If you look at the current market capitalization of USDT and USDC, you might be fooled into thinking that they are uncontested. With Tether and Circle controlling more than 80% of global stablecoin value by market cap as of October 2025, most other crypto-native rivals have yet to put up a convincing fight, even though many offer compelling value propositions for both users and distribution platforms. To date, a crypto-centric market, lack of regulatory clarity, first-mover advantages, and strong integrations with on- and off-ramps have enabled enormous value creation for Tether and Circle.
Stablecoin Summer (a term to describe the surge in demand, regulatory clarity, and market participants in recent months) has begun to expose some very real challenges for what many consider the de facto stablecoins. It’s clear that both have felt the pressure to respond: a series of well-connected executive hires and regulated launches in Europe (EURC) and the US (USA₮) have shown that they understand the need to change and adapt to maintain dominance, or at least continue to grow. But one important question remains: will this be enough to maintain his lead over the pack?
Ecosystem competition
The current use of stablecoins has been driven by decentralized finance (DeFi) applications, including trading, lending, staking, yield farming, and liquidity provisioning. Another important component stems from strong demand for cross-border payments, savings and general access to dollars in economies with volatile or restricted fiat currencies.
Large centralized exchanges have acted as kingmakers for Tether and Circle, playing the vital role of on- and off-ramps needed to bring global demand in and out of the system. There is no doubt that without Coinbase, USDC (launched four years after USDT) would not enjoy the position it has today. One need look no further than Coinbase’s 50% share of Circle’s USDC reserve revenue to understand the dynamic. Bitfinex and Tether’s relationship is slightly different, but shares similarities, and exchanges like Binance providing support have enabled Tether’s success.
However, a recent wave of new entrants, such as USDG (Paxos) and USDe (Ethena), have shown that participants are willing to move in by offering easier ways for users to earn returns on their holdings. In a relatively homogeneous product, this is one of the main value drivers for users. Take USDe’s recent announcements for example: integrations with Bybit and Binance have made it easier for users to earn rewards along with deeper product integration, i.e. offering users returns on funds parked on the platform or held as collateral. USDG, as part of the Global Dollar Network, has done much the same thing.
Most recently, Hyperliquid (a decentralized exchange operating on its own layer 1 blockchain) announced the launch of its own native and supported stablecoin, USDH, in partnership with Native Markets. Prior to this, Hyperliquid experienced incredible volume growth, jumping to over $330 billion in spot and perpetual trading volume in July 2025, briefly surpassing Robinhood. As a result of this, they maintain $5.97 billion in USDC deposits on the platform, almost 10% of the total circulating supply. The move to its own stablecoin clearly signaled that major players in the ecosystem want in on the action; Without any agreement in place, these players would not receive any of the interest income generated by Circle from the reserves backing USDC. In the case of Hyperliquid, assuming a conservative 4% yield, the opportunity could represent up to $240 million in annual revenue if they could convert the entire USDC platform to their own stablecoin.
In direct response to the news, Circle, in a bid to defend its market and revenue share, launched its own native version of USDC on HyperEVM. The move aims to deepen the integration of USDC into the Hyperliquid ecosystem by enabling seamless transfers across more than a dozen networks via Circle’s Cross-Chain Transfer Protocol. In addition to this, they announced an investment by purchasing $HYPE tokens, the native utility and governance token of the Hyperliquid ecosystem.
Similarly, Ethena’s recent USDe announcement with Binance poses a challenge for Tether. After Binance listed USDe, the exchange added USDe trading pairs along with an integration with Binance’s Earn program. Like USDC and Coinbase, Binance users in certain jurisdictions will now be able to earn rewards for the stablecoins they hold on the platform, even within the portfolio margin in futures and perpetual trading. The move, along with an attractive incentive offer (12% APR for a limited time), has seen USDe on the platform soar to over $2 billion. At the same time, the market capitalization of USDe exceeded $14 billion, up from $6 billion in January this year.
