The golden age of stablecoins begins: USDT to the left, USDC to the right

*Author: Wenser, * Odaily Planet Daily

In the latest news, after a vote of 68 in favor and 30 against, the U.S. Senate has passed the "GENIUS Act." The golden age of stablecoins is about to unfold.

Previously, we briefly reviewed the past development of the stablecoin industry in the article "The 10-Year Journey of Stablecoins: Finally Recognized as 'Peer-to-Peer Electronic Cash' by the U.S." Now, with Circle's "first stablecoin stock" making a strong debut on the U.S. stock market with a market capitalization exceeding $20 billion, the distinctions between the second-largest stablecoin USDC and the dominant stablecoin USDT are gradually becoming clear. The former focuses on compliance, subsidies, and earning interest, especially performing actively in the Solana ecosystem; the latter centers on decentralization, diversified layouts, and real-world payment applications, playing a significant role in cross-border trade and global currency.

Odaily Planet Daily will systematically review the past development and current status of USDT and USDC in this article, attempting to learn from history to trace the future development directions of these two major stablecoin projects.

The Initial Stablecoin Landscape: The Growth History of Dragon One and Dragon Two

Looking back, the rise of USDT and USDC to their current "Dragon One" and "Dragon Two" status is no coincidence. The competitive landscape and market performance between the two have, to some extent, become industry indicators akin to a "crypto barometer."

According to DefiLlama data, as of June 12, USDT, the "pioneer of the stablecoin sector," issued by Tether in 2014, has long held the "leading position," with a current market capitalization of approximately $156 billion and a market share of 62.1%. USDC, issued by Circle, has remained active in the cryptocurrency market as the "Dragon Two" of the stablecoin sector, with a current market capitalization of about $60.8 billion and a market share of approximately 24.2%. Other stablecoin projects, including USDe, DAI, Sky Dollar, BUIDL, and USD 1, collectively account for less than 15%.

To trace the key milestones in the "head-to-head battle" between USDT and USDC, 2019 undoubtedly stands out.

Current Market Share of USDT/USDC

The Dominance of USDT: Partnering with TRON, Seizing DeFi Summer and Global Application Scenarios

In 2019, after a series of upheavals including the theft of 120,000 BTC from its sister company BitFinex, the interruption of cooperation with Tether's reserve bank, and the New York Attorney General's investigation into Tether's reserves, Tether reached an official partnership with the TRON ecosystem.

Since then, after Bitcoin and Ethereum, TRON has become the third ecosystem propelling USDT's rapid growth, gradually becoming the largest network for USDT issuance through initial official subsidies and subsequent energy leasing models. Currently, according to Tether's official website, the issuance of USDT in the TRON ecosystem has reached $78.2 billion, accounting for about 50% of USDT's total issuance, making it "half of USDT's territory."

Moreover, the "liquidity mining craze" sparked by the DeFi Summer in 2020 injected new momentum into USDT's rapid development. As a general equivalent, USDT became the most intuitive "price quantification machine" in the crypto market, serving as the "entry ticket" for many popular DeFi protocols, while the prices of BTC and ETH experienced waves of rapid rises and falls in an increasingly frenzied market environment. To cope with the volatile market, aside from BTC, "holding U" became a choice for many to weather the bear market.

In the real world, USDT gradually became a common intermediary for illegal activities such as money laundering, fraud, drug trafficking, and even human trafficking in Southeast Asia; regions with severe currency inflation, such as South America and the Middle East, also adopted USDT, which is pegged 1:1 to the U.S. dollar, as a common tool for daily payments and cross-border transactions.

Against this backdrop, USDT's issuance and market capitalization experienced exponential growth: in June 2020, USDT's market capitalization surged to around $9.5 billion, with a market share skyrocketing to 86.5%; USDC's market capitalization was around $1.1 billion, with a market share ranking second in the market at only 6.79%. Other stablecoins, including USDP, BUSD, and TUSD, lagged behind USDT by more than one order of magnitude.

In July 2020, USDT became the first stablecoin project to surpass a market capitalization of $10 billion, thus establishing its dominant position in the stablecoin sector.

Overview of Stablecoin Market Share in 2020

"The Closest Episode of USDC to USDT": The Turmoil of UST and LUNA in 2022

Turning the clock back to 2019, it was a painful year for Circle, the issuer behind USDC.

After experiencing a massive market correction in 2018 and the initial signs of the DeFi Summer, Circle's operating costs spiraled out of control, and cash flow was on the brink of collapse. To ensure the company's survival, it was forced to quickly "lighten its load"—selling off Poloniex exchange, Circle Trade OTC business, and the retail-focused Circle Invest product, while also shutting down and liquidating its previously launched payment application.

Despite making drastic adjustments, by the fall of 2019, Circle found itself once again on the brink of bankruptcy. It was then that Circle had to face its own do-or-die moment: ALL IN USDC.

