JPMorgan: Concerns Over Tether's Dominance in Stablecoins

According to a report by The Block, JPMorgan stated in a report on Thursday that while the recent growth in stablecoin market cap is encouraging, the increasing dominance of Tether, the issuer of USDT, is a cause for concern. The report mentioned:

Due to the lack of regulatory compliance and transparency, Tether faces significant risks. We believe that the continuous growth of Tether over the past year is detrimental to the stablecoin space and the broader crypto ecosystem.

Stablecoin Market Share: USDT 70%, USDC 20%

According to CoinGecko data, the total market value of stablecoins is currently $137 billion, with USDT accounting for 70% and the second-ranked USDC close to 20%. Since the U.S. banking crisis in March 2023, USDC briefly unpegged, shaking market confidence, leading to a continuous decline in USDC's market value while USDT has been steadily rising.

Analysts point out that stablecoin issuers face regulatory risks globally. In the U.S., the "Stablecoin Clarity Act" is awaiting congressional approval. Meanwhile, in Europe, the Markets in Crypto-Assets (MiCA) regulation is expected to be partially implemented this June. Therefore, analysts believe that stablecoin issuers who strictly comply with existing regulations will benefit from upcoming regulatory scrutiny and may gain market share.

Tether CEO Paolo Ardoino's Response

Tether CEO Paolo Ardoino responded to this:

I am pleased to see JPMorgan acknowledging the importance of stablecoin technology created by Tether and our company. However, it seems a bit hypocritical for the world's largest bank, JPMorgan, to talk about centralization.

He added: The success of USDT is attributed to its financial reliability, strong reserves, and commitment to emerging markets and developing countries, where the entire community sees USDT as a lifeline to protect their families from high inflation and devaluation of their national currencies.

Tether recently released its Q4 reserve report, with excess reserves reaching $5.4 billion. The net profit for Q4 was $2.85 billion, even higher than Goldman Sachs' $2.01 billion.

Tether's Q4 Excess Reserves Reach $5.4 Billion, Earning $6.2 Billion in 2023

Circle Secretly Files for IPO, Actively Preparing for Compliance

JPMorgan analysts also mentioned that stablecoin USDC issuer Circle recently secretly applied for a public listing in the U.S., indicating Circle's intention to expand internationally and actively prepare for the upcoming stablecoin regulations.

USDC Issuer Circle Quietly Applies for U.S. IPO

Analysts stated:

Stablecoins act as a bridge between the traditional financial and cryptocurrency worlds, functioning like "cash" in the crypto realm. The expansion of stablecoins means more funds flowing from traditional finance into cryptocurrency, more cash circulating in the crypto space, increased collateral, thereby making the cryptocurrency financial system more stable.