Circle Raises USDC Redemption Fees Again Even as Market Share Declines

Move comes amid concerns that higher fees harm USDC’s appeal for use in trades.

Stablecoin issuer Circle has raised USDC redemption fees for a second time this year, according to a Bloomberg report.

USDC holders seeking near-instant redemption of the stablecoin will have to pay additional fees for daily redemptions that exceed $2 million, according to the report. 

The fee structure update comes after Circle introduced tiered redemption options in February, under which USDC holders on a “standard” redemption plan incur a 0.1% fee for cashing out sums greater than $15 million.

Standard redemptions are processed almost instantly, unlike “basic” redemptions, which can take up to two business days to process. 

When Circle introduced its new redemption processes, it enrolled all customers in its standard plan as a default, making access to its basic plan subject to a manual opt-in. 

The latest update means that fees of 0.03% will apply to standard redemptions between $2 million and $5 million, and fees of 0.06% will be charged for redemptions from $5 million to $15 million.

A person close to the matter told Bloomberg that the additional fees were introduced in late September, and that Circle clients had expressed concern that the increased fees would dent USDC’s appeal as a digital currency for trading.

Circle has been one of the industry’s top-earning onchain businesses by fees during the past month. Data from Token Terminal show that it has earned $136 million in fees over the last 30 days. 

Rival stablecoin issuer Tether claimed the top spot during the same period, generating fee income of $400 million. Tether charges a flat fee of 0.1% on redemptions of its USDT stablecoin that exceed $100,000.

Circle’s new fees have taken effect despite stiffening competition in the stablecoin market that has seen the entrance of new issuers and increased activity among TradFi players in the space, and a decline in USDC’s market share. 

In February, USDC accounted for 31% of the stablecoin market, while USDT represented 52%, but USDC’s market share has since dropped to 20% as USDT’s has grown to 70%.