The Tornado Cash story the day before sparked a wave of outrage among members of the cryptocurrency community. Many felt that blocking certain crypto-addresses at the behest of the government was a worrying precedent for full-fledged censorship of the entire industry. Circle has also been involved in blocking the sanctioned wallets, causing it to be officially abandoned by decentralised platform Maker DAO.

It’s important to understand that Circle is a US company, so interacting with addresses that are linked to an essentially banned platform could cause problems. This is why USDC has blacklisted addresses that have interacted with Tornado Cash. The listing inside the smart contract looks like this.

Blocking cryptocurrency addresses with USDC at the smart contract level

That said, it’s important to understand that USDT from Tether is also a centralised stablcoin, so addresses in certain blockchains could be blocked for interaction with this coin at any time. In this regard, the trend of USDT acquisition to replace USDC seems rather strange. However, it is there.

What’s going on with the top Stablecoins

The Glassnode Alerts Twitter account posted a chart of USDC supply held by top cryptocurrencies with the following quote.

The USDC supply share of the top 1 per cent of crypto accounts has fallen to 87.667 per cent, the lowest in 22 months. Back on 20 August 2022, the figure was 87.669 per cent.

USDC supply share dynamics on major cryptocurrencies

Since the sanctions against Tornado Cash were imposed, USDT capitalisation has increased by $2 billion. Circle’s Stablecoin, on the other hand, has seen a marked decline in capitalisation. Again, this all came after the issuing company decided to freeze around 75,000 USDC at addresses associated with the cryptomixer.

Another indicator from Glassnode: the number of USDC deposits on the cryptocurrency exchange has dropped to its lowest in 17 months and is now at 138,250 units on average over the past week. Accordingly, interaction activity with this cryptocurrency is also slipping, Cointelegraph reports.

Number of USDC deposits to exchanges

Meanwhile, the average transaction volume with the stablcoin rose to a 3-year high of 228,721 USDC during the week.

Volume of USDC transactions

The outflow of funds from the Circle ecosystem in favor of Tether is also due to the fact that representatives of the USDT issuer have not yet made any official statements regarding the Tornado Cash incident. However, the general trend remains very clear – harsh measures by cryptocurrencies that go along with various government agencies are hitting their reputations in the crypto industry hard.

Read also: Major stabelcoin issuers have revealed their official support for the PoS network of Etherium. What does it mean?

Another interesting statistic was shared by analysts at JPMorgan Bank. According to their data, various issuers of the most popular steiblocoins currently hold more than $80 billion worth of US Treasury securities in reserves. That’s about 2 per cent of the market for these financial instruments.

Moreover, the issuers of Stablecoin have surpassed even Berkshire Hathaway, the US holding company owned by world-renowned investor and ardent cryptocurrency critic Warren Buffett, by the aforementioned figure.

Largest holders of US Treasury securities (in billions of dollars)

Recall that US Treasury securities are government securities issued by the US Department of the Treasury through its Bureau of the Public Debt. It is an instrument for financing the national debt. It is generally considered a safe investment to maintain company reserves.

The day before, Tether released a report on its reserves for the second quarter of this year. In it there was information that the issuer has significantly reduced the share of commercial paper in backing USDT, while slightly increasing the share of cash. Tether reserves are very important to maintain for the overall stability of the crypto market, as USDT is the most popular stackablecoin, which is the backbone of so many processes within the digital asset market. And no one cancelled the banal desire to preserve the dollar value of their own portfolio in a bear market.


It should be noted that the day before, Tether and Circle representatives confirmed that they are not going to support the PoW network of Etherium, if it continues to exist after the blockchain transition to the PoS consensus mechanism. Still, since stackcoins require collateral, supporting coins on a PoW-based network would require tens of billions of dollars. So, at least initially, there will be no popular stabelcoins in the PoW branch of Etherium.


Etherium and other cryptocurrencies


We believe that the current situation with changes in preferences of Stablecoin holders is situational and not definitive. Certainly Circle was the first to react to sanctions against the Tornado Cash platform and managed to block certain addresses. However, that doesn't mean that Tether won't do the same if anything. Therefore, cryptocurrency investors should either accept a possible development that is unlikely to affect them, or avoid interacting with Stable in general.