Robinhood and Revolut are mulling the launch of their own stablecoins, betting that stricter regulations in Europe could loosen Tether’s dominance in the $170 billion digital asset market.
While both fintech companies are considering the move, they have not yet committed, according to Bloomberg.
Stablecoins have seen Tether’s USDT grow to almost $120 billion in circulation, accounting for over two-thirds of the market. Despite numerous attempts by competitors, Tether has maintained its stronghold, with the next largest stablecoin, USDC, standing at $36 billion in circulation.
However, with the European Union’s Markets in Crypto-Assets (MiCA) regulation set to take full effect by the end of the year, Tether could face new challenges. MiCA requires stablecoin issuers to hold specific licenses, which could force exchanges in the EU to delist non-compliant tokens like USDT.
Circle, the issuer of USDC, already holds the necessary EU license and is preparing for a U.S. initial public offering. Meanwhile, Tether CEO Paolo Ardoino voiced concerns about the risks posed by EU rules, noting that the company is working on a “technology-based solution” for the region.
New players in the stablecoin market
Robinhood and Revolut are among the fintechs eyeing the market, though neither has confirmed concrete plans. A Robinhood spokesperson said there are “no imminent plans” to launch a stablecoin, while Revolut indicated it is focused on expanding its crypto product offerings.
The financial incentives for stablecoin issuers are substantial. Tether earned $5.2 billion in profit in the first half of 2024, mainly from the reserves backing USDT, according to the company.
As stablecoins gain traction beyond just moving funds on and off crypto exchanges, their use in payments is also expanding, particularly in emerging markets. In countries like Brazil, Indonesia, and Nigeria, stablecoins are increasingly being used to save in U.S. dollars, pay for goods, and even settle salaries.
MiCA’s stablecoin rules came into effect in June, requiring issuers to hold an electronic-money license and meet strict backing requirements. An 18-month implementation period for other crypto platforms will begin at the end of 2024, during which exchanges must comply with the new rules.
Exchanges such as OKX, Uphold, and Bitstamp have already partially delisted Tether’s stablecoins in anticipation of the new regulatory environment. Meanwhile, some companies, like SG-Forge, a subsidiary of Societe Generale, see an opportunity. SG-Forge obtained an e-money license and is expanding its stablecoin offering into the retail market, seeing MiCA as a turning point for the industry.
