can Tether stay on top?

The following is a guest post and opinion of Anastasija Plotnikova, CEO and Co-Founder of Fideum.

2025 has been dubbed “the year of the stablecoin,” with stablecoins surging in popularity and gaining ground globally, especially under the new crypto-friendly U.S. administration.

Leading fiat-backed stablecoins USDT and USDC hold 92% of the market share. Tether, the issuer of USDT, has grown to a market cap of over $140 billion, supporting more than 400 million users, particularly in underbanked regions.

However, Tether’s dominance is facing increasing competition. Well-established and new competitors are eager to grab market share, and new regulatory hurdles are adding pressure, particularly in markets like the European Union. This raises a critical question: Can Tether hold onto its place as the dominant stablecoin amid growing regulatory pressures and competition?

The EU and Tether

Tether’s USDT was recently delisted from exchanges in the EU due to non-compliance with the new Markets in Crypto-Assets (MiCA) regulations, which took effect at the end of last year. The regulations require stablecoins to meet stringent transparency and licensing rules, and companies issuing stablecoins in the EU must hold an electronic money institution (EMI) license and, if fiat-backed, ensure a 1:1 reserve ratio.

Tether’s delisting has caused significant disruptions in the European market, reducing EU residents’ access to stablecoins. Tether responded by accusing the EU of “rushed actions” and creating “a disorderly market,” although MiCA had been in development for years, and the European Securities and Markets Authority (ESMA) had warned exchanges since last summer. Ten stablecoin issuers were approved for operation under MiCA, but Tether was not among them.

Will the US be any friendlier?

The EU is not the only region where Tether faces regulatory challenges. Recently, the U.S. Senate Banking Committee voted to send the GENIUS Act — legislation for payments-focused stablecoins — to the full Senate. The bill would bring issuers of U.S. dollar-denominated stablecoins with market caps over $10 billion under U.S. federal regulations. Foreign stablecoin issuers, such as Tether, will face stricter reserve, liquidity, and anti-money laundering requirements compared to domestic issuers.

Only two issuers meet the market cap requirements for federal regulation as laid out in the bill — Tether and Circle. The latter, a U.S.-domiciled issuer, has announced it can comply with the bill’s requirements. However, Tether, which is domiciled in El Salvador, lacks a formal U.S. presence and may struggle to meet these new standards. This leaves Tether vulnerable to additional regulatory scrutiny in the U.S. as well.

Competitors rush to fill the gaps

As Tether faces mounting regulatory challenges, competitors are seizing the opportunity. Among the emerging challengers is Reeve Collins, Tether’s co-founder, who recently announced the launch of Pi Protocol, a yield-bearing stablecoin backed by real-world assets.

Pi Protocol aims to debut on Ethereum and Solana blockchains in 2025. While Pi Protocol may not fully comply with MiCA regulations, its yield-bearing structure offers advantages, particularly in the U.S. market, where the SEC approved yield-bearing stablecoins in February.

Competitors like Collins’ Pi Protocol may see Tether’s regulatory issues as a chance to capture market share. Tether’s CEO Paolo Ardoino has expressed confidence in this possibility, claiming that many competitors’ real aim is to “Kill Tether.”

The stablecoin storm is unleashed

Can Tether survive the growing competition and mounting regulatory pressures? Until now, Tether has faced minimal disruption due to its significantly dominant market share, leading the stablecoin category in terms of market cap, as well as 24 hour trading volume, by a wide margin. However, as global regulations catch up and new players enter the scene, Tether will need to navigate the challenges ahead carefully. The outcome could be the fragmentation of the global stablecoin markets and a split between unregulated and regulated options.