The golden age of stablecoins begins: USDT to the left, USDC to the right

Author: Wenser, Odaily

Breaking news, after a vote of 68 in favor and 30 against, the U.S. Senate has voted to pass the “GENIUS Act.” The golden age of stablecoins is about to begin.

Previously, we briefly reviewed the past development of the stablecoin industry in the article “A Decade of Storms for Stablecoins: Finally Recognized as ‘Peer-to-Peer Electronic Cash’ by the U.S. Government”; now, with Circle strong debut on the U.S. stock market as the “first stablecoin stock” boasting a market value of over $20 billion, the second leading stablecoin USDC and the dominant stablecoin USDT in the 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 a significant role especially in cross-border trade and global currency.

Odaily will systematically sort out the historical development and current status of USDT and USDC in this article. We attempt to draw on history to trace the future development direction of the two major stablecoin projects.

Stablecoin landscape initially set: Dragon One, Dragon Two growth history

Looking back, the rise of the two major stablecoins, USDT and USDC, to their current positions as “Dragon One” and “Dragon Two” 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 since 2014 as the “pioneer of the stablecoin track,” 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 “runner-up of the stablecoin track,” 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 USD 1, collectively account for less than 15%.

To trace back the key points in the “battle for supremacy” between USDT and USDC, 2019 is undoubtedly at the forefront.

Current Market Share Status of USDT/USDC

The Dominance Path of USDT: Partnering with TRON, Seizing DeFi Summer and Global Application Scenarios

In 2019, after a series of turmoil including the theft of 120,000 BTC from its sister company BitFinex, the interruption of cooperation with the Tether reserve bank, and the investigation launched by the New York Attorney General’s Office (NYAG) into Tether’s reserves, Tether officially partnered with the TRON ecosystem.

Since then, after the Bitcoin network and the Ethereum ecosystem, TRON has become the third ecological network propelling USDT to surge forward, 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 amount of USDT in the TRON ecosystem has reached 78.2 billion dollars, accounting for approximately 50% of the total USDT issuance, which can be called “half of USDT’s territory.”

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 cryptocurrency market, serving as a “stepping stone” or “entry ticket” for many popular DeFi protocols. The prices of BTC and ETH have also experienced waves of sharp rises and falls in an increasingly frenzied market environment. To cope with the highly volatile market, aside from BTC, “hoarding U” has become a choice for many people 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 like South America and the Middle East, where currency inflation is severe, USDT, which is pegged to the US dollar at a 1:1 ratio, 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 seen exponential growth: in June 2020, the market value of USDT surged to around $9.5 billion, with a market share skyrocketing 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 such as USDP, BUSD, and TUSD, their market values are already lagging behind USDT by more than one order of magnitude.

In July 2020, USDT became the first stablecoin project to exceed a market value of 10 billion USD, thus establishing its dominant position in the stablecoin sector.

Overview of Stablecoin Market Share in 2020

“The closest thing to USDT for USDC”: During the 2022 UST and Luna crash period.

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 operating costs had spiraled out of control, and its cash flow was on the brink of collapse. To ensure the company’s development, it reluctantly chose to quickly “lighten its load” in a short period—selling off the Poloniex exchange, the Circle Trade OTC 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 found itself once again on the brink of bankruptcy. It was then that Circle had 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 shown early signs of growth, but it was still not enough to support a scaled company. However, we chose to redirect all company resources to USDC, betting all our funds on it. I remember very clearly that we formally announced this strategy in January 2020, at which point the homepage of Circle’s official website was completely revamped, turning into a huge billboard promoting ‘stablecoins are the future of the international financial system.’ The only action button on the page was: ‘Get USDC,’ and all other functions were removed.”

Focusing on core 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 whole set of new APIs were introduced. This greatly facilitated developers in seamlessly integrating payment systems such as banks and bank cards into their applications, making the deposit and withdrawal operations of USDC smoother. Circle finally got back on track.

By the end of 2020, the circulation of USDC surged from 400 million USD at the beginning of the year to nearly 4 billion USD, an increase of nearly 10 times. Of course, the growth of USDT was also remarkable, as its market value had skyrocketed to around 20 billion USD at that time, making it the absolute leader among stablecoins.

It is worth mentioning that the global COVID-19 pandemic has provided some developmental support for on-chain stablecoins like 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 the market value of USDT during its subsequent development was in June 2022.

At that time, due to the impact of the collapse of the algorithmic stablecoin UST and LUNA under Terra Labs, panic and FUD regarding “USDT is about to depeg” resurfaced in the market. In extreme cases, the issuer of USDT, Tether, rapidly processed about 7 billion USD in redemptions within 48 hours, which was almost 10% of its then capital reserves, making it a remarkable stress test.

At that time, the market capitalization of USDT fell to around 66.9 billion USD; backed by Coinbase and adhering to compliance and sufficient reserves, USDC experienced a surge, with its market capitalization increasing to around 55 billion USD, narrowing the gap between the two to less than 12 billion USD.

Comparison of Market Capitalization Gap Between USDT and USDC in June 2022

However, subsequently, USDT, which does not require “supply to the upper levels” and has more diversified business and broader application scenarios, gradually outpaced others, while USDC, limited by conditions such as profit-sharing with partners like Coinbase and Binance, despite also being in a rapid growth phase in terms of market capitalization, falls short of Tether, a cash machine whose annual net profit exceeds 10 billion dollars.

