Week In Crypto: Circle Ditches Tron Network As US Stablecoin War Escalates

February 23, 2024
Circle cuts ties with the Tron blockchain, Coinbase meets with the UK’s new city minister, and Montenegro confirms that the man behind TerraUSD will be extradited to the US.

Circle cuts ties with the Tron blockchain, Coinbase meets with the UK’s new city minister, and Montenegro confirms that the man behind TerraUSD will be extradited to the US.

US stablecoin issuer Circle has announced plans to discontinue support for USDC on the Tron blockchain, as the network’s poor compliance record comes under scrutiny.

On Tuesday (February 20), Circle published a blog post in which confirmed that it has removed the ability to mint new USDC on Tron with immediate effect.

Existing USDC can still be transacted on Tron, but this too will be gradually phased out.

Until February 2025, Circle Mint customers will be able to transfer USDC to other blockchains or redeem their USDC on Tron for fiat currency directly from Circle.

However, transfers of USDC on Tron from Circle Mint to external wallets are no longer supported.

Last November, as covered by Vixio, Circle closed all of its retail customer accounts after announcing that it would switch to serving business and institutional customers only.

Former retail and other non-Circle customers can still hold and trade USDC, however, and these customers are now encouraged to move their USDC to another blockchain if it is currently on Tron.

Circle said the decision to discontinue its support for Tron is the result of a reassessment of the blockchain’s “suitability”.

The decision was taken at an “enterprise-wide” level, the stablecoin issuer said, with input from Circle’s compliance department and other functions across the business.

“This action aligns with our efforts to ensure that USDC remains trusted, transparent and safe — characteristics that make it the leading regulated digital dollar on the internet,” Circle said in a statement.

Circle ramps up pressure on Tron, Tether

Circle’s decision to ditch Tron is at least partly related to Tron’s close ties with Tether.

Last month, as covered by Vixio, the UN Office on Drugs and Crime (UNODC) published a report showing that Tether is now a money laundering vehicle of choice for criminals in East and Southeast Asia.

In particular, the report noted that criminals use Tether on the Tron blockchain due to its higher speeds and lower transaction fees.

Of the $97bn USDT currently in circulation, $51.8bn is issued on Tron and $45bn is issued on Ethereum.

When Tether first launched in 2014, USDT was available only on Ethereum. It was not until 2019 that Tether began issuing USDT on Tron, and very quickly Tron surpassed Ethereum as the stablecoin’s largest network.

The UNODC’s report covers the years 2019 to 2023, showing that the rise in USDT-based money laundering correlates with the stablecoin’s deployment on Tron.

Also in 2023, Tron’s founder Justin Sun was charged with fraud and market manipulation by the US Securities and Exchange Commission (SEC).

Sun is alleged to have played a leading role in a pump-and-dump scheme involving two Tron-based tokens and multiple US celebrities.

Six of the eight celebrities, including actress Lindsay Lohan and musicians Ne-Yo and Akon, have already settled with the SEC, but Sun has confirmed that he will fight the charges in court.

UK City minister visits Coinbase HQ

This week Coinbase hosted a UK Cabinet member at its London HQ for a dialogue on crypto and stablecoin regulation.

Bim Afolami, the UK’s new City minister and economic secretary to the Treasury, took part in a fireside chat at the office with Tom Duff Gordon, Coinbase’s VP for international policy.

During his talk with Gordon, Afolami restated the government's commitment to passing new crypto and stablecoin legislation within six months.

“We were honoured to host city minister Bim Afolami,” said Gordon after the event. “It’s great that the government continues to support fintech and crypto, and we welcome the intention to legislate for stablecoins and staking before the summer.”

As covered by Vixio, Coinbase has now had close relationships with successive City ministers and former UK Cabinet members.

In April 2023, Afolami’s predecessor, Andrew Griffith, met with Coinbase CEO Brian Armstrong when he visited London.

Armstrong passed by Griffith’s office en route to UK Fintech Week, where he was scheduled for a fireside chat with former UK chancellor George Osborne.

The pair appear to have kept in touch, as less than a year later Osborne was offered a seat on the Coinbase Global Advisory Council — a position which he accepted and took up last month.

Highlighting the success of Coinbase’s lobbying efforts, Osborne will join a team that includes several former US senators and several former Cabinet officials who served under President George W Bush and President Donald Trump.

Change of plan: Do Kwon heads to the US

Finally, this week a High Court in Montenegro has confirmed that the creator of the TerraUSD stablecoin will be extradited to the US to face the SEC in court.

Do Kwon, 32, is the founder and former CEO of Terraform Labs, the company that built the LUNA blockchain ecosystem and launched its ill-fated stablecoin.

Do Kwon has been in Montenegro since March last year, when he and Hon Chand Jun, a former colleague from Terraform Labs, arrived in the country using fake passports.

The pair were arrested and later convicted of possessing fraudulent travel documents. After they had each served a four-month sentence, the Montenegro courts then had to adjudicate competing extradition requests from both the US and South Korea.

As covered by Vixio, Do Kwon has already successfully appealed against two previous extradition rulings, but his luck now appears to have run out.

As reported by Montenegrin news outlet Pobjeda, the High Court has confirmed that Do Kwon will be extradited to the US, where he will face charges of fraud and unregistered securities offences.

The court found that the conditions had been met to extradite Do Kwon to either the US or South Korea, so the decision was left to justice minister Andrej Milović to choose which destination was more suitable.

“The USA is our main foreign policy partner,” said Milović, explaining his decision. “We want to sign a bilateral extradition agreement as soon as possible in order to create a legal framework for future extraditions.”

Pobjeda also noted that Hon Chand Jun was extradited to South Korea earlier this month.



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