The following reflects the views and insights of Anastasija Plotnikova, CEO and Co-Founder of Fideum.
The year 2025 has been referred to as “the year of the stablecoin,” as these digital assets gain traction and recognition worldwide, particularly under the newly crypto-friendly U.S. administration.
The leading fiat-backed stablecoins, USDT and USDC, control 92% of the market share. Tether, the company behind USDT, has observed its market capitalization expand to over $140 billion, catering to more than 400 million users, especially in regions where banking services are limited.
Nonetheless, Tether’s supremacy is encountering heightened competition. Both established players and newcomers are eager to seize a portion of the market, while increasing regulatory challenges, particularly in regions like the European Union, add further pressure. This leads us to an essential question: Can Tether maintain its status as the leading stablecoin amid escalating regulatory scrutiny and emerging rivals?
The EU’s stance on Tether
Tether’s USDT was recently removed from exchanges within the EU due to its failure to comply with the new Markets in Crypto-Assets (MiCA) regulations, which were implemented at the close of last year. These regulations mandate that stablecoins adhere to strict transparency and licensing guidelines, and companies issuing stablecoins in the EU must obtain an electronic money institution (EMI) license while ensuring a 1:1 reserve ratio if backed by fiat currency.
The delisting of Tether has led to notable disruptions in the European market, limiting access to stablecoins for EU residents. In response, Tether has accused the EU of acting hastily and creating “a disorderly market,” despite the fact that the MiCA legislation had been under development for years, with warnings issued to exchanges by the European Securities and Markets Authority (ESMA) since last summer. Ten stablecoin issuers have been granted approval to operate under MiCA, yet Tether is not among them.
Is the U.S. a more welcoming environment?
The regulatory obstacles for Tether are not confined to the EU. Recently, the U.S. Senate Banking Committee voted to advance the GENIUS Act — legislation focused on payments-oriented stablecoins — to the full Senate. This bill would subject issuers of U.S. dollar-pegged stablecoins with market caps exceeding $10 billion to federal regulations. Foreign stablecoin issuers, including Tether, will be required to meet more stringent reserve, liquidity, and anti-money laundering regulations compared to their domestic counterparts.
At present, only two issuers meet the market capitalization criteria for federal oversight according to the bill — Tether and Circle. The latter, which is based in the U.S., has indicated its ability to comply with the proposed regulations. In contrast, Tether, headquartered in El Salvador, lacks a formal presence in the U.S. and may find it challenging to meet these new requirements. As a result, Tether could face heightened regulatory examination in the U.S. as well.
Rivals eager to capitalize on Tether’s troubles
As Tether grapples with increasing regulatory challenges, rivals are poised to take advantage of the situation. Among the rising challengers is Reeve Collins, a co-founder of Tether, who recently unveiled the Pi Protocol — a yield-bearing stablecoin backed by tangible assets.
Pi Protocol aims for a launch on the Ethereum and Solana blockchains in 2025. Although Pi Protocol may not fully align with MiCA’s regulations, its yield-generating model presents certain advantages, particularly in the U.S. market, where the SEC approved yield-bearing stablecoins earlier this year.
Competitors, including Collins’ Pi Protocol, may view Tether’s regulatory challenges as an opportunity to capture market share. Tether’s CEO, Paolo Ardoino, has voiced his belief that many of these new entrants aim to “Kill Tether.”
The winds of change in stablecoin markets
Can Tether withstand the mounting competition and increasing regulatory pressures? To date, Tether has enjoyed minimal disruption thanks to its large market share, leading the stablecoin sector in both market capitalization and 24-hour trading volume by a considerable margin. However, as global regulations tighten and new competitors emerge, Tether will need to navigate the challenges that lie ahead with vigilance. The result could lead to a fragmentation of the global stablecoin markets, creating a divide between regulated and unregulated options.