Looking at the team’s composition from the very beginning and the subsequent development direction, the development paths of USDT and USDC may indeed be predetermined.

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 Tether’s founder and CEO Paolo Ardoino, the Tether core figure Giancarlo Devasini, who holds 40% of the shares and is not well known to the outside world, is even more crucial. In his early years, he worked in plastic surgery before switching to the fields of electronic product import and software reselling, even involving himself in the trading of pirated software. It was precisely due to his extraordinary adventurous spirit and unorthodox business methods that Devasini’s personal net worth has grown to approximately 9.2 billion USD, at one point surpassing the wealth of Piero Ferrari, the son of the famous luxury car company Ferrari’s founder, Enzo Ferrari.

“The Giant Behind Tether”

However, its traditionally aggressive business philosophy and extremely bold operational methods subsequently led to Tether misappropriating user funds for interest-earning investments, and it has constantly faced a series of questions from the market regarding whether Tether has sufficient reserves. When collaborating with the Puerto Rican Silver Bank to deposit funds, after insisting on putting money into interest-bearing bonds, which was rejected by the bank’s founder John Betts, Devasini bluntly stated: “We need to take customer funds to invest in bonds; we need more income and do not need to do so much to respond to critics.”

For the wildly growing cryptocurrency industry, perhaps street wisdom from the wild can make a crypto project more antifragile.

Despite previously encountering a series of controversies and even excessive issuance, Tether has still managed to navigate the edge of regulation and compliance, becoming what CEO Paolo Ardoino referred to in a 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 lose sovereignty over both money and data. The goal of Tether is to use technology to provide tools that help people break free from these intermediaries and achieve true individual sovereignty.”

Yes, this is the story told by Tether, a sovereign individual-supported service provider that stands against traditional big tech companies and big financial institutions, a decentralized stablecoin project 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 cooperating accounting firm BDO, which essentially belongs to a black box state. This situation is expected to improve after the introduction of the U.S. stablecoin regulatory bill, the Genius Act, at which point Tether may publish annual, quarterly, and even monthly transparency reports.

USDT exists on a blockchain network, with its transaction records stored on a decentralized blockchain, ensuring transparency and immutability; users have direct control over USDT assets in non-custodial wallets; it can circulate freely in scenarios such as DeFi protocols, DEX, and CEX.

Tether, as a centralized issuer, has full control over the issuance, destruction, and reserve management of USDT, and can freeze USDT assets of specific addresses through blacklist permissions (such as those involved in illegal activities). Previously, in the “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 credibility of Tether. As a group of crypto users who frequently use USDT, we can only hope that Tether does not suddenly act irrationally and easily destroy this business with an annual net profit of over 10 billion dollars.

In addition, based on Tether’s subsequent development plans, it intends to cover many sectors including mining, AI, digital agriculture, education, and mobile communications, undoubtedly revealing the ambitions and adventurous attitude of this stablecoin leader.

Latest news, Tether CEO Paolo Ardoino also shared on social media the news that a major U.S. bank is set to issue a stablecoin, captioning it “Select your player,” which seems to hint at a potential collaboration between the two parties.

USDC’s decision: Move to the right and embrace the centralized compliance system.

Unlike Tether, Circle is taking a more cautious, yet more arduous, but also 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 cryptocurrency industry to obtain a full set of compliance licenses from start to finish, as well as the first cryptocurrency company to receive an Electronic Money Institution (EMI) license in Europe, and the first to obtain the so-called “BitLicense” in New York—this is the first regulatory license specifically established for the cryptocurrency industry. Nearly a year later, we are the only company holding this license.

We always adhere to the concept of “regulation first”, consistently choosing to take the “front door” approach to ensure 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 means you can truly create and redeem stablecoins, connect to real bank accounts, and buy and redeem stablecoins with fiat currency. If you are a suspicious offshore company, no one is willing to open a bank account for you, then you simply cannot do 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 provide institutional-level services. This means that we have achieved transparency, compliance, regulatory frameworks, and actual liquidity.

Regarding Circle’s business composition and profit sources, details can be found in our previous article “Will Circle’s IPO Be Delayed? What Is the Valuation of the ‘First Stablecoin Stock’?” Currently, Circle still mainly relies on reserve interest for revenue, but this situation may change after the IPO.

It is worth mentioning that Circle’s compliance flag is 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 Washington D.C.; 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 Regulation on Markets in Crypto-Assets (MiCA).

In the future, the path of USDC to the right may carry the banner of “American nationalism”, further expanding its global footprint with favorable regulatory policies, and shining in areas such as institutional-level payments, PayFi, and TradFi. At the same time, it may also provide certain support or monetary assistance for the Trump administration’s plans to digest US debt and Bitcoin strategic reserves.

Thanks to the rapid development of the Solana ecosystem and the PayFi sector, the future of USDC, as the main circulating stablecoin of this ecosystem, is also worth looking forward to.

Conclusion: You reap what you sow.

Looking back 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 perseverance and dedication from the past have finally led to the day when stablecoins take root and blossom as a “peer-to-peer electronic payment system.”

A firm mass line and a differentiated development approach focusing on compliance operations have opened up new ideas for the subsequent development ceilings of USDT and USDC: the former’s market is the tens of trillions to hundreds of trillions of dollars in cross-border 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 official implementation of the “GENIUS Act.”