Tether’s once-unshakable grip on the stablecoin market loosens as USDC and new contenders rise, reshaping crypto’s financial landscape.
Stablecoins, digital currencies designed to maintain a stable value relative to assets like the US dollar, are pivotal in the cryptocurrency ecosystem for trading, lending, and as a store of value. For years, Tether (USDT) has dominated the stablecoin market, serving as the go-to asset for traders and institutions seeking dollar-pegged liquidity. However, recent data reveals a shift in this dominance.
While the total market capitalization of stablecoins has continued to grow, Tether’s relative share has started to decline in favor of emerging competitors. Tether's early dominance in the stablecoin market created a high barrier to entry for newcomers. However, its stronghold is weakening. USDT's market share, around 70% at the beginning of December 2024, has dropped to 63% more recently.
A Gradual but Noticeable Shift
Data from DeFiLlama, visualized in the chart below tracks the total value of stablecoins from January 2024 to January 2025, revealing Tether's market share erosion. The chart segments the market into Tether (black), Circle's USDC (pink), and other stablecoins (yellow). At the start of 2024, Tether held a commanding share of approximately $150 billion in a total market of the same value, but by January 2025, the total market grew to around $250 billion, with Tether's share noticeably diminished, while USDC and others expanded.
Tether's decline can be attributed to several factors, primarily regulatory scrutiny and transparency concerns. Tether has faced criticism for its reserve transparency, which has led to increased pressure from regulators, especially in regions like Europe. This scrutiny has prompted exchanges to seek more compliant alternatives, impacting Tether's adoption.
Rise of USDC & Strategic Partnerships
Circle's USDC has emerged as a frontrunner, benefiting from its perceived compliance and strategic alliances. Late in 2024, Coinbase, with a revenue-sharing agreement with Circle, delisted Tether and other non-compliant tokens in Europe, prioritizing USDC. This decision was driven by the European Union's Markets in Crypto-Assets (MiCA) regulations, requiring stablecoin issuers to hold e-money authorization. This move underscores USDC's alignment with regulatory standards, enhancing its appeal.
Additionally, Binance, a major exchange, established a partnership with Circle in December 2024, as announced at Abu Dhabi Finance Week. This partnership aims to make USDC more readily available across Binance's suite of products, serving its 240 million global users for trading, saving, and payments. This strategic alliance has bolstered USDC's market position, leveraging Binance's vast user base to drive adoption and liquidity.
Other Competitors
Beyond USDC, other stablecoins are gaining traction, as evidenced by the yellow segment in the chart. Notable players include Paxos and TrueUSD, which have expanded their presence by emphasizing transparency and regulatory compliance. Decentralized stablecoins like DAI, issued by MakerDAO, have also seen increased adoption among DeFi enthusiasts, particularly for their algorithmic stability mechanisms. These developments indicate a diversifying stablecoin landscape, eroding Tether's once-dominant market share.
Emerging Threats
The competitive landscape is set to intensify even further with major cryptocurrency entities planning to launch their own stablecoins. Kraken and Crypto.com are set to introduce proprietary stablecoins in 2025. Among the need to comply with MiCA regulations in the EU, these new entrants aim to reduce dependency on third-party issuers like Tether and Circle, potentially offering lower costs and tighter integration with their ecosystems, further challenging Tether's position.
Implications and Future Outlook
As evidenced by the data above, this shift in market dynamic reflects a maturing stablecoin market prioritizing regulatory compliance, transparency, and diversification. Tether's decline, while not catastrophic, signals a move away from its once-unrivaled dominance, with USDC, backed by major exchanges like Coinbase and Binance, poised to challenge its position. The entry of new stablecoins from established crypto names like Kraken and Crypto.com promises to reshape the competitive landscape even further.
Originally published at Substack.
