Author | Wenser, Odaily
Original title: The golden age of stablecoins begins: USDT to the left, USDC to the right
Latest news, after a vote with 68 in favor and 30 against, the U.S. Senate has voted to pass the “GENIUS Act.” The golden era of stablecoins is about to begin. (Recommended reading: “Dollar Hegemony 2.0: How the ‘GENIUS Act’ Reshapes the Global Landscape of Stablecoins?”)
Previously, we briefly summarized the past development of the stablecoin industry in the article “The 10-Year Journey of Stablecoins, Finally Becoming the Official ‘Peer-to-Peer Electronic Cash’ Designated by the U.S.”; now, with Circle making a strong entry into the U.S. stock market with a market value exceeding $20 billion as the “first stock of stablecoins”, the second-largest player USDC and the dominant player USDT in the stablecoin market are gradually diverging. The former focuses on compliance, subsidies, and yield generation, particularly performing actively in the Solana ecosystem; the latter centers on decentralization, diversified layouts, and real-world payment applications, playing an important role especially in cross-border trade and global currency.
Odaily will summarize the past development history and current status of USDT and USDC in this article. We aim to learn from history and trace the future development direction of these two major stablecoin projects.
Stablecoin landscape initially defined: Dragon One, Dragon Two growth history
Looking back, the rise of the two major stablecoins, USDT and USDC, to their current “first” and “second” positions is not coincidental. The competitive landscape and market performance between the two have, to some extent, become an industry indicator akin to a “crypto barometer.”
According to DefiLlama data, as of June 12, USDT, issued by Tether in 2014 as the “pioneering stablecoin”, has long held the “leading position”, with a current market capitalization of approximately $156 billion and a market share of up to 62.1%; USDC, issued by Circle, has been active in the cryptocurrency market as the “second stablecoin”, with a current market capitalization of approximately $60.8 billion and a market share of about 24.2%. Other stablecoin projects, including USDe, DAI, Sky Dollar, BUIDL, and USD1, collectively account for less than 15%.
To trace back the key points in the “competition between USDT and USDC”, 2019 undoubtedly comes first.
Current Market Share Status of USDT/USDC
The Dominance of USDT: Partnering with TRON to Capture DeFi Summer and Global Application Scenarios
In 2019, after a series of turmoil including the theft of 120,000 BTC at its sister company BitFinex, the interruption of cooperation with the Tether reserve fund bank, and the New York Attorney General’s Office (NYAG) initiating an investigation into Tether’s reserves, Tether reached an official cooperation with the TRON ecosystem.
Since then, after the Bitcoin network and the Ethereum ecosystem, TRON has become the third ecological network to boost the rapid growth of USDT, gradually becoming the largest network for USDT issuance through initial official subsidies and subsequent energy leasing models. Currently, according to Tether’s official website, the issuance of USDT in the TRON ecosystem has reached 78.2 billion USD, accounting for about 50% of the total USDT issuance, making it a “half of USDT’s empire.”
In addition, the “liquidity mining craze” spawned by the DeFi Summer of 2020 injected new momentum into the rapid development of USDT. As a general equivalent, USDT has become the most intuitive “price quantification machine” in the crypto market, serving as the “gateway” or “entry ticket” for many popular DeFi protocols. The prices of BTC and ETH have also experienced waves of sharp rises and falls amid an increasingly frantic market environment. To cope with the volatile market, aside from BTC, “hoarding U” has become a choice for many to survive the bear market.
In the real world, USDT has gradually become a commonly used intermediary for illegal activities such as money laundering, fraud, drug trafficking, and even human trafficking in Southeast Asia; in regions with severe currency inflation like South America and the Middle East, USDT, which is pegged 1:1 to the US dollar, is also used as a common tool for daily payments and cross-border transactions.
Against this backdrop, the issuance and market value of USDT have experienced exponential growth: in June 2020, the market value of USDT surged to around $9.5 billion, and its market share skyrocketed to 86.5%; the market value of USDC was around $1.1 billion; its market share ranked second in the market, but only accounted for 6.79%. As for other stablecoins including USDP, BUSD, and TUSD, their market values have lagged behind USDT by more than one order of magnitude.
In July 2020, USDT became the first stablecoin project with a market value exceeding $10 billion, thereby establishing its dominant position in the stablecoin sector.
Overview of Stablecoin Market Share in 2020
“The episode closest to USDT for USDC”: during the 2022 ust and luna crisis.
Turning the clock back to 2019, it was a year of growing pains for Circle, the issuer behind USDC.
After experiencing a massive market correction in 2018 and the dawn of DeFi Summer, Circle’s operational costs had spiraled out of control, and its cash flow was on the verge of collapse. In order to facilitate the company’s development, it reluctantly chose to quickly “lighten the load” in a short period by selling off the Poloniex exchange, the Circle Trade over-the-counter trading business, and the retail-oriented Circle Invest product, while also shutting down and liquidating the previously launched payment application.
Despite making sweeping reforms, by the fall of 2019, Circle was once again on the brink of bankruptcy. It was at that time that Circle began to face its own desperate battle: ALL IN USDC.
