USDT is under scrutiny because of the MiCA regulation, but will other stablecoins be able to use this opportunity and overthrow the king?
The cryptocurrency ecosystem now cannot function without stablecoins. They facilitate easy lending, trading, and remittances by connecting traditionally stable fiat currencies with more volatile digital assets. They started off as specialized financial instruments but are now indispensable to millions of people around the world.
Yet, the tides of regulation are turning. The stablecoin market is about to go into unexplored territory due to the increased scrutiny from the US and the Markets in Crypto-Assets (MiCA) regulation in the EU.
With the full implementation of MiCA in December 2024, a new age of responsibility began. In order to do business in the European Union, issuers need to get the necessary authorizations while simultaneously meeting the stringent requirements for financial security and transparency. Although this takes crypto assets one step closer to legitimacy, it also forces established players to change or face being left out of profitable markets.
The largest stablecoin by market capitalization, USDT, from Tether, is at the eye of the storm. For many years, USDT was the undisputed leader, with a market cap of over $137 billion and daily transactions surpassing $68 billion. However, rivals such as USDC and RLUSD are making progress as regulatory obstacles increase.
Would these competitors be able to depose Tether? Or will USDT be able to ride out the storm and keep its lead?
USDT’s Predicament: Navigating Regulatory and Market Pressures
USDT’s success is undeniable. It has long been the go-to choice for traders seeking a reliable anchor amidst crypto’s volatility. Its daily transaction volume often rivals giants like Visa, and its liquidity fuels a significant portion of crypto exchanges worldwide. But its dominance faces significant threats.
MiCA and the EU Market
MiCA has set the stage for tighter oversight of stablecoins within Europe. To continue operating in the EU, issuers must prove that reserves back their tokens, ensure consumer protection, and implement clear reporting mechanisms. Tether, however, has struggled to meet these requirements.
As of early 2025, USDT has been delisted from major European exchanges, such as Bitstamp and Kraken, due to non-compliance.
“The EU is no longer the Wild West for stablecoins. Issuers need to play by the rules or leave,” said Christina Segal-Knowles, a European Central Bank advisor, in a recent interview with Reuters.
Tether’s lack of authorization under MiCA is causing a ripple effect, with a reported $7 billion drop in market cap since the legislation came into effect.
U.S. Scrutiny
In the U.S., Tether has also faced legal challenges over its reserve transparency.
The company settled a $41 million fine with the CFTC in 2021 over claims that its tokens were not fully backed by reserves at all times. While Tether has increased disclosures since then, critics argue that it still falls short of full transparency.
SEC Chair Gary Gensler has repeatedly highlighted stablecoin risks, stating, “Many are operating as unregistered securities, which undermines investor protections.”
Gensler is leaving soon, and there is no clear understanding of how will the pro-crypto Trump administration look at the Tether’s situation.
Public Perception and Trust
Tether’s management, led by CEO Paolo Ardoino, has defended its operations vigorously.
Ardoino emphasizes the company’s $1.5 billion profit in 2024 and investments in emerging technologies like Bitcoin mining and artificial intelligence.
“We are not just a stablecoin issuer; we are innovators driving the future of financial ecosystems,” Ardoino told Wired. Despite these assurances, skepticism remains due to the absence of comprehensive third-party audits.
Market Share Erosion
The combined pressures have resulted in USDT’s declining dominance.
While still the market leader, its share has dipped from 75% in 2021 to 60% in early 2025. This erosion opens the door for competitors to fill the gaps left by USDT’s regulatory and reputational challenges.
Emerging Contenders: Can They Dethrone USDT?
As Tether falters under regulatory and market pressures, other stablecoins are rising to the occasion. These competitors bring unique strengths, including transparency, compliance, and strategic partnerships.
USD Coin (USDC)
Issued by Circle, USDC has positioned itself as the stablecoin of choice for regulatory-compliant crypto transactions. Its $45 billion market cap may seem modest compared to USDT, but its daily trading volume of $4.3 billion highlights its growing adoption.
Circle has been proactive in aligning with MiCA and U.S. regulations.
It holds reserves in audited bank accounts and regularly publishes attestations by Grant Thornton.
“Transparency is our core value. We want users and regulators to trust us completely,” said Jeremy Allaire, Circle’s CEO. Partnerships with traditional financial institutions, including Visa, have further strengthened USDC’s position.
Ripple’s RLUSD
Ripple made headlines in December 2024 with the launch of RLUSD, a stablecoin backed by U.S. dollars and operating on the XRP Ledger.
The company’s experience in cross-border payments has enabled RLUSD to gain traction quickly, with a market cap of $53 million and daily trading volumes exceeding $73 million.
Ripple has also prioritized regulatory approvals, securing licenses from the New York Department of Financial Services (NYDFS).
“We’re not just compliant; we’re setting the standard for stablecoins in regulated markets,” Ripple CEO Brad Garlinghouse said during the World Economic Forum in Davos.
FDUSD and Other Stablecoins
Smaller players like FDUSD offer niche functionalities, such as cross-chain interoperability, making them attractive to decentralized finance (DeFi) users. Although FUSD’s market cap is still modest at $1.7 billion, its innovative features cater to a growing segment of the crypto ecosystem.
“While we’re not looking to dethrone USDT or USDC, we see ourselves as complementary, serving specific use cases,” said Eva Song, founder of FUSD.
Other contenders, like DAI and GUSD, bring decentralized governance and compliance with U.S. regulations, respectively.
The Road Ahead: Is Dethroning USDT Possible?
A precarious equilibrium between trust and adaptability will determine the fate of the stablecoin market.
USDT still has a few benefits, even though it has a lot of problems. Many platforms and traders rely on it because of its widespread use and large liquidity.
“Tether’s resilience lies in its network effects. Users may grumble about transparency but continue to rely on it due to its ubiquity,” said Nicholas Merten, a prominent crypto analyst.
The situation might be changing, though. By placing an emphasis on compliance and consumer protection, MiCA and comparable regulations in other jurisdictions are altering the stablecoin scene.
Because of its commitment to openness, USDC is positioned to take advantage of this change. RLUSD, Ripple's cryptocurrency, has the potential to make a big splash thanks to its payment network and compliance initiatives.
Still, unseating USDT isn't exactly a walk in the park.
Given USDT's global reach and liquidity, analysts predict that no stablecoin will be able to compete with it for at least five to seven years, assuming Tether doesn't change its strategy any further. Additionally, the stablecoin market may become fragmented as a result of increased regulatory scrutiny, with various regions showing preference for different issuers.
Conclusion: The Stablecoin Battleground
Innovation and regulation are driving forces at a crossroads in the stablecoin market. Once unstoppable, USDT is now confronting its greatest test to date in meeting MiCA requirements and regaining the confidence of both regulators and users.
Companies like USDC and RLUSD are jumping on the bandwagon, using openness and strategic alliances to gain ground in the industry.
What happens to the market in the coming years is totally up to chance. Can USDT adjust to the new circumstances while maintaining its dominion? Or will the crypto industry mature, and a new leader will step up to meet the market and regulatory demands? Competition for stablecoin supremacy is sure to heat up in the years to come, given the continued importance of stablecoins in international finance.