The stablecoin management war: Can Tether hold its leading position?

Below is the post and opinion of Anastasija Plotnikova, Chief Executive Officer and Co-founder of Fideum. The year 2025 is dubbed the “year of stablecoins” as stablecoins become increasingly popular and dominate the global market, especially under the new cryptocurrency-friendly administration of the United States. The stablecoins backed by top fiat currencies are USDT and USDC, holding 92% market share. Tether, the issuer of USDT, has grown to a market capitalization of over $140 billion, supporting more than 400 million users, particularly in unbanked regions. However, Tether’s dominance is facing increasing competition. New and long-standing rivals are eager to capture market share, and new legal barriers are intensifying pressure, especially in markets like the European Union. This raises an important question: Can Tether maintain its position as the dominant stablecoin amid increasing legal pressure and competition? EU and Tether Tether’s USDT has recently been delisted from exchanges in the EU for not complying with the new regulations of the Crypto Asset Market (MiCA), which came into effect at the end of last year. The regulations require stablecoins to meet strict licensing and transparency rules, and companies issuing stablecoins in the EU must have a license from a cryptocurrency organization (EMI) and, if backed by fiat, must ensure a 1:1 reserve ratio. The delisting of Tether has caused significant disruption in the European market, reducing EU residents’ access to stablecoins. Tether has responded by accusing the EU of “acting hastily” and creating “a chaotic market,” even though MiCA has been developed over many years and the European Securities and Markets Authority (ESMA) has warned exchanges since last summer. Ten stablecoin issuers have been approved to operate under MiCA, but Tether is not among them. Will the United States be friendlier? The EU is not the only region where Tether faces regulatory challenges. Recently, the U.S. Senate Banking Committee voted to send the GENIUS Act — a law focused on payment stablecoins — to the full Senate. This bill would place stablecoin issuers with a market capitalization of over $10 billion into the U.S. federal regulatory framework. Foreign stablecoin issuers, such as Tether, will face stricter requirements regarding reserves, liquidity, and anti-money laundering compared to domestic issuers. Only two issuers meet the market capitalization requirements to be regulated under federal law as outlined in the bill — Tether and Circle. The latter issuer, a U.S.-based entity, has stated that it can comply with the requirements of the bill. However, Tether, headquartered in El Salvador, has no official presence in the U.S. and may struggle to meet these new standards. This puts Tether at greater risk of increased oversight under U.S. regulations. Competitors hurriedly fill the gap As Tether faces increasing regulatory challenges, competitors are seizing the opportunity. Among the emerging competitors is Reeve Collins, co-founder of Tether, who recently announced the launch of Pi Protocol, a profit-generating stablecoin backed by real-world assets. Pi Protocol aims to launch on the Ethereum and Solana blockchains in 2025. Although Pi Protocol may not fully comply with MiCA regulations, its profit structure offers many advantages, especially in the U.S. market, where the SEC approved profitable stablecoins in February. Competitors like Collins’ Pi Protocol may see Tether’s regulatory issues as an opportunity to capture market share. Tether’s CEO, Paolo Ardoino, has expressed confidence in this ability, stating that the true goal of many competitors is to “Kill Tether.” The stablecoin storm has erupted. Can Tether survive the increasing competition and rising regulatory pressure? So far, Tether has faced minimal disruption due to its significant dominant market share, leading the stablecoin category in market capitalization as well as 24-hour trading volume, by a large margin. However, as global regulations catch up and new players enter the market, Tether will need to carefully navigate the challenges ahead. The result could be a fragmentation of the global stablecoin market and a divide between unmanaged and managed options.