As Circle's founder and CEO Jeremy Allaire recalled: "At that time, USDC had already gained early momentum, but it was still not enough to support a scaled company. But we chose to shift all company resources to USDC and bet all our funds on it. I remember very clearly that we officially announced this strategy in January 2020, and the homepage of Circle's website was completely revamped into a huge billboard promoting 'stablecoins are the future of the international financial system.' The only operational button on the page was 'Get USDC,' and all other functions were removed."

Focusing on core business is often the beginning of a company's rebirth.

In March 2020, Circle's platform underwent an upgrade, and the USDC account system along with a new set of APIs emerged, greatly facilitating developers in seamlessly integrating banking, credit card, and other payment systems into their applications. The deposit and withdrawal operations for USDC became smoother, and Circle finally got back on track.

By the end of 2020, USDC's circulation surged from $400 million at the beginning of the year to nearly $4 billion, an increase of nearly 10 times. Of course, USDT's growth was equally astonishing, with its market capitalization soaring to around $20 billion, making it the absolute leader in stablecoins.

It is worth mentioning that the global COVID-19 pandemic provided a certain boost to the development of on-chain stablecoins like USDT and USDC. After all, compared to the cumbersome and complex processes of traditional banking systems, stablecoin payments in the cryptocurrency industry are more flexible, convenient, and cost-effective.

For USDC, the moment it came closest to USDT's market capitalization occurred in June 2022.

At that time, influenced by the collapse of the algorithmic stablecoin UST and LUNA under Terra Labs, panic and FUD regarding "USDT's imminent de-pegging" resurfaced in the market. In extreme cases, Tether, the issuer behind USDT, quickly processed about $7 billion in redemptions within 48 hours, nearly 10% of its then-reserve amount, representing the most extreme stress test.

At that time, USDT's market capitalization fell to around $66.9 billion; USDC, backed by Coinbase and adhering to compliance and sufficient reserves, experienced a surge, with its market capitalization increasing to around $55 billion, narrowing the gap between the two to less than $12 billion.

Comparison of USDT vs USDC Market Capitalization Gap in June 2022

However, subsequently, USDT, which did not require "supply" and had a more diversified business and broader application scenarios, gradually pulled ahead, while USDC, constrained by profit-sharing conditions with partners like Coinbase and Binance, despite also being in a phase of rapid growth, fell short in net profit compared to Tether, which had an annual net profit exceeding $10 billion.

From the initial team composition and subsequent development direction, it seems that the development paths of USDT and USDC may have been predetermined.

USDT's Choice: Moving Left Towards Decentralized Intermediary

For USDT and its backer Tether, they have chosen a "leftward path"—to become a decentralized intermediary service provider.

In this regard, aside from Tether's founder and CEO Paolo Ardoino, another key figure often overlooked by the public is Giancarlo Devasini, who holds 40% of the shares. He previously worked in plastic surgery before transitioning to the electronics import and software resale industry, even involving himself in the trade of pirated software. It is precisely due to his extraordinary adventurous spirit and unorthodox business methods that Devasini's personal net worth has grown to approximately $9.2 billion, surpassing even the wealth of Piero Ferrari, son of the famous luxury car company Ferrari's founder, Enzo Ferrari.

"The Giant Behind Tether"

His traditionally aggressive business philosophy and bold operational methods have also led Tether to misappropriate user funds for interest-generating investments, raising ongoing market questions about whether Tether has sufficient reserves. When collaborating with a Puerto Rican bank to store funds, after insisting on investing in profitable bonds and being rejected by the bank's founder John Betts, Devasini bluntly stated: 'We need to take clients' funds to invest in bonds; we need more income and don't need to do so much to respond to critics.'

For the rapidly growing cryptocurrency industry, perhaps street wisdom can make a crypto project more resilient.

Despite previously encountering a series of upheavals and even excessive issuance, Tether has managed to navigate the edges of regulation and compliance, becoming what CEO Paolo Ardoino recently referred to at a Bitcoin conference as a "decentralized infrastructure provider."

As Paolo described:

"Financial and big tech companies often rely on layers of intermediaries: financial intermediaries charge fees on every transaction, while tech giants control our data. Essentially, it's the same thing: we lose sovereignty over both money and data. Tether's goal is to provide tools through technology to help people escape these intermediaries and achieve true individual sovereignty."

Indeed, this is the story Tether tells—a service provider supporting sovereign individuals against traditional big tech and finance companies, a decentralized stablecoin project that does not care about the user's identity, nationality, age, gender, or purpose of use.

