Miami Beach — The stablecoin space, dominated by Tether and Circle, is hindering competition that could lead to better product-market fit for some important use cases, according to Ben O’Neill, head of currency movement at Bridge.
“I think it’s a net bad thing for the growth of stablecoins as a whole, because you have two counterparties that have advantages and disadvantages in terms of what they’ve built and the design choices they’ve made. But they don’t work for all use cases,” O’Neill said during a panel on stablecoin growth at Consensus Miami.
Tether’s USDT, with its gargantuan market cap of around $189.5 billion, and Circle’s USDC, which has grown to around $71 billion, each emerged in different generational eras of crypto’s evolution.
Tether, launched in 2014 as Realcoin, captured China’s export trade, O’Neill said, and built this underground economy of dollars that people can use without the U.S. financial system. Circle, launched in association with Coinbase in 2018, sought to do just the opposite: a stablecoin regulated in the United States, which then relied heavily on decentralized finance (DeFi).
For O’Neill, the perspective of a large payments company, such as Stripe, which owns Bridge, illustrates the shortcomings of the two dollar-pegged token giants.
“As a payments company, I need certainty about how things are going to work,” he said. “So with Tether, they say we’re going to spend 10 beeps, which is extremely expensive for a payment company, or you can trade on the open market, which means I have no certainty.”
“For Circle, their entire business is AUM, and they keep increasing these burn fees. So again, if I’m someone like Visa, and I want to do billions of dollars in card settlement and stablecoins, I’m burning a bunch of USDC, and it’s going to be net bad,” O’Neill said.
The solution, “which is expected to arrive fairly quickly over the next couple of years,” is more stable parts designed for specific use cases, so they can be optimized for those use cases. The other part is the rise of the clearinghouse, “a sexy topic for founders and venture capitalists” to make “stablecoin trading as efficient as possible,” he added.
To conclude his argument, O’Neill said: “You need more competition, otherwise [Tether and Circle] will just continue to increase fees. They will not share the yield. They will dissuade you from burning it. They’re going to make it harder and harder to make it look like money with every turn.
