The Golden Age of Stablecoins Begins: USDT to the left, USDC to the right

Author: Wenser, Odaily Planet Daily

The latest news: After a 68-vote and 30-vote vote, the U.S. Senate has voted to pass the GENIUS Act. The golden age of stablecoins is about to begin.

Previously, we briefly sorted out the past development of the stablecoin industry in the article "10 years of stormy roads, and finally became the official US official to select "point-to-point electronic cash""; and now, with the momentum of Circle with the "first stablecoin stock" and the strong market value of over US$20 billion, the Dragon USDC in the stablecoin market and the USDT, the overlord of the stablecoin market, are gradually becoming apart. The former focuses on compliance, subsidies, and interest income, especially in the Solana ecosystem; the latter focuses on decentralization, diversified layout, and real payment applications, especially in cross-border trade and global currency.

Odaily Planet Daily will systematically sort out the past development history and current situation of USDT and USDC in this article. We try to learn from history and pursue the future development direction of the two major stablecoin projects.

The stablecoin pattern is initially determined: the growth history of

dragon one and dragon two

Looking back at the past, it is not accidental that the two major stablecoins, USDT and USDC, have been able to reach their current status as "Dragon One" and "Dragon Two", but the competitive landscape and market performance between the two have become industry indicators like "crypto barometer".

According to DefiLlama data , as of June 12, as the "founder of the stablecoin track", USDT, issued by Tether in 2014, has been in the "leading position" for a long time, with a market value of about US$156 billion and a market share of as high as 62.1%. USDC issued by Circle has been active in the cryptocurrency market as the "Stablecoin Track Dragon 2". Its current market value is about US$60.8 billion and a market share of about 24.2%. Other stablecoin projects including USDe, DAI, Sky Dollar, BUIDL, and USD 1 account for less than 15%.

To trace the key node of the "leading dispute" between USDT and USDC, 2019 will undoubtedly bear the brunt.

Current market share status of USDT/USDC

**USDT 's domineering path: Join forces with Tron TRON to capture DeFi

Summer and global application scenarios**

In 2019, Tether reached an official cooperation with Tron TRON Ecosystem after a series of storms of 120,000 BTC theft, Tether's Reserve Bank interruption of cooperation, and the New York State Attorney General's Office (NYAG) launched an investigation into Tether reserve funds.

Since then, after the Bitcoin network and Ethereum ecosystem, Tron TRON has become the third ecological network that promotes USDT's rapid progress, and has gradually become the largest network for USDT issuance through early official subsidies and subsequent energy leasing models. At present, according to Tether's official website , USDT's issuance in the Tron TRON ecosystem is as high as US$78.2 billion, accounting for about 50% of the total USDT's issuance, which can be called "half of USDT." **
**

In addition, the "liquidity mining boom" spawned by DeFi Summer in 2020 has also injected new strength into the rapid development of USDT. As a general equivalent, USDT has become the most intuitive "price quantification machine" in the crypto market. USDT has become the "stepbrake" or "entry ticket" for many popular DeFi protocols. The prices of BTC and ETH have also ushered in waves of rapid rise and fall in the increasingly crazy market environment. In order to cope with the volatile market, in addition to BTC, "stocking U" has become a choice for many people to choose to spend the winter in the bear market.

In the real world, USDT has gradually become a common intermediary for illegal activities such as money laundering, fraud, drug transactions and even human trafficking in Southeast Asia; South America and the Middle East and other regions with severe currency inflation will also be USDT bound to the USD 1:1 as a common tool for daily payments and cross-border transactions.

Based on this background, USDT's issuance and market value have ushered in exponential growth: in June 2020, USDT's market value soared to around US$9.5 billion, and its market share soared to 86.5%; USDC's market value was around US$1.1 billion; its market share ranked second in the market, but only 6.79%. As for the market value of other stablecoins including USDP, BUSD, TUSD, etc., is more than one order of magnitude behind USDT.

In July 2020, USDT became the first stablecoin project with a market value of over US$10 billion, thus establishing its dominant position in the stablecoin track.

List of stablecoin market share in 2020

"The episode closest to USDT in USDC": UST and Luna 2022

Turning the time pointer back to 2019 is a year of pain for Circle, the publisher behind USDC.

When the market was undergoing a large-scale market pullback in 2018 and the dawn of DeFi Summer was first revealed, Circle's operating costs were out of control and cash flow was on the verge of collapse. In order to develop the company, it had no choice but to quickly "clear the load" in a short period of time - selling the Poloniex exchange, Circle Trade over-the-counter trading business, and Circle Invest products for retail investors, and also closed and cleared the payment applications it once launched.

Despite the drastic rectification, by the fall of 2019, Circle was on the verge of bankruptcy again. It was then that Circle began to have to face its own battle: ALL IN USDC.

