Key Insights:
Circle has notified on its website and X that it would immediately stop minting USDC on Tron and would allow migrations of its stablecoin out of Tron till Feb 2025. The news comes as a shock because Tron is the second largest blockchain and Circle was expanding its reach to newer blockchains.
There seems no immediate impact on either Circle or Tron. However, in the long run, Circle might lose popularity because of its decision to move out of a popular blockchain.
Retail users can choose between blockchain bridges or exchanges to transfer their crypto out of Tron.
Circle stated that the move to stop minting USDC on Tron and the subsequent move to end support of USDC on the blockchain was a result of Circle's risk management framework. The company also said that it constantly tests the suitability of blockchains where its stablecoin exists.
Tron has been facing the hear of several investigations by the US authorities, especially the SEC. The agency accused Tron of selling unregistered securities and alleged that Justin Sun, its founder was running an "extensive wash trading".
#NOTE: Wash trading is the act of buying and selling securities such as stocks, bonds or crypto to generate false trade volumes.
Retail users would have to migrate their USDC out of the Tron blockchain themselves through either of blockchain bridges, central exchanges or decentralized exchanges.
Blockchain bridges are protocols which allow you to move your assets from one chain to another. They do so by destroying or locking your funds in one chain and minting the same in another blockchain. This is more suited for advanced users.
Beginners can use centralized exchanges like Binance or Coinbase. Here, they can first transfer their USDC to the exchange and then send them back to their wallets.
Users can also swap it for other stablecoins or if they choose, can also redeem the stablecoins for cash.
There is also an option to use decentralized exchanges, where users could choose if they just want to swap USDC for any other stablecoin.
In case users want to keep their stablecoins in Tron, they might either swap the USDC with USDT or any other Tron-supported stablecoin.
Due to its low fees, the Tron blockchain has risen to be the top choice for issuing stablecoins after Ethereum. Also, because stablecoins are frequently transferred, keeping them on Tron directly benefits the users.
As of Feb 21, 2024. Tron has the second highest volume of stablecoins on its blockchain, even higher than Arbitrum , BSC, Optimism and all others combined. Around $51.5 billion worth of stablecoins exist of Tron with USDT accounting for $49.53 billion alone.
The volume of USDC on Tron is almost non-existent at $312 million. Below is a list of top 5 stablecoins on Tron with their respective volumes.
Circle had introduced its Cross Chain Transfer Protocol where it had extended support for cross-chain transfers on multiple blockchains i.e., Arbitrum, Avalanche, Base, Ethereum, Noble, Optimism, and Polygon.
Since, Tron was never a part of the CCTP, the decision by Circle would hardly see any impact on its protocol.
Yet, we believe, Tron could have been the second most important blockchain for USDC if it were integrated with the CCTP.
USDT has nothing much to gain from the exit of USDC from Tron. Being a preferred blockchain, the vacant space left by the USDC would prove to be beneficial for smaller stablecoins such as USDJ or HUSD.
However, it would definitely impact Circle's image at a point where it is already losing its market share to USDT. So, Circle might not lose market share directly to USDT, but it would do so in the long run.
Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.