Reshaping the Stablecoin Market Landscape: The Rise of USDC and the Integration with Decentralized Finance

In 2021, the stablecoin market presented a new landscape. Although USDT still dominates the exchanges, USDC has risen in the DeFi space, with various data indicating that it is more favored by DeFi users. At the same time, stablecoins are no longer just a tool for risk reduction; they have also become an important bridge for traditional finance to enter the crypto and DeFi markets.

Stablecoins have always been a focal point in the cryptocurrency market, playing a key role in the decentralized ecosystem, especially in helping users manage asset volatility risks in trading and transfer scenarios. In January of this year, the U.S. Treasury Department's Office of the Comptroller of the Currency allowed banks to use USD stablecoins for payment settlements, reflecting the regulatory recognition of the status of stablecoins.

This year, the cryptocurrency market has strengthened, with a surge in demand for stablecoins. Various issuers have frequently increased their issuance, with the total market value rising from $28 billion at the beginning of the year to $108.1 billion. The market has been anticipating a new alternative to USDT, and although compliant stablecoins like USDC have made an impact, USDT still dominates centralized exchanges.

In May, USDT first detailed the composition of its reserves, with 76% being cash or cash equivalents. Although safety has been preliminarily ensured, its market position has changed. Currently, the issuance of USDT is 64.3 billion USD, nearly tripling since the beginning of the year, but its market share has dropped from 75% to 58%, which is closely related to the explosion of the DeFi market.

In the DeFi field, for compliance and security reasons, most projects prefer to use ETH and USDC to establish liquidity pools. According to data, on a leading DEX platform, the locked amount and trading volume of USDC significantly outpace that of USDT. On lending platforms, the deposit and borrowing amounts of USDC also far exceed those of USDT. This reflects that USDC has become the preferred stablecoin for DeFi users.

USDC is striving to become the main channel for traditional finance to enter the crypto market. Its issuer has significant advantages in regulatory compliance and has obtained licenses in multiple countries. In March, a major payment giant announced it would allow transactions to be settled using USDC. In May, USDC secured $440 million in funding to accelerate its promotion to financial institutions.

In June, multiple institutions launched USDC savings products with an annualized rate of around 4%, significantly higher than traditional banks. These products simplify the Decentralized Finance operations, which are expected to attract a large amount of traditional capital. USDC also launched a DeFi API, making it easier for institutional users to access various DeFi protocols.

Driven by demand, the supply of USDC has surged from $1.3 billion to $25.1 billion. In the future, it will be issued on multiple public chains to further expand its advantages. The stablecoin landscape is becoming increasingly clear: USDT mainly serves centralized exchanges, USDC aims to connect traditional finance with the crypto world, DAI serves the native needs of Decentralized Finance, and BUSD occupies an important position in specific ecosystems.

As the market matures, the role of stablecoins becomes increasingly important. USDC has become the industry benchmark due to its compliance, just like a leading exchange that may not have the highest trading volume but has the greatest influence. The future development of stablecoins is worth ongoing attention.