[Feature] The Stablecoins Battle Continues, Solana to Bear the Brunt

Binance, the world’s leading cryptocurrency exchange by volume, announced the auto-conversion of selected stablecoins (USDC, USDP and TUSD) into their own-issued stablecoin BUSD effective 29^th September this year. It has then sparked a hot discussion in the crypto space, mostly criticising Binance’s motive to promote its own stablecoin and to eliminate competitors. With the support from Jeremy Allaire, CEO of USDC issuance company Circle, and other crypto leaders, things have settled down over the past months.

Coming out of nowhere, the largest crypto exchange announced the suspension deposit of USDC and USDT of the Solana network yesterday. It’s a norm that centralised crypto exchange (CEX) halt deposits or withdrawals for a limited time due to schedule maintenance. However, what’s made Binance’s call elusive is that other CEXes are following suits, such as OKX, Bybit and MEXC, some of them even suspending both deposits and withdrawals. Solana’s price panicky dropped 9% to $12.93 within 2 hours of Binance’s announcement.

Binance

OKX

MEXC

Three hours later, Binance resumed deposits of USDT on the Solana blockchain, yet USDC is still in suspension as of the time of writing. The leader who started the temporary FUD has yet to explain further the reason for the suspension. The latest announcement only stated, “after internal assessment and review, Binance has resumed deposits for USDT (SOL).” Solana’s price is currently trading at $13.60, unable to recover back to its price of $14.10 pre-announcement.

Amid the suspension, Allaire, who once supported Binance stablecoins consolidation, expressed his disappointment on Twitter, “USDC on Solana is natively issued by Circle and is functioning fine. Not clear what the motivations are for exchange actions, which are disappointing.” Circle subsequently tweeted that USDC is always redeemable 1: 1 for US dollars.

Without an explanation from Binance and its boss, CZ, we would never know the reason behind this suspension. Tether CTO Paolo Ardoino gave his two cents on this matter, “USDt on solana issued directly by Tether. Just speculating, but could be that exchanges are seeing too much connection between FTX and Alameda and Solana. There is a lot of tension.” Another speculation is related to FTX that the CEXes might fear depeg happening to stablecoins on the Solana network. Roughly a week ago, following the fall of the FTX empire, the FTX-issued-and-backed wrapped versions of Bitcoin and Ether on the Solana blockchain had heavily lost their peg, trading at a discount of more than 80% from the price of the native tokens. Yet USDT and USDC were directly issued and backed by Tether and Circle; depeg is unlikely to happen. Nevertheless, it is not wrong to withdraw and swap your asset in the Solana network; it’s better to be safe than sorry until everything is cleared.