Looking at the market cap of USDT and USDC today, you might think they are indisputable. While Tether and Circle controlled over 80% of the global stablecoin value by market cap as of October 2025, most other crypto-native challengers have yet to put up a convincing fight, despite many offering compelling value propositions for users and distribution platforms. To date, a crypto-centric market, lack of regulatory clarity, first-mover advantages, and strong integrations with on- and off-ramps have enabled enormous value creation for Tether and Circle.
Stablecoin Summer (a term to describe the surge in demand, regulatory clarity, and market participants over the past few months) has begun to expose very real challenges for what many consider to be the de facto stablecoins. It’s clear that both men felt the pressure to respond: a wave of well-connected executive hires and regulated launches in Europe (EURC) and the United States (USA₮) proved that they understood the need to change and adapt to maintain their dominance – or at least continue to grow. But an important question remains: will this be enough to maintain its lead over the peloton?
Ecosystem competition
Today, stablecoin usage is driven by decentralized finance (DeFi) applications, including trading, lending, staking, yield farming, and liquidity provisioning. Another important element arises from the strong demand for cross-border payments, savings and general access to the dollar in economies with volatile or restricted fiat currencies.
Large centralized exchanges have acted as kingmakers for Tether and Circle, serving the vital role of entry and exit ramps needed to move global demand in and out of the system. There is no doubt that without Coinbase, USDC (launched four years after USDT) would not enjoy the position it does today. Just look at Coinbase’s 50% share of Circle’s USDC reserve revenue to understand the dynamic. The relationship between Bitfinex and Tether is slightly different but shares similarities, and exchanges like Binance providing support have enabled Tether’s success.
However, a recent wave of new entrants, such as USDG (Paxos) and USDe (Ethena), have shown that participants are ready to enter by offering users easier ways to earn returns on their holdings. In a relatively homogeneous product, this is one of the key drivers of value for users. Take for example the recent USDe announcements: integrations with Bybit and Binance have made it easier for users to earn rewards as well as deeper product integration, namely providing users with a return on funds parked on the platform or held as collateral. USDG, as a member of the Global Dollar Network, has done much the same thing.
Most recently, Hyperliquid (a decentralized exchange running on its own layer 1 blockchain) announced the launch of its own native and compliant stablecoin, USDH, in partnership with Native Markets. Prior to this, Hyperliquide had seen incredible volume growth, growing to over $330 billion in spot and perpetual trading volume as of July 2025, briefly surpassing Robinhood. As a result, they hold $5.97 billion in USDC deposits on the platform, almost 10% of the total circulating supply. The move to their own stablecoin has made it clear that major players in the ecosystem want in on the action; without any agreement in place, these players would not receive any of the interest income generated by Circle on the reserves supporting USDC. In Hyperliquid’s case, assuming a conservative 4% yield, the opportunity could represent up to $240 million in annual revenue if they could convert the entire USDC platform into their own stablecoin.
In direct response to this news, Circle, in an effort to defend its market share and revenue, launched its own native version of USDC on HyperEVM. The move aims to deepen the integration of USDC into Hyperliquid’s ecosystem by enabling seamless transfers across more than a dozen networks via Circle’s Cross-Chain Transfer Protocol. At the same time, they announced an investment by purchasing $HYPE tokens, the native utility and governance token of the Hyperliquid ecosystem.
Similarly, Ethena’s recent announcement of USDe with Binance poses a challenge to Tether. After Binance listed USDe, the exchange added USDe trading pairs as well as integration with Binance’s Earn program. Like USDC and Coinbase, Binance users in certain jurisdictions will now be able to earn rewards on the stablecoins they hold on the platform, including in wallet margin on futures and perpetual trades. The move, coupled with an attractive incentive offer (12% APR for a limited time), saw USDe on the platform skyrocket to over $2 billion. At the same time, the market capitalization of USDe exceeded $14 billion, up from $6 billion in January this year.
