This column was co-written by Frank Chaparro, director of special projects at The Block, and Laura Vidiella of MNNC Group. The views expressed in this column are their own and do not reflect the opinions of their employers.
For much of the crypto world, lower interest rates are a welcome tailwind. The 50 basis-point rate cut by the U.S. Federal Reserve has not only helped push Bitcoin above $73,000 but has also reignited "animal spirits" across global equities. Lower rates mean cheaper borrowing, enabling firms to access more capital for speculation — a boost for our bags.
But not everyone in crypto benefits. For stablecoin operators, falling interest rates mean less revenue from the cash reserves backing their tokens. The impressive earnings that stablecoin issuers like Tether have enjoyed during the high-interest-rate era are well-documented; Tether reported billions in revenue throughout 2024. However, these golden days could dim if the Fed keeps rates low.
Today’s news that Circle will increase fees for cashing out its USDC stablecoin underscores this shift. The New York-based company now charges fees for USDC swaps above $15 million, and additional fees apply for near-instant redemptions over $2 million per day. These fees start at 0.03% per transaction and can reach 0.1% for redemptions over $15 million.
At first glance, Circle’s fee adjustment makes sense as it braces for lower interest rates and works toward an IPO. But it’s a tricky time to raise costs on USDC redemptions, given rising competition in the stablecoin space. While Tether dominates with over 70% market share, Circle also faces smaller, nimble startups vying for attention. With around 1,000 employees and a gleaming new downtown office, Circle is juggling operational expenses that its leaner competitors don’t have to worry about.
And with its market cap at less than half of its all-time high, gaining ground on rivals won’t be easy.
The Block’s Frank Chaparro serves up the latest headlines, charts, trends, and views on crypto and DeFi from around The Block, Twitter, and The Scoop pod. Subscribe to The Scoop newsletter, which hits inboxes on Tuesday and Friday mornings.
Disclaimer: The Block is an independent media outlet that delivers news, research, and data. As of November 2023, Foresight Ventures is a majority investor of The Block. Foresight Ventures invests in other companies in the crypto space. Crypto exchange Bitget is an anchor LP for Foresight Ventures. The Block continues to operate independently to deliver objective, impactful, and timely information about the crypto industry. Here are our current financial disclosures.
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