This follows a series of growth initiatives from the third-largest stablecoin by market cap; USDe usage overtook USDC on Bybit following a similar integration announcement. These examples are not exhaustive either. Other players, such as USDG, a stablecoin issued by Paxos, have also sought to integrate with other exchanges and key players with the same goal of gaining market share from Tether and Circle by breaking the value chain and distributing a greater share of the interest income earned from reserves.
As of January 1, 2025, USDT and USDC collectively accounted for 88% of the total stablecoin market capitalization, valued at $181 billion. Ten months later, the overall market had risen more than 50%, from $205 billion to $313 billion as of October 9. However, the combined market share of USDT and USDC decreased to approximately 82%. While that drop may seem modest, it marks a clear sign that competition is heating up and new entrants are beginning to erode the dominance of the two incumbents.
Regulatory and other challenges
The two incumbents have not only seen headwinds from industry players. Recent regulatory updates have also brought increasing challenges. The EU recently launched MiCA, its comprehensive crypto framework that regulates crypto assets, their providers and other ecosystem participants. Tether made a definitive announcement: they would not comply with the regulations, considered too restrictive and dangerous according to their CEO. As a result, it was delisted from centralized exchanges that provided vital on- and off-ramps. Circle, although in a stronger position thanks to its compliance with MiCA, was not unscathed either. According to regulation, USDC and other stablecoins are classified as electronic money tokens (EMT); legally cannot pay yield to holders in the EU, which could affect its value to users in places that previously offered rewards.
Fortunately for Tether, it is the fact that Europe makes up a relatively small part of its total market, with the majority of USDT volume coming from Asia and other non-Western markets. Circle also saw a slightly muted effect, as all stablecoins meet the same requirements, meaning that unless they are kept on-chain, no users would be able to receive reward payments. However, this generally decreases the value of stablecoins compared to other traditional ways of holding cash.
The GENIUS Act in the United States is likely to move the market in a very similar way. As things stand, Tether’s USDT is non-compliant and will follow the same delistings that have marked its centralized exit from the EU. Stablecoins will also not be able to pay interest directly to their holders, and although they are currently exempt, banks are pushing for rewards programs to also be included in the ban. This is not surprising, given the potential for deposit flight due to the significantly higher yields offered through these stablecoin programs.
Tether responded by launching USA₮, its new US-compatible offering, which will be issued by Anchorage Digital and led by former White House crypto sherpa Bo Hines as CEO. The movement was measured; Tether opted to maintain support for the highly profitable, offshore-structured, compliant USDT outside the US and EU and add USA₮ as a complementary regulated product.
While rewards programs remain up in the air with banks lobbying against them, Circle and other issuers in the United States face the threat of these same banks and other institutions entering the race with a vengeance after the GENIUS Act. Institutions such as Bank of America, Citigroup, JPMorgan Chase and Wells Fargo are planning or actively exploring stablecoin initiatives, and Bank of America and Citigroup have confirmed plans to launch their own US dollar-backed stablecoins. Fintech giants are also getting in on the action, with PayPal, Revolut and Robinhood set to launch their own tokens.
Conclusion
Tether and Circle’s dominance, once considered unbreakable, is now facing its most formidable test yet. What was once a two-horse race is evolving into a complex, crowded ecosystem of challengers, each leveraging new technologies, integrations and regulatory openings to gain market share. The rise of natively integrated stablecoins like USDe and USDH, coupled with growing pressure from regulators and the imminent entry of banking and fintech giants, suggests that the next phase of the stablecoin market will be defined by fragmentation, innovation, and a realignment of power.
Tether and Circle are not blind to the changing tides. Strategic partnerships, regulatory pivots and technical integrations show a willingness to adapt, but whether this will be enough remains to be seen. Their future will depend not only on scale and occupancy, but also on how effectively they evolve to meet user demands in an increasingly competitive and regulated environment.
As the market matures, the very definition of a “dominant” stablecoin may change. In this new landscape, success may depend less on being first and more on being the most adaptable.