According to Circle founder and CEO Jeremy Allaire’s recollection: “At that time, USDC had already gained early traction, but it was still insufficient to support a scaled company. However, we chose to allocate all company resources to USDC, betting everything on it. I remember very clearly that we officially announced this strategy in January 2020, when Circle’s official website homepage was completely revamped into a huge billboard promoting ‘stablecoins are the future of the international financial system.’ The only operational button on the page was: ‘Get USDC’, while other functions were removed.”
Focusing on the main business is often the beginning of a company’s rebirth from the brink of death.
In March 2020, the Circle platform underwent an upgrade, and the USDC account system along with a complete set of new APIs was born. This greatly facilitated developers in seamlessly integrating payment systems such as banks and bank cards into their application systems. The deposit and withdrawal operations of USDC became smoother, and Circle finally got back on track.
By the end of 2020, the circulation of USDC surged from 400 million at the beginning of the year to nearly 4 billion, an increase of nearly 10 times. Of course, the increase of USDT was equally astonishing, as its market capitalization had skyrocketed to around 20 billion, making it the absolute leader among stablecoins.
It is worth mentioning that the global COVID-19 pandemic has provided some development impetus for on-chain stablecoins such as USDT and USDC. After all, compared to the cumbersome processes and complex procedures of the real-world banking system, stablecoin payments in the cryptocurrency industry are more flexible, convenient, and cost-effective.
For USDC, the moment that came closest to matching the market value of USDT during its subsequent development was June 2022.
At that time, influenced by the collapse of the algorithmic stablecoin UST and LUNA under Terra Labs, the market once again saw a surge of panic and FUD regarding “USDT is about to de-peg.” In extreme cases, the issuer of USDT, Tether, quickly processed about 7 billion dollars in redemptions within 48 hours, which was nearly 10% of its then capital reserves, making it a true extreme stress test.
At that time, the market value of USDT fell to around 66.9 billion dollars; backed by Coinbase and insisting on compliance and sufficient reserves as its foothold, USDC experienced a wave of rapid growth, with its market value increasing to around 55 billion dollars, narrowing the gap between the two to less than 12 billion dollars.
Comparison of Market Capitalization Between USDT and USDC in June 2022
However, subsequently, USDT, which does not require “supply” and has a more diversified business and broader application scenarios, gradually outpaced the competition. In contrast, USDC is limited by conditions such as revenue sharing with partners like Coinbase and Binance. Although its market value is also in a rapid growth phase, its net profit from operations pales in comparison to Tether, which is a cash cow with an annual net profit exceeding $10 billion.
From the initial team composition and subsequent development direction, the development trajectories of USDT and USDC may indeed be predetermined.
The choice of USDT: Go left, towards decentralized intermediaries.
For USDT and its underlying Tether, they have chosen a “left-hand route” - a decentralized intermediary service provider.
Speaking of this, apart from Paolo Ardoino, the founder and CEO of Tether, Giancarlo Devasini, a key figure in Tether who holds 40% of the shares and is not well-known to the public, is even more critical. In his early years, he worked in plastic surgery, then shifted to the fields of electronic product import and software resale, even involving himself in pirated software transactions. It is precisely because of his extraordinary adventurous spirit and unorthodox business methods that Devasini’s personal net worth has grown to approximately $9.2 billion, at one point surpassing the wealth of famous luxury car company Ferrari’s executive, Piero Ferrari, the son of Enzo Ferrari.
“The Giant Behind Tether”
Its traditionally aggressive business philosophy and extremely bold operational methods subsequently led Tether to misappropriate user funds for interest-generating investments, and it has been continuously questioned by the market about whether Tether has sufficient reserves. When collaborating with the Puerto Rico Silver Bank to store funds, after insisting on putting the money in profitable bonds but being rejected by the bank’s founder John Betts, Devasini bluntly stated: “We need to take our clients’ funds to invest in bonds, we need more income, and we do not need to do so much to respond to critics.”
For the wildly growing cryptocurrency industry, perhaps the street wisdom of unconventional methods can make a crypto project more anti-fragile.
Despite previously encountering a series of turmoil and even excessive issuance, Tether still manages to navigate the edge of regulation and compliance, becoming what CEOPaolo Ardoino referred to in his recent speech at the Bitcoin conference as a “decentralized infrastructure provider.”
As described by Paolo —
“Financial and big tech companies often rely on layers of intermediaries: financial intermediaries charge fees on every transaction we make, while tech giants control our data. Essentially, it’s the same thing: we have lost sovereignty over both money and data. Tether’s goal is to provide tools through technology to help people break free from these intermediaries and achieve true individual sovereignty.”
Yes, this is the story told by Tether, a decentralized stablecoin project that supports sovereign individuals against traditional big tech companies and large financial institutions, one that does not care about the user’s identity, nationality, age, gender, or even the purpose of use.
