USDC Surpasses USDT: How Compliance is Shaping Stablecoin Leadership

Crypto News– Tether has long been the heavyweight champion of the stablecoin arena, largely owing to USDT’s status as the inaugural fiat-backed stablecoin. However, in recent years, formidable contenders have emerged, posing a formidable challenge to USDT’s dominance.

USDC Surpasses USDT: How Compliance is Shaping Stablecoin Leadership

Since 2024, Circle’s stablecoin, USD Coin (USDC), has been gaining traction, steadily increasing its transaction volume. According to industry behemoth Visa, USDC surpassed USDT in monthly transactions for the first time in December 2023.

By March 2024, USDC’s transaction volume began to surge consistently, maintaining its lead while USDT experienced a decline. By March 24, 2024, USDC closed the week with nearly five times the volume of USDT.

Fast forward to April 21, 2024, and the downtrend in USDT’s weekly transaction volume persisted, plummeting to $89 billion, while USDC soared to $455 billion. The tides are shifting, marking a potential turning point in the stablecoin landscape.

Despite being launched as recently as 2018, USDC has swiftly captured a significant 20% share of the entire stablecoin market.

The race for stablecoin supremacy unequivocally centers around USDT and USDC, which collectively command a staggering 90% share of the stablecoin market, as reported by crypto exchange OKX in January 2024.

On-chain data further underscores USDC’s ascendancy, particularly in the realm of institutional adoption within the crypto sphere. This trend poses a potential challenge to USDT’s dominant position, especially considering the anticipated role of institutional investors in propelling the bull market forward.

Stablecoin Race: Attracting Institutional Investors

The evolution of the crypto market has been profound, transitioning from the wild west of fraudulent projects during the initial coin offering (ICO) era to a landscape primed for major institutional involvement, particularly following the green light for spot Bitcoin exchange-traded funds earlier this year.

As the market matures, there’s a palpable shift towards prioritizing compliance, as highlighted by former Binance CEO Changpeng Zhao’s recent remarks on May 2. This emphasis on regulatory adherence is sparking intense competition among firms aiming to attract the influx of new investors, with compliant stablecoins emerging as frontrunners.

In this context, USDT, long dogged by concerns over reserve transparency, finds itself in a precarious position. With USDC positioning itself as a fully regulated and transparent stablecoin, the pressure mounts for Tether to revamp its public image. Despite Tether’s recent independent audit, USDC’s association with U.S. jurisdiction bolsters its credibility.

The impending regulatory frameworks in the U.S. and Europe are key drivers nudging users towards regulatory-compliant options like USDC over USDT. The introduction of the Lummis-Gillibrand Payment Stablecoin Act in the U.S. Congress and the impending Markets in Crypto-Assets regulations in the EU are poised to reshape the stablecoin landscape significantly.

To secure approval from U.S. authorities, Tether may need to relocate its operations from offshore havens, potentially missing out on lucrative markets. Similarly, in Europe, stablecoin issuers must align with stringent e-money issuer regulations, positioning Circle’s EURC favorably ahead of impending changes.

As the regulatory tide swells, stablecoins that embrace compliance are poised to thrive, while others may struggle to adapt to the new regulatory paradigm.