According to recent reports, Circle, the issuer of the USDC is set to cut ties with Tron.
Circle is set to stop minting more USDC on the Tron network, due to reasons that aren't quite clear.
How will Tron react? What do we know about this move from Circle?
Let's find out.
According to a recent blog post published on 20 February 2024, Circle announced that it will stop minting more USDC coins on the Tron network, effective immediately.
Moreover, Circle also mentioned that it will discontinue support for the stablecoin over the next year, and has urged users to remove their USDC from Tron and transfer to other supported blockchains.
What is interesting about this new development, is how Circle failed to explain exactly why it was taking this step, but mentioned factors relating to its "risk management and compliance policies".
Recall that last month in January 2024, Circle announced plans to launch an IPO in the U.S.
As part of the process leading to the IPO, Circle was obligated to disclose details about its finances, which revealed some potential issues with its USDC reserves, according to Reuters.
According to the filings from Circle, the company has about 61% of its USDC reserves in cash and cash equivalents.
The remaining 39% is in other assets, ranging from bonds to U.S. treasuries, which aren't readily convertible into cash and could lead to issues with liquidation.
Moreover, in November 2023, Circle was also faced with a barrage of criticism from a non-profit group called Campaign for Accountability, under money laundering, gambling and sanction evasion accusations.
The NPO claimed that Tron was involved in all of these illegal activities, and was doing so with support from Circle.
"Circle continues to offer its USDC stablecoins on Tron and over a dozen other offshore blockchains, none of which it sought or received regulatory approval for, […] several of which continue to pose risks of being employed in illicit activities."
The group also accused Circle of associating with the founder of Tron, Justin Sun, who himself, is under investigation from the SEC for securities laws violations.
The recent developments between Circle and Tron may be part of a housekeeping move from Circle, which is only months away from the launch of its IPO.
Overall, USDC is one of the most popular stablecoins on the Tron network, with about 311,742,285 $USDC in circulation at the time of writing according to TronScan.
Seeing as USDC is an integral part of several Tron-based dApps, such as JustSwap, JustLend, and JustStable, Tron users may have to shift to other stablecoins without USDC.
According to data from CoinMarketCap, Tron hasn't been all that much affected by its severed ties with Circle.
CoinMarketCap data shows that the cryptocurrency isn't so bullish over the last day, but is still doing alright, compared to the rest of the market.
This growth is also visible over most of the past year as shown by the chart below:
Tron in the chart above, is attempting to close up the gap with the $0.18 high from April 2021.
The cryptocurrency just broke above the crucial $0.13 high from November 2021 and is aiming to complete the cup formation shown above.
In the worst case, we can expect a consolidation or a retest of $0.13 from here.
However, at the end of the day, we can still expect the cryptocurrency to continue further upwards from here and hit or even break above $0.18.
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