TLDR:
- Tether and Circle control 86% of supply, down from 91.6% in March 2024, showing pressure from new entrants.
- Fintechs and exchanges are steering users into white-labeled stablecoins to capture yield lost to incumbents.
- DeFi projects like Hyperliquid and fintech wallets like Phantom are launching stablecoins to internalize revenue.
- Banks can now issue stablecoins post-GENIUS, raising competition against Tether and Circle’s $245B supply share.
The stablecoin market, long dominated by Tether and Circle, is starting to fracture. Once thought untouchable, the two issuers now face a wave of challengers ranging from crypto startups to traditional banks.
The supply share of the so-called “big two” has slipped after peaking last year, suggesting that the age of a pure duopoly may be ending. New issuers are entering with yield-driven strategies, while exchanges and fintechs are steering customers into branded alternatives.
Crypto investor Nic Carter noted in a recent post that this shift could mark the beginning of a more fragmented stablecoin market.
The Tether and Circle Grip on Supply Slips
According to Carter, Tether and Circle together command about 86 percent of all stablecoin supply. This is down from their peak of 91.6 percent in March 2024.
Their combined supply stands at $245 billion, a number unmatched by competitors. Yet new entrants are steadily taking ground, forcing a rethink of the market structure.
Earlier challengers like Dai and Terra’s UST briefly grew, but neither managed to sustain share. Binance’s BUSD, which once captured 15 percent of supply, was shuttered by regulators.
Today’s crop of rivals looks different. Ethena’s USDe, Ondo’s USDY, and Paxos’ USDG have carved out share by offering revenue-sharing models that appeal to intermediaries.
Exchanges are another front in this contest. Carter explained that platforms are incentivized to launch their own stablecoins to capture yield. A crypto exchange holding $500 million in Tether deposits earns nothing from it.
By issuing its own token, the same platform could internalize returns from U.S. Treasuries. This logic is pushing many to move away from incumbents.
Fintech apps are also adopting this model. Instead of showing balances in USDT or USDC, they simply display dollar values. Behind the scenes, those balances are swapped into stablecoins issued by the fintech itself or its partners.
Carter noted that wallets such as Phantom have already rolled out branded products like Phantom Cash using this approach.
Banks and DeFi Protocols Enter the Stablecoin Game
DeFi protocols are experimenting with native stablecoins as well. Hyperliquid recently launched USDH after weighing offers from issuers, signaling a clear push to capture yield for its own ecosystem.
Similar moves are being explored across decentralized platforms, adding further pressure on USDC and USDT.
Traditional finance is also preparing to enter. Regulatory changes under GENIUS allow banks to issue stablecoins with strict requirements on backing and audits. Carter pointed out that banks may form consortia to pool resources and compete directly.
JPMorgan, Bank of America, Citi, and Wells Fargo have already discussed such initiatives.
The combination of fintech wallets, DeFi protocols, and banks creates a crowded field. Costs of issuing stablecoins have fallen, and yield distribution remains a central driver. For incumbents, the challenge lies in defending their position while others find new ways to monetize user deposits.
Carter concluded that while Tether and Circle remain dominant, the duopoly is no longer secure. Infrastructure improvements, regulatory shifts, and new competitors are pushing stablecoins into their next phase of competition.