It is interesting to know that USDT has a larger market cap than USDC— that Coinbase considers more stable. Furthermore, Coinbase said high-quality reserves back the USDC token.
They added that the token delivers transparency via "monthly attestations by Grant Thornton LLP." You would recall that Tether has been the subject of several regulatory checks since it failed to provide adequate transparency over its reserves.
In promoting transparency, Tether Lab said it had reduced its commercial paper holdings to zero. Similarly, the stablecoin issuer said it would increase its investment in US treasury bills and short-term government-issued debt.
Experts say Coinbase's announcement that users can swap from Tether's USDT to Circle's USDC for zero fees is a dominance strategy. They said the world's second-largest crypto exchange by trading volume had triggered a battle for stablecoin dominance.
Coinbase, a US-based exchange, has acknowledged the recent events and happenings in the market. Therefore, there is a need to restore stability and improve customers' confidence in fiat-backed stablecoins in times of volatility. It is on this premise that the exchange is waiving its conversion fees.
You would recall that in 2018, Circle and Coinbase formed a consortium named Centre. They formed the consortium to improve mainstream stablecoins adoption and have been managing USDC since the launch.
Furthermore, Coinbase noted that USDC is unique because it is fully backed by cash. Similarly, the stablecoin is equivalent to dollars and can be redeemed from 1 USD to $1. The USDC stablecoin has a market capitalization of $42.8 billion and remains the second largest stablecoin— following USDT with about a $65.7 billion market cap.
Since Coinbase announced that users can now convert their USDT to USDC for free, several industry players have reacted. Most of them questioned the motive behind the decision, while others considered it a desperate move.
For instance, Gabor Gurbacs, the strategy advisor at VanEck, said,
Tether was the first stablecoin in the world and has been trusted by millions worldwide since its inception. In fact, if you ask people outside a narrow group in the US, they'd pick Tether over USDC. "
Surprisingly, Tethers CTO Paolo Ardoino retweeted Gabor Gurbacs' statement.
However, one of the prominent players in the crypto ecosystem, Samson Now, does not support Coinbase's decision. He tweeted that "users should beware of companies that offer free stuff because "the door in is usually big, but the door out is small."
He opined that the zero-fee swapping might sound appealing but could cost users after a while.
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