Specifically, the advantages of USDT issued by Tether are mainly reflected in:
- The reserve fund audit is conducted by Tether’s cooperative accounting firm BDO, which is essentially in a black box state. This situation is expected to improve with the introduction of the U.S. stablecoin regulatory bill, the “Genius Act,” at which point Tether may issue annual, quarterly, and even monthly transparency reports;
- USDT exists on a blockchain network, with its transaction records stored on a decentralized blockchain, providing transparency and immutability; users have direct control over the USDT assets in their non-custodial wallets; it can circulate freely in scenarios such as DeFi protocols, DEX, and CEX.
- As a centralized issuer, Tether has full control over the issuance, destruction, and reserve management of USDT, and can freeze the USDT assets of specific addresses through blacklist permissions (for instance, if illegal activities are involved). In the previous “Bybit $1.5 billion asset theft case,” Tether was also one of the assisting parties.
Yes, you are not mistaken. The value stability and convertibility of USDT highly depend on the reputation of Tether. As members of the crypto community who frequently use USDT, we can only hope that Tether won’t suddenly act irrationally and easily destroy this business that has an annual net profit of over 10 billion dollars.
In addition, based on Tether’s subsequent development blueprint, its plans cover various sectors including mining, AI, digital agriculture, education, and mobile communications, undoubtedly revealing the ambitious aspirations and adventurous approach of this stablecoin leader.
In the latest news, Tether CEO Paolo Ardoino also shared on social media the news that a US bank is about to issue a stablecoin, adding the caption “Select your player”, which seems to suggest that the two parties will cooperate in the future.
USDC’s decision: move to the right and embrace the centralized compliance system
Unlike Tether, Circle takes a more cautious and challenging, yet more solid path of centralized compliance.
Specifically, as Circle CEO Jeremy Allaire mentioned in his article “How I Went All in on Stablecoins 7 Years Ago”:
Circle is the first company in the crypto industry to obtain a full set of compliance licenses from the ground up, and it is also the first crypto company to receive an Electronic Money Institution (EMI) license in Europe, as well as the first to obtain the so-called “BitLicense” in New York — the first regulatory license specifically established for the crypto industry. Nearly a year later, we are the only ones holding this license.
We always adhere to the principle of ‘regulation first’ and consistently choose to take the ‘front door’ approach to ensure that we have a good and robust compliance system. By the way, it is precisely because of this compliance foundation that we can achieve another key goal: liquidity. What is liquidity? It is the ability to truly create and redeem stablecoins, to connect to real bank accounts, and to buy and redeem stablecoins with fiat currency. If you are a suspicious offshore company and no one is willing to give you a bank account, then you simply cannot do any of these things. You might not even know where your bank is.
Circle is the first company to establish high-quality banking partnerships, and has introduced strategic partners like Coinbase to massively distribute USDC at the retail level, allowing any ordinary user with a bank account to easily buy and redeem USDC. We also offer institutional-grade services. In other words, from transparency, compliance, and regulatory frameworks to actual liquidity, we have achieved it all.
Regarding Circle’s business composition and profit sources, more details can be found in our previous article “Will Circle IPO be Delayed? What is the Valuation of the ‘First Stock of Stablecoin’?” At present, Circle still mainly relies on reserve interest for revenue, and this situation may change after the IPO.
It is worth mentioning that Circle’s compliance efforts are indeed solid: it is registered as a Money Services Business (MSB) in the United States and complies with relevant regulations such as the Bank Secrecy Act (BSA); it holds money transmission licenses in 49 states, Puerto Rico, and the District of Columbia; in 2023, Circle obtained a Major Payment Institution license issued by the Monetary Authority of Singapore (MAS), allowing it to operate in Singapore; in 2024, Circle received an Electronic Money Institution (EMI) license from the French Prudential Supervision and Resolution Authority (ACPR), enabling it to issue USDC and EURC in Europe under the EU’s Markets in Crypto-Assets Regulation (MiCA).
In the future, USDC’s path to the right may carry the “American Nativism banner,” leveraging favorable regulatory policies to further expand its global footprint and shine in areas such as institutional payments, PayFi, and TradFi. At the same time, it could also provide some assistance or monetary support for the Trump administration’s plans to digest U.S. debt and Bitcoin as a strategic reserve.
Thanks to the rapid development of the Solana ecosystem and the PayFi track, the future of USDC, as the main circulating stablecoin in this ecosystem, is also worth looking forward to.
Conclusion: You reap what you sow.
Looking at the development history of USDT and USDC, as well as the rise of stablecoin issuers like Tether and Circle, after more than a decade, the persistence and dedication of the past have finally witnessed the day when stablecoins take root and bloom as a “peer-to-peer electronic payment system.”
A firm mass line and a differentiated development approach that emphasizes compliance operations have opened up new ideas for the future development ceilings of USDT and USDC, respectively: the former’s market is the hundreds of trillions to even millions of billions of dollars in cross-border foreign trade and everyday payments; the latter’s market is the overall scale of over 100 trillion dollars in global legal electronic currency.
The previous round of competition in the cryptocurrency industry has come to an end, and a new round of competition has quietly begun following the formal implementation of the “GENIUS Act.”
