Facing the fiercely competitive stablecoin market, the digital dollar issuer Circle has once again raised the large-scale redemption fees for USDC in less than a year, mainly affecting institutional investors and large traders. Circle stated that this move is to address liquidity demands, but it has also raised concerns among users.
Quick exchanges over $2 million start to incur fees
According to Bloomberg, the Circle Mint service for exchanging USDC into dollars used to be free and had no limits on the amount exchanged. However, in February of this year, fees were introduced for exchanges over $15 million. In late September, Circle introduced a new tiered fee structure, charging a 0.03% fee for quick exchanges over $2 million per day and a maximum fee of 0.1% for exchanges over $15 million. Circle stated that this fee structure is to address global liquidity demands, similar to the fees charged by banks and other financial institutions for expediting services. If traders are not in a hurry to exchange, they can choose to wait an additional two days to receive fee-free exchanges.
Fierce competition in the stablecoin market, mixed reactions from Circle customers
According to sources cited by Bloomberg, some Circle customers are concerned that the increased fees may reduce the attractiveness of USDC for trading. In contrast, the stablecoin issuer Tether, the biggest competitor of USDC, has seen the circulation of its stablecoin USDT reach a record high this year, reaching $123 billion, and Tether charges a 0.1% fee for exchanges of over $100,000 USDT.
In conclusion, if Circle is unable to provide fee reductions or incentives to attract more large institutional users, it may further lose market share. In addition, other stablecoin issuers may take advantage of this situation and join in to share the large stablecoin market.