The competition for stablecoin dominance is entering a third phase, as industry leaders like Tether, the issuer of the largest token, and Circle, the second-largest, position themselves amidst a backdrop of increasing regulatory scrutiny. The European Union’s Markets in Crypto Assets (MiCA) regime and various U.S. legislations currently progressing through Congress are pivotal considerations in this evolving scenario, according to experts from Fireblocks, a digital asset cryptography and custody firm.
This next stage in the stablecoin market will see banks—both large and small—as well as established payment firms actively exploring integration strategies for these digital tokens into their current operations. As highlighted by Ran Goldi, SVP of Payments at Fireblocks, the landscape is transforming rapidly.
Stablecoins, blockchain-based tokens primarily pegged to the U.S. dollar, have surged in significance. Tether’s USDT remains the frontrunner with a market capitalization nearing $145 billion, while Circle’s USDC boasts over $60 billion in circulation. Circle is even eyeing a public offering on the New York Stock Exchange, further solidifying its ambitions in this space. Standard Chartered anticipates the stablecoin market could swell to $2 trillion by the end of 2028.
Goldi emphasized that we are witnessing banks begin to issue their own stablecoins as regulated entities under MiCA. A diverse range of financial institutions, including fintechs such as Robinhood, Ripple, and Revolut, are also entering the fray. By year’s end, it is projected that around 50 more stablecoins will emerge.
Reflecting on past developments, Goldi explained that the industry has undergone two significant phases. Initially, USDC competed with the U.S. regulated trading firm Paxos, which partnered with crypto exchange Binance to issue BUSD. For regulatory reasons, Paxos ceased minting BUSD, allowing Circle to claim that segment of the market. However, Paxos’ newly formed USDG consortium is positioning itself for a strong future presence.
The second phase saw competition evolve between Circle and Tether. “USDC aimed to surpass USDT, but its growth was hampered by events such as the collapse of Silicon Valley Bank, making it less appealing to users, especially those outside the U.S. On the other hand, USDT has significantly expanded its market presence. I anticipate USDT maintaining its dominance as the stablecoin of choice outside the U.S., while Circle faces the challenge of sustaining robust competition,” Goldi remarked.
Notably, USDC’s licensing under MiCA provides access to a sizable market comprising 27 EU nations and approximately 450 million people, an advantage not enjoyed by USDT.
Growth in International Payments
The rise of stablecoins has facilitated a critical avenue for transferring funds across highly volatile cryptocurrency markets, addressing an urgent need in the industry due to a scarcity of fiat on and off ramps. As decentralized finance (DeFi) has flourished, dollar-pegged tokens have seen accelerated growth.
Historically, the cryptocurrency landscape has evolved through several stages involving payment service providers (PSPs). The first wave consisted of entities looking to utilize cryptocurrencies for bill settlements, while a subsequent wave brought about business-to-business PSPs such as Bridge, recently acquired by Stripe, and platforms like Zero Hash.
Goldi noted that many PSPs, though not widely recognized, are managing substantial volumes in stablecoin transactions, primarily facilitating business-to-business payments. For instance, less than 20% of Fireblocks’ total transaction volume consisted of stablecoins in 2020, which surged to approximately 54% the previous year.
To illustrate a typical use case, consider an importer in Brazil seeking to pay an exporter in Turkey or Singapore. The importer may convert Brazilian reals to a stablecoin, enabling either direct fund transfers to the exporter or conversion into the destination currency for payment.
Recognizing the potential of stablecoins for cross-border transactions, banks like Braza Bank in Brazil, BTG Bank, and DBS in Singapore are already developing accounts that support stablecoin operations. Others are still in the assessment phase regarding their optimal usage.
Goldi highlighted that numerous banks are actively contemplating their strategies: whether to serve as on/off ramps, hold reserves, or issue their own stablecoin. There are multiple avenues for banks to monetize stablecoins, spanning from credit, on/off ramps to foreign exchange operations.
Based on these strategic discussions, Goldi anticipates many banks will finalize their plans by the end of this quarter. It remains to be seen whether banks will develop their infrastructure from the ground up or partner with providers like BNY Mellon or Fireblocks. Large tier-1 banks like JPMorgan, Citi, and Morgan Stanley may choose to build proprietary technology, whereas tier-2 banks might favor utilizing hosted tech solutions. However, given the conservative nature of banking operations, he believes that formal approvals will likely extend into late 2026.
