Major stock and cryptocurrency exchange Robinhood and neobank Revolut are considering entering the stablecoin market.
According to a Sept. 26 Bloomberg report, Robinhood and Revolut expect increasingly strict regulations to loosen Tether’s chokehold on the stablecoin market. Anonymous people with knowledge of the matter reportedly said that both companies are considering launching their stablecoins but may still decide not to proceed.
Tether’s dominance
Tether has dominated the stablecoin market with its first mover advantage ever since the firm launched the first USDT tokens in early October 2014. CoinMarketCap data shows that as of press time, USDT is the third top digital asset with a market cap under $120 billion.
The top contender is Circle’s USD Coin (USDC) with its market cap of over $36 billion — a whole 70% lower than Tether’s. The next runner-up is worth $5.3 billion and the rest is far smaller than that.
Tether’s dominance is even more surprising — and according to many, concerning — when one considers the lack of transparency around its reserves.
Consumer protection group Consumers’ Research released a report earlier this month that criticized the lack of transparency around stablecoin issuer Tether’s U.S. dollar reserves and called it a “disaster for consumers waiting to happen.” The organization’s main concern is Tether’s lack of a full audit from a reputable accounting firm of the dollar reserves.
Still, with the European Union adopting its comprehensive Markets in Crypto-Assets Regulation (MiCA) framework the situation may soon radically change. Under the new rules crypto exchanges operating in the EU may be forced to delist stablecoins from issuers that do not hold the necessary permits — such as Tether.
USDC issuer Circle already holds the necessary license to continue its operations in the European Union. Tether has great incentive to react quickly, with the firm’s CEO Paolo Ardoino telling Bloomberg that the company is working on a “technology-based solution” to serve the EU market.
The profit Tether has earned — mainly from interest on its reserves after the rate hikes — hit $5.2 billion in the first half of this year. That is coming from a company that only employed about 100 people at the time. Thomas Eichenberger, chief product officer at Swiss crypto bank Sygnum said:
“Many businesses have looked at the likes of Circle and Tether and the figures they’ve posted. […] It sounded like a beautiful business model, and there are many out there that might want to replicate that.”
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