third-party accounting companies on a quarterly basis to support its claims.

According to Tether's latest report from December 31, 2022, the company's consolidated assets amounted to at least $67 billion, exceeding its consolidated liabilities by at least $960 million.