According to Jeremy Allariie, founder and CEO of Circle, “At that time, USDC had early growth momentum, but it was not enough to support a large-scale company. But we chose to turn all the company’s resources to USDC and bet on it. I remember very clearly that we officially announced this strategy in January 2020, when the homepage of Circle’s official website was completely redesigned and turned into a huge billboard that promoted 'stable coins are the future of the international financial system'. The only button on the page was: 'Get USDC', and other functions were removed."

Focusing on the main business is often the beginning of a company 's death.

In March 2020, the Circle platform ushered in an upgrade, and the USDC account system and a complete set of corresponding new APIs also came into being. This greatly provided convenience for developers to seamlessly connect bank, bank card and other payment systems into their own application systems. USDC's deposit and withdrawal operations became more silky, and Circle finally got on track again.

By the end of 2020, USDC 's circulation soared from US$400 million at the beginning of that year to nearly US$4 billion, an increase of nearly 10 times. Of course, USDT's growth rate is also amazing. At that time, its market value had soared to around US$20 billion, making it an absolute leader in stablecoins.

It is worth mentioning that the global COVID-19 pandemic has provided certain development support for on-chain stablecoins such as USDT and USDC. After all, compared with the real world banking system with cumbersome processes and complex procedures, stablecoin payments in the cryptocurrency industry are more flexible, convenient and cost-effective.

For USDC, the moment closest to USDT's market value in the subsequent development process was June 2022.

At that time, affected by the bursting of the algorithmic stablecoins UST and LUNA under Terra Labs, panic and FUD of "USDT is about to be deanned" emerged in the market again. In extreme cases, Tether, the issuer behind USDT, once quickly processed about $7 billion in redemptions within 48 hours, almost 10% of its capital reserves at that time, which was the most extreme stress test.

At that time, USDT 's market value fell to around US$66.9 billion; USDC, which backed Coinbase and insisted on compliant and full reserves as its foothold, ushered in a peak growth, with its market value once increasing to around US$55 billion, and the market value gap between the two was less than US$12 billion.

Comparison of USDT vs USDC Market Cap Gap in June 2022

But then, USDT, which does not require "provisioning", has a more diversified business and a wider application scenario, gradually surpassed the market, while USDC is limited to the distribution of profits to partners such as Coinbase and Binance. Although its market value is also in a stage of rapid growth, its net profit in its business is at a disadvantage compared to the money-making machine like Tether, which has an annual net profit of more than US$10 billion.

Judging from the team composition at the beginning and the subsequent development direction, the development routes of USDT and USDC may be determined.

USDT's Choice: Go left and move towards decentralized intermediaries

For USDT and the Tether behind it, they chose a "left route" - a decentralized intermediary service provider.

Speaking of this, apart from Paolo Ardoino, the founder and CEO of Tether , Giancarlo Devasini, a core figure in Tether who is not paid attention to but owns a 40% stake, is even more critical. He worked in plastic surgery in his early years, and later changed his career to the fields of electronic product import and software reselling, and even involved pirated software transactions. It is precisely with its adventurous spirit and non-traditional business methods that Devasini's personal net assets have grown to about US$9.2 billion, and its wealth once surpassed Piero Ferrari, an executive of a well-known luxury car company Ferrari and son of Enzo Ferrari.

"The Giant Behind Tether"

Its always aggressive business philosophy and extremely bold operation methods also led to Tether misappropriating user funds for interest-based investments, and has always been questioned by a series of market questions about whether Tether has sufficient reserves. After working with the Bank of Puerto Rico to deposit funds, Devasini said bluntly, “We need to take the money from our clients to invest in bonds, we need more income, and we don’t need to respond to critics doing so many things.”

And for the cryptocurrency industry that is growing wildly, perhaps the wild street intelligence can make a crypto project more anti-fragile.

Despite the previous series of storms and even the over-issuance of printing and printing, Tether still roams the edge of regulation and compliance by wiggling and moving around, becoming what CEO Paolo Ardoino said in his recent speech at the Bitcoin Conference - "de-intermediary infrastructure provider."

As Paolo described-

" Financial and big tech companies often rely on layers of intermediaries: financial intermediaries charge fees from each of our transactions, and tech giants control our data. This is essentially one thing: we lose sovereignty in both money and data. And Tether's goal is to use technology to provide tools to help people get rid of these intermediaries and achieve true individual sovereignty. "

Yes, this is the story Tether tells, a sovereign individual support service provider against traditional big tech companies and big financial companies, a decentralized stablecoin project that doesn 't care about the user's identity, nationality, age, gender, and even the purpose of use.