This follows a series of growth initiatives for the third largest stablecoin by market capitalization; USDe usage surpassed USDC on Bybit following a similar integration announcement. These examples are also far from exhaustive. Other players, such as USDG, a stablecoin issued by Paxos, have also sought to integrate with other exchanges and key players with the same goal of gaining market share from Tether and Circle by breaking the value chain and distributing more of the interest income earned on reserves.
As of January 1, 2025, USDT and USDC collectively represented 88% of the total stablecoin market capitalization, valued at $181 billion. Ten months later, the overall market had jumped more than 50%, from $205 billion to $313 billion as of October 9. However, the combined market share of USDT and USDC has fallen to around 82%. Although this drop may seem modest, it clearly indicates that competition is intensifying and new entrants are starting to erode the dominance of the two incumbents.
Regulatory and other challenges
The two incumbents have not only faced headwinds from industry players. Recent regulatory updates have also brought increasing challenges. The EU recently rolled out MiCA, its comprehensive crypto framework regulating crypto assets, their providers and other ecosystem participants. Tether made a definitive announcement: they would not respect the regulations, considered too restrictive and dangerous according to their CEO. As a result, it was delisted from centralized exchanges providing vital on- and off-ramps. Circle, although in a stronger position thanks to its MiCA compliance, has not been spared either. Under regulations, USDC and other stablecoins are classified as electronic money tokens (EMT); it cannot legally pay returns to holders in the EU, which could impact its value to users on sites previously offering rewards.
Fortunately for Tether, Europe represents a relatively small share of its total market, with the majority of USDT volume coming from Asia and other non-Western markets. Circle also saw a slightly muted effect, given that all stablecoins are subject to the same requirements, meaning that unless kept on-chain, no users will be able to receive reward payments. However, this generally decreases the value of stablecoins compared to other traditional ways of holding liquidity.
In the United States, the GENIUS Act is likely to influence the market in a similar way. As it stands, Tether’s USDT is non-compliant and will follow the same delistings that marked its centralized exit from the EU. Stablecoins will also not be able to pay interest directly to their holders and, although currently exempt, banks are pushing for rewards programs to also be included in the ban. This is not a surprise, given the potential for deposit flight due to the significantly higher yields offered by these stablecoin programs.
Tether responded by launching USA₮, its new U.S.-compliant offering, which will be issued by Anchorage Digital and led by former White House crypto sherpa Bo Hines as CEO. The gesture was measured; Tether has chosen to maintain support for the highly profitable, offshore structured, non-US/EU compliant USDT and add USA₮ as a complementary regulated product.
As rewards programs remain on hold with banks lobbying against them, Circle and other issuers in the U.S. face the threat of those same banks and other institutions entering the fray as a result of the GENIUS Act. Institutions such as Bank of America, Citigroup, JPMorgan Chase and Wells Fargo are all actively planning or exploring stablecoin initiatives, with Bank of America and Citigroup confirming plans to launch their own US dollar-backed stablecoins. Fintech giants are also getting in on the action, with PayPal, Revolut and Robinhood all set to launch their own tokens.
Conclusion
Tether and Circle’s dominance, once considered unshakeable, now faces its most daunting test yet. What was once a two-horse race is evolving into a complex and crowded ecosystem of challengers, each leveraging new technologies, integrations and regulatory openings to gain market share. The rise of natively integrated stablecoins like USDe and USDH, coupled with increasing pressure from regulators and the imminent entry of banking and fintech giants, suggests that the next phase of the stablecoin market will be defined by fragmentation, innovation and a realignment of power.
Tether and Circle are not blind to changing tides. Strategic partnerships, regulatory pivots and technical integrations show a willingness to adapt, but it remains to be seen whether this will be enough. Their future will depend not only on their size and established position, but also on their ability to evolve to meet user demands in an increasingly competitive and regulated environment.
As the market matures, the very definition of a “dominant” stablecoin may change. In this new landscape, success depends less on being first and more on being the most adaptable.
