Crypto trading platform Robinhood and fintech company Revolut are exploring the launch of their own stablecoins, according to a Bloomberg report. This potential move comes as European regulators prepare to implement new rules.
The changes could weaken Tether's dominance in the $170 billion stablecoin market. Theoretically, of course. As no one has been able to do that in the recent past.
Tether currently holds a commanding position, its USDT stablecoin boasts a circulation of nearly $120 billion. This represents over two-thirds of the total market. Circle Internet's USDC, the closest competitor, has a circulation of about $36 billion.
The landscape might shift rapidly as the European Union is set to roll out its Markets in Crypto-Assets (MiCA) framework by year-end. These comprehensive regulations could force EU crypto exchanges to delist stablecoins from issuers lacking proper permits.
Circle has already secured the necessary EU license. This positions the company favorably as regulations tighten. Circle has even confidentially filed for a US initial public offering, this move signals confidence in the evolving regulatory environment.
Tether, however, faces uncertainty. CEO Paolo Ardoino has expressed concerns about EU regulations. He worries particularly about scenarios involving mass redemptions. Tether is now exploring a "technology-based solution" for the EU market. The company currently lacks an e-money license in the region.
So what about Robinhood and Revolut? These well fintech companies are well established in Europe and have an enormous potential to undermine Tether's leadership here.
Despite all the rumors in the Bloomberg report, Robinhood states it has "no imminent plans" to launch a stablecoin. That doesn't mean these plans aren't cooking, analysts say. Revolut, meanwhile, has expressed intentions to expand its crypto offerings. The potential for profit is significant. Tether reported earnings of $5.2 billion from its reserves in the first half of 2024.
Experts warn of potential market fragmentation. Nuri Chang, head of product at BitGo, notes that various financial applications may develop their own stablecoins. This could lead to seamless transactions that users may not even notice.
MiCA regulations are already partially in effect. They require stablecoin issuers to hold an e-money license. Issuers must also ensure a significant portion of their assets are held in independent banks. The second phase will cover all crypto platforms, this is expected to provide a clearer compliance framework.
Some exchanges are taking preemptive action. OKX, Uphold, and Bitstamp have begun delisting Tether's stablecoins, thus creating competitive disadvantages for those still supporting Tether.
The stablecoin market stands at a crossroads. Regulatory changes and new entrants could reshape the landscape. Whether Robinhood and Revolut will seize this opportunity remains to be seen. The coming months will likely prove crucial for the future of stablecoins in Europe and beyond.