MiCA Leads Stablecoin Market Reshaping, Robinhood and Revolut Also Considering Joining

According to a report from Bloomberg citing sources familiar with the matter, financial technology companies Robinhood and Revolut are considering launching stablecoins to tap into the booming $170 billion stablecoin market, betting that stricter regulations in Europe and other regions will lead to the downfall of market leader Tether.

Stablecoin Market Continues to Grow, Tether Dominates

Insiders revealed that fintech companies Robinhood and Revolut are exploring the issuance of their own stablecoins, but they may choose not to proceed. They requested anonymity when discussing confidential information.

Over the years, emerging enterprises have been striving to compete with Tether's USDT. The market capitalization of stablecoins has reached $173.1 billion, with USDT accounting for 65%, totaling nearly $120 billion. The second-ranking USDC has a market capitalization of $36.3 billion, while other stablecoins are significantly smaller.

However, with the European Union preparing to fully adopt extensive cryptocurrency regulations by the end of this year, Tether faces increased uncertainty. According to the MiCA regulations, cryptocurrency exchanges operating in the EU may be forced to delist stablecoins issued by issuers like Tether that lack proper licenses.

The issuer of USDC, Circle Internet Financial Ltd., has become a compliant stablecoin issuer under MiCA and has officially opened its services for USDC and EURC to European business clients. The company announced in January that it had confidentially filed for an initial public offering (IPO) in the United States.

As Circle becomes the first MiCA-compliant stablecoin issuer, will Tether's leading position be challenged?

Lucrative Reserves for Stablecoins

As the US dollar interest rates remain high, stablecoin issuers are investing a large amount of USD in the U.S. bond market, earning nearly 5% risk-free profit. Unlike banks that need to pay interest to depositors, this seems to be a profitable business. Tether reported a record-high profit of $5.2 billion in the first half of 2024, with only 100 employees.

With the Fed expected to cut rates soon, Tether's quarterly earnings may decrease by $200 million. How will the leading stablecoin adjust?

Thomas Eichenberger, Product Manager at Swiss crypto bank Sygnum, stated in an interview with Bloomberg:

Many enterprises are closely watching companies like Circle and Tether and the data they release. It sounds like a wonderful business model that many may want to replicate.

Early signs indicate that stablecoins are becoming increasingly used for transferring funds to and from cryptocurrency exchanges and are becoming more widely used for payments. For example, Russian companies use USDT to pay for imports, allowing them to bypass banking systems that have been affected by sanctions.

A survey conducted this month by Castle Island Ventures, Brevan Howard Digital, and Artemis revealed that in emerging markets such as Brazil, Indonesia, Turkey, India, and Nigeria, nearly half of cryptocurrency users are buying stablecoins to convert local currencies to USD. Almost 40% use stablecoins to pay for goods or services, while over one-fifth receive or pay wages in such tokens.

Everyone Wants to Join the Stablecoin Market

Nuri Chang, Product Manager at BitGo, mentioned that with more issuers entering the market, the result could be "highly fragmented stablecoins." Different financial applications may operate their own stablecoins, and the exchange between tokens will become seamless, with end-users possibly not even noticing.

Christian Catalini, Founder of the MIT Cryptoeconomics Lab, believes:

Mainstream retail brands, new banks, and exchanges are all considering issuance. Credit card companies are also doing so, as people are becoming increasingly aware of the significant influence Tether and Circle have in this market.

Payment giant PayPal launched the stablecoin PYUSD last year in an attempt to consolidate its dominance in the digital payment sector. However, its circulation peaked slightly above $1 billion in August and now stands at $700 million, ranking sixth in the stablecoin market.

MiCA Implementation, Banks Join the Stablecoin Issuance Ranks

The European Union's stablecoin regulatory framework MiCA's first phase took effect at the end of June. Exchanges such as OKX, Uphold, and Bitstamp have delisted Tether stablecoins from the EU region.

French investment bank Societe Generale SA launched its own Euro stablecoin EURCV last year, becoming the first major bank in Europe to offer stablecoins to a wide range of investors. Its subsidiary SG-Forge obtained an Electronic Money Institution (EMI) license from the French regulatory authority ACPR and restructured its EURCV into an Electronic Money Token (EMT) to comply with EU MiCA regulations, expanding its stablecoin to the retail market.

The participation of major banks also signifies the mainstreaming and compliance of stablecoins. The stablecoin market will first be reshaped by MiCA in Europe, and may later expand globally.