The stablecoin market has boomed, surpassing $250 billion at this writing. Within this rapidly growing market, two stablecoins have established a stronghold—Tether (USDT) and USD Coin (USDC). In fact, stablecoins represent over 90% of all daily transactions and the market cap. That competition is a welcome and refreshing change and a key focus in the wide-ranging digital currency landscape. This article examines the dynamics between USDT and USDC, considering regulatory developments, market share fluctuations, and potential opportunities and risks for investors.
ThrowingToken.com is your home for fresh, expert DeFi perspectives. This deep dive of the current stablecoin market is a must read for anyone looking to explore the DeFi space. To better equip yourself to make informed decisions within the evolving crypto ecosystem, it’s important to know both the pros and cons of USDT and USDC. Pay attention to the regulatory landscape that influences their deployment.
The Stablecoin Landscape: A Two-Horse Race?
USDT, the stablecoin issued by Tether, has for a long time been America’s stablecoin. It is multi-chain compatible on Ethereum, Tron, and Solana blockchains. This platform sits at the center of enabling a highly disproportionate 70% of global stablecoin trade. USDC, issued by Circle, has continued to slowly make headway. As of this writing in early 2025, USDC’s market capitalization floats in the $58–62 billion range, a testament to its growing acceptance and usage.
In fact, last year stablecoins facilitated more than $27.6 trillion in transaction volume. On the high side, that shocking total was greater than the yearly totals of Visa and Mastercard combined. This paints a picture of the growing importance of stablecoins, even outside the crypto space. Over the last few months stablecoins have raced past Bitcoin as the most commonly received cryptocurrency on African exchanges. This trend reflects their increasing role in places where access to conventional financial services is scarce. In Europe, the average monthly stablecoin inflows are above $10–15 billion, demonstrating a global hunger for these digital assets.
Regulatory Winds: The GENIUS Act and MiCA
The regulatory environment will be a huge factor in determining the future of stablecoins. The U.S. GENIUS Act and the European Markets in Crypto-Assets (MiCA) regulation represent landmark legislation. If enacted, these three provisions could significantly reshape the stablecoin landscape.
MiCA, which was adopted in 2023, provides an extensive new regime for digital assets, particularly stablecoins. As of June 2024, MiCA’s stablecoin provisions are now officially in force. This step positions the EU as one of the first jurisdictions to adopt customized regulations for stablecoins. A more extensive regulatory framework would help foster broader adoption of stablecoins throughout the EU. This change would especially play in favor of stablecoins that fulfill the needs of MiCA. The GENIUS Act, currently pending in Congress, would create that same regulatory framework in the U.S. These important regulations address monopolistic transparency issues, reserve requirements and consumer protection. Their stated aim is to create an ecosystem that is secure, reliable and interoperable in which stablecoins can operate.
The journey towards regulatory compliance has not been an easy one. In February 2021, Tether, the largest issuer of USDT, settled U.S. regulatory investigations. They were slapped with a fine of $41 million they immediately paid to the Commodity Futures Trading Commission (CFTC). These settlements highlight the need for strong regulatory adherence and the risks of failing to do so amidst the emergence of a stablecoin market.
USDC vs. USDT: A Closer Look
The rivalry between USDC and USDT is complex, involving not just market share but regulatory considerations and perceived risk. While USDT has held traditional monopolistic power in this arena. By contrast, USDC has been positioned as the more transparent, regulated stablecoin alternative.
USDC just passed one of the most stressful stress tests in 2023 during the chaos in the U.S. banking sector. Circle recently disclosed that a sizeable portion of its reserves were held at the now-failed Silicon Valley Bank. As a result, USDC was temporarily de-pegged from the US dollar, calling into question the stability of USDC. To their credit, Circle immediately went into overdrive to manage the fallout and reestablish trust in USDC.
USDT has come under fire for the composition of its reserves, as well as the lack of transparency around its auditing process. Concerns about USDT’s backing have existed for years. Despite the fundamental transparency issues with Tether, the company has made moves to increase transparency over the last year and provide more granular information about their reserves.
Though USDT and USDC continue to represent a large majority of the stablecoin market, other stablecoins are quickly catching up. Together, these alternative stablecoins complement each other’s features and risk profiles, serving different users’ needs and preferences.
- USDT (Tether):
- Pros: High liquidity, wide availability across exchanges and blockchains, established market presence.
- Cons: Less transparent reserve audits, regulatory concerns, perceived higher risk.
- USDC (USD Coin):
- Pros: Greater transparency in reserve audits, strong regulatory compliance, perceived lower risk.
- Cons: Lower liquidity compared to USDT, less availability on some exchanges and blockchains.
Beyond USDT and USDC: Diversification in the Stablecoin Market
The rise of such alternative stablecoins is a testament to the continued innovation and diversification in the stablecoin market. From a regulatory perspective, each stablecoin would have its own value proposition, appealing to varying levels of risk appetite and use-case requirements.
- DAI: Issued by MakerDAO, DAI is collateralized not by fiat reserves but by crypto assets. This decentralized approach offers greater transparency and censorship resistance but also introduces the risk of volatility in the underlying collateral.
- BUSD: A USD-backed stablecoin previously issued by Binance in partnership with Paxos, BUSD saw its circulation decline by more than 70% between 2023 and mid-2024 due to regulatory pressure. This highlights the impact of regulatory actions on the stablecoin market.
- PayPal USD (PYUSD): Launched in August 2023, PayPal USD represents a significant entry of a major financial institution into the stablecoin space. Backed by U.S. dollar deposits, U.S. Treasury bills, and similar cash equivalents, PYUSD aims to provide a stable and reliable digital currency for online payments and transfers.
The rapid growth and evolution of the stablecoin market present important opportunities and risks for retail and institutional investors alike. Stablecoins offer a range of benefits, including:
Implications for Investors
Investors should be aware of the risks associated with stablecoins, including:
- Price Stability: Stablecoins provide a relatively stable store of value compared to more volatile cryptocurrencies like Bitcoin and Ethereum.
- Efficient Transactions: Stablecoins facilitate faster and cheaper transactions compared to traditional payment methods.
- Access to DeFi: Stablecoins serve as a gateway to the decentralized finance (DeFi) ecosystem, enabling users to participate in lending, borrowing, and other DeFi activities.
For retail investors, stablecoins can offer a simple mechanism to hold value, pay others and enter the DeFi ecosystem. It's important to know the risks at play and select the right stablecoins that are reputable and transparent. For institutional investors, stablecoins can provide greater efficiency and cost savings and unlock new markets and opportunities. Indeed, major banks view stablecoins as pivotal to establishing the future payment infrastructure, capitalizing on their 24/7 instant settlement and programmability advantages. At the same time, institutional investors must consider and fully evaluate the regulatory and other operational risks posed by stablecoins.
- Regulatory Risk: Changes in regulations could impact the value and usability of stablecoins.
- Counterparty Risk: Stablecoins are subject to the risk of the issuer becoming insolvent or failing to maintain adequate reserves.
- De-pegging Risk: Stablecoins can temporarily or permanently lose their peg to the underlying fiat currency, resulting in losses for investors.
The stablecoin space is changing by the minute. It will be critical for investors to be aware of these recent and forthcoming developments and recalibrate investment strategies in turn. ThrowingToken.com will continue to provide expert insights and analysis. Only then will investors be able to confidently navigate the rapidly evolving, stablecoin-stuffed, DeFi-saturated world.
As the stablecoin market continues to evolve, investors need to stay informed about the latest developments and adapt their strategies accordingly. ThrowingToken.com will continue to provide expert insights and analysis to help investors navigate the complex world of stablecoins and DeFi.
