Is Tether Losing Its Grip on the Stablecoin Market?

The stablecoin market is one of the most profitable parts of crypto. Currently amounting to ~$150 billion, the industry can grow to over $500 billion in the next couple of years.

For now, Tether is the absolute king of this field, but can the questionable company hold its position in time?

In this article, we’ll analyze the possibility of Tether losing its grip on the stablecoin market, giving up ground to the newly-emerged competitors and long-term enemies. Enjoy!

Tether – Most Profitable Company Ever

Tether has always been the dark horse of crypto, with popular personalities like Coffeezilla saying that the stablecoin company is a ticking bomb waiting to explode.

As of October 2024, we don’t have enough evidence to be 100% sure of anything that Tether says, starting from its reserves and ending with the ties with Bitfinex and more.

Nevertheless, Tether has proven to be the world's most “stable” stablecoin issuer, as its USDT didn’t lose value through several high-profile collapses. This way, the company has cemented the absolute first place in the stablecoin market, with a whopping 69.45% of the total market capitalization of stables.

That’s why the company is showing the most insane numbers known to Wall Street. The peak of its financial power was revealed in the first half of 2024 when Tether reported a jaw-dropping $5.2 billion in net profit. That’s more than giants like Netflix, Pfizer, Pepsico and Marriot.

What’s even more impressive is their efficiency. With fewer than 100 employees, Tether generates an astonishing $124 million in profit per employee.

Tether's influence in the crypto world continues to grow. In Q2 alone, the supply of USDT increased by $8.3 billion. On top of that, they hold 75,354 Bitcoin, worth around $5 billion, making them the 8th largest corporate Bitcoin wallet.

They’ve also accumulated $3.8 billion in gold and a massive $97.5 billion in U.S. Treasuries, putting them 20th in global rankings for U.S. debt holdings. They hold more US debt than Germany, the UAE and Spain.

But, with Europe’s new rules and powerful opponents emerging, Tether can lose its grip on the stablecoin market. Let’s see what can happen.

MiCA Regulations in Europe

The European Union has a great track record of pushing giant companies to comply with their regulations. Take Apple, for example. The EU forced the biggest company in the world to change its charging port in all iPhones, cutting sales by billions of dollars annually.

The same happens with the crypto market now. The EU introduced MiCA, a set of rules that regulate Web3 companies, including stablecoin issuers.

Under Article 23 of the law, companies must halt the issuance of asset-referenced stablecoins used for more than 1 million transactions or exceeding a daily value of $215 million. These stablecoin rules come into effect at the end of June, with additional provisions set to be enforced in December.

Circle has already received permission to continue operating on EU soil, but Tether has not. That’s why Coinbase, the second biggest crypto exchange in the EU, has already announced that it will delist all non-compliant stablecoins on December 30, 2024. That includes USDT as well. Binance has also limited the functionality of USDT for its EU users.

The rest of the exchanges will also have to comply with this rule. Otherwise, the European Union will come after them as well.

Tremendous Competition Emerges

While the regulations are a problem for Tether, the emerging competitors can deal the final blow to the company. In a span of just a few months, several BIG companies from the US and Europe announced plans to create their own stablecoins. Let’s see who can become Tether’s biggest enemies:

PayPal

PayPal USD is the fifth largest stablecoin by trading volume and the sixth by market capitalization.

What sets PYUSD apart is its integration with PayPal’s ecosystem, making it easier for over 430 million users to send, receive, and transact using this stablecoin. Whether for e-commerce or person-to-person payments, PYUSD offers fast and low-cost transactions.

Also, don’t forget that PYUSD is, for now, only available on Ethereum and Solana. Once the company decides to make PYUSD available on all the existing blockchains (like Tether did,) the market capitalization and trading volume will skyrocket.

BBVA and Visa

BBVA plans to launch its own stablecoin with Visa's help next year. They are currently in the testing phase of Visa's program to help firms create tokenized assets. BBVA aims to have the prototype ready by 2025. BBVA is one of the largest banks in the EU, controlling over a trillion dollars in assets.

The bank hasn't decided whether its stablecoin will be backed by deposits, money market funds, or fiat currencies like the euro or U.S. dollar. The goal is for it to be used for settlement on exchanges offering tokenized assets.

BlackRock and Ethena

Ethena Labs has partnered with BlackRock to launch a new stablecoin, UStb. The stablecoin will be backed by BlackRock's USD Institutional Digital Liquidity Fund, which offers a stable value of $1 per token.

UStb will work alongside Ethena's existing stablecoin, USDe, which was introduced in February. UStb will provide users and exchange partners with a product that has a different risk profile from USDe. It is expected to support USDe during periods of weak funding conditions.

With BlackRock’s appetite to conquer the Web3 world and their absolute influence over the financial markets, UStb could become a top 5 stablecoins in no time. BlackRock's USD Institutional Digital Liquidity Fund has already gathered more than $700 million in assets in just under two months from its launch.

Revolut

Fintech company Revolut is reportedly close to launching its own stablecoin. After securing a UK banking license earlier this year, Revolut aims to compete with major players like PayPal, Ripple, and BitGo in the stablecoin market.

The development of this stablecoin aligns with Revolut's mission to create a secure and compliant crypto ecosystem. A company spokesperson highlighted that crypto is a significant part of its vision for “banking without borders.” Revolut wants to offer a range of safe and accessible crypto services.

Ripple

Ripple, the company behind the XRP Ledger, has already finalized the testing of its stablecoin pegged to the U.S. dollar backed by U.S. dollar deposits, short-term government Treasuries, and other cash equivalents. The launch is planned for this year.

This stablecoin will be deployed on Ripple’s XRP Ledger and the Ethereum blockchain using the ERC-20 token standard. Ripple aims to stand out by offering a stablecoin with strong backing and transparency. The company promises monthly public audits by a top accounting firm to ensure accountability.

First Problems Have Already Appeared

Despite its record-breaking business numbers, Tether has already started facing problems in 2024. Its market share on CEXs has dropped from 82% to 69% this year. This decline is partly due to increased competition from other stablecoins, like FDUSD, which benefits from Binance’s zero-fee promotions.

Additionally, USDC has gained market share, reflecting a growing preference for regulated alternatives. Currently, U.S.-issued stablecoins account for 10% of the total stablecoin trading volume.

USDC, the only top five stablecoin regulated under state money transmitter laws, has increased its share from less than 1% in 2020 to 11% today. With Circle going public in 2025, Tether can lose more market share to the company.

Tether's decline may also be linked to the rise of innovative yield-bearing alternatives like Ethena’s USDe. Since its launch in February, USDe’s trading volume has grown significantly, though it has since decreased from an all-time high of over $800 million after Ethena’s ENA airdrop

Conclusion

So here you have it: a complete analysis of Tether’s market position and all the possibilities that could cause its fall.

However, it’s safe to say that for now, Tether isn’t going anywhere. The company is still the biggest stablecoin issuer on the market, and it will take time for the competition to catch up to them.