Specifically, the advantages of USDT issued by Tether are mainly reflected in:

• The reserve fund audit was conducted by Tether's cooperative accounting firm BDO, which is essentially a black box state. This situation is expected to improve after the introduction of the US stablecoin regulation bill, the Genius Act, and Tether may issue annual, quarterly and even monthly transparency reports;

• USDT exists based on a blockchain network, and its transaction records are stored on a decentralized blockchain, which is transparent and tamper-free; users have direct control over USDT assets in non-custodial wallets; they can be freely circulated in DeFi protocols, DEX, CEX and other scenarios.

• As a centralized issuer, Tether has full control over the issuance, destruction and reserve management of USDT and can freeze USDT assets at specific addresses (if illegal activities are involved). In the previous "Bybit's $1.5 billion asset theft case", Tether was also one of the parties to assist in the handling.

Yes, you read that right. The value stability and convertibility of USDT highly depend on the reputation of Tether. As an encrypted person who often uses USDT, we can only hope that Tether will not be brain-breaking, and destroying the Great Wall itself will easily destroy this business with an annual net profit of over US$10 billion.

In addition, according to Tether's subsequent development map, its plan covers many sectors such as mining, AI, digital agriculture, education, and mobile communications, which undoubtedly reveals the vigorous ambitions and adventurous attitude of this stablecoin overlord.

The latest news , Tether CEO Paolo Ardoino also reposted the news that Bank of America is about to issue stablecoins on social media platforms, and wrote "Select your player", which is suspected to suggest that the two parties will cooperate in the future.

USDC’s decision: Go to the right and embrace a centralized compliance

system

In contrast to Tether, Circle is taking a more cautious and difficult but more down-to-earth centralized compliance route.

Specifically, as Circle CEO Jeremy Allaire mentioned in the article "How I All in Stablecoin 7 Years Ago":

• Circle is the first company in the crypto industry to obtain a full set of compliance licenses, the first crypto company to obtain an electronic currency institution (EMI) license in Europe, and the first company to obtain the so-called "BitLicense" in New York - the first regulatory license specially set up for the crypto industry. Nearly a year after that, only our family held this license.

• We always adhere to the concept of "regulation first" and always choose to take the "most important" route to ensure that we have a good and stable compliance system. By the way, it is precisely because of such a compliance basis that we can achieve another key goal: liquidity. What is liquidity? It is that you can really create and redeem stablecoins, connect to real bank accounts, buy and redeem stablecoins with fiat currency. If you are a suspicious offshore company and no one wants to open a bank account for you, you can't do this at all. You don't even know where your bank is.

• Circle is the first company to establish a high-quality banking partnership. It also introduces strategic partners like Coinbase to distribute USDC on a large scale on the retail side, allowing any ordinary user with a bank account to easily buy and redeem USDC. We also provide agency-level services. That is to say, we have done everything from transparency, compliance, regulatory frameworks, to actual liquidity.

For details about Circle's business composition and profit source, please refer to our previously released "Circle IPO may be delayed. What is the valuation of the "first stablecoin stock"? 》, At present, Circle still mainly relies on reserve interest to generate revenue, and this situation may change after its IPO listing.

It is worth mentioning that Circle's compliance banner is indeed solid: it is registered as a currency service business (MSB) in the United States and complies with relevant regulations such as the Bank Secrecy Act (BSA); has a currency transfer license in 49 U.S. states, Puerto Rico and the District of Columbia; in 2023, Circle obtained a major payment agency license issued by the Monetary Authority of Singapore (MAS), allowing it to operate in Singapore; in 2024, Circle obtained an electronic currency agency (EMI) license issued by the French Prudential Regulation and Resolution Authority (ACPR), enabling it to issue USDC and EURC in Europe under the EU Crypto Asset Market Supervision (MiCA) regulations.

In the future, USDC 's rightward route may hold high the "Bank of American Nativism", further broaden its global territory with the help of regulatory policies, and shine in sectors such as institutional payments, PayFi and TradFi. At the same time, it will also provide certain assistance or monetary support for the Trump administration to digest US debt and Bitcoin strategic reserves.

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

Conclusion: Planting flowers will bring you flowers, planting beans will

bring you beans

Looking at the development history of USDT and USDC and the history of stablecoin issuers such as Tether and Circle, after more than ten years, the last day of stablecoin as a "point-to-point electronic payment system" has taken root and sprouted and broken into the ground.

A firm mass line and a differentiated development idea that focuses on compliance operations have also opened up new ideas for the subsequent development ceiling of USDT and USDC: the former market is tens of trillions or even millions of dollars of cross-border foreign trade and living payments; the latter market is a global legal electronic currency with an overall scale of over US$100 trillion.

The last round of competition in the cryptocurrency industry has come to an end, and a new round of competition after the official implementation of the GENIUS Act has quietly begun.