Specifically, the advantages of USDT issued by Tether mainly include:

• Reserve fund audits conducted by Tether's partner accounting firm BDO, which essentially operates in a black box. This situation is expected to improve with the introduction of the U.S. stablecoin regulatory bill "GENIUS Act," at which point Tether may release annual, quarterly, and even monthly transparency reports;

• USDT exists on a blockchain network, with transaction records stored on a decentralized blockchain, ensuring transparency and immutability; users have direct control over USDT assets in non-custodial wallets; it can circulate freely in DeFi protocols, DEXs, and CEXs.

• As a centralized issuer, Tether has complete control over the issuance, redemption, and reserve management of USDT, and can freeze USDT assets in specific addresses through blacklist permissions (e.g., in cases of illegal activities). In the previous "Bybit $1.5 billion asset theft case," Tether was also one of the assisting parties.

Yes, you read that right; the value stability and convertibility of USDT highly depend on Tether's reputation. As frequent users of USDT, we can only hope that Tether will not make a rash decision that could easily destroy this business, which generates an annual net profit exceeding $10 billion.

Furthermore, according to Tether's subsequent development blueprint, its plans encompass mining, AI, digital agriculture, education, mobile communications, and many other sectors, undoubtedly revealing the ambitious and adventurous attitude of this stablecoin giant.

Latest news indicates that Tether CEO Paolo Ardoino has also shared news about a U.S. bank's upcoming stablecoin issuance on social media, captioned "Select your player," seemingly hinting at potential collaboration between the two.

USDC's Decision: Moving Right, Embracing a Centralized Compliance System

In contrast to Tether, Circle has taken a more cautious, arduous, yet solid centralized compliance route.

Specifically, as Circle CEO Jeremy Allaire mentioned in the article "How I Went All in on Stablecoins Seven Years Ago":

• Circle is the first company in the crypto industry to obtain a full set of compliance licenses from the ground up, the first crypto company to obtain an Electronic Money Institution (EMI) license in Europe, and the first company to receive the so-called "BitLicense" in New York—this is the first regulatory license specifically established for the crypto industry. Nearly a year later, we were the only company holding this license.

• We have always adhered to the principle of "regulation first," consistently choosing to take the "front door" route to ensure we have a good and robust compliance system. By the way, it is precisely because of this compliance foundation that we can achieve another key goal: liquidity. What is liquidity? It means you can truly create and redeem stablecoins, connect to real bank accounts, and use fiat currency to buy and redeem stablecoins. If you are a suspicious offshore company, no one will want to open a bank account for you, and you simply cannot do these things. You wouldn't even know where your bank is.

• Circle is the first company to establish high-quality banking partnerships and has introduced strategic partners like Coinbase to massively distribute USDC at the retail level, allowing any ordinary user with a bank account to easily buy and redeem USDC. We also provide institutional-level services. In other words, from transparency, compliance, and regulatory framework to actual liquidity, we have achieved it all.

For details on Circle's business composition and profit sources, please refer to our previous article "Circle IPO May Be Delayed, What Is the Valuation of the 'First Stablecoin Stock'?" Currently, Circle still primarily relies on reserve interest for revenue, a situation that may change after the IPO.

It is worth noting that Circle's compliance foundation is indeed solid: it is registered in the U.S. as a Money Services Business (MSB) and complies with the Bank Secrecy Act (BSA) and other relevant regulations; it holds money transmission licenses in 49 U.S. states, Puerto Rico, and Washington D.C.; in 2023, Circle obtained a Major Payment Institution license from the Monetary Authority of Singapore (MAS), allowing it to operate in Singapore; in 2024, Circle received an Electronic Money Institution (EMI) license from the French Prudential Supervision and Resolution Authority (ACPR), enabling it to issue USDC and EURC in Europe under the EU's Markets in Crypto-Assets (MiCA) regulation.

In the future, USDC's rightward path may wave the banner of "American localism," leveraging favorable regulatory policies to further expand its global footprint and shine in institutional-level payments, PayFi, and TradFi sectors, while also providing some support or monetary assistance for plans such as the Trump administration's digestion of U.S. debt and Bitcoin strategic reserves.

Thanks to the rapid development of the Solana ecosystem and the PayFi sector, as the main circulating stablecoin in this ecosystem, USDC's future is also worth looking forward to.

Conclusion: Plant Flowers, Reap Flowers; Plant Beans, Reap Beans

Looking at the development history of USDT and USDC, as well as the rise of stablecoin issuers like Tether and Circle, after more than a decade, the persistence and dedication of the past have finally led to the day when stablecoins, as "peer-to-peer electronic payment systems," take root, sprout, and bloom.

One firmly adheres to the mass line, while the other emphasizes differentiated development through compliance operations, opening new avenues for the subsequent development ceilings of USDT and USDC: the former's market is the tens of trillions to hundreds of trillions of dollars in cross-border trade and daily payments; the latter's market encompasses the overall scale of over $100 trillion in global legal electronic currency.

The previous round of competition in the cryptocurrency industry has come to a close, and a new round of competition has quietly begun following the formal implementation of the "GENIUS Act."