Compliance is the key to stable coin dominance.

Tether has dominated the stablecoin sector thanks to USDT's status as the first fiat-backed stablecoin.

However, new serious competitors have entered the stablecoin market over the past several years, giving USDT a run for its money.

Since 2024, the trading volume of Circle's stablecoin, USD Coin (USDC), has been increasing.

According to payment giant Visa, monthly transactions of USDC overtook USDT for the first time in December 2023.

In March 2024, USDC trading volume began to steadily increase, maintaining its dominance while USDT lost trading volume. On March 24, 2024, USDC closed the week at five times higher than USDT.

In the year On April 21, 2024, USDT's weekly trading volume continued to decline, falling to $89 billion, while USDC rose to $455 billion.

When USDC launched in 2018, it accounted for 20% of the total stablecoin market.

According to a January 2024 report from crypto exchange OKX, the battle for stablecoin leadership is clear between USDT and USDC, as they account for 90% of the total stablecoin market.

According to on-chain data, USDC is driving institutional adoption of crypto. This could threaten USDT's dominance as institutional investors are expected to drive the bull market.

Stablecoins are racing to attract institutional investors

From a market flooded with fraudulent projects during the initial coin offering (ICO) era to a market targeted at major institutional investors following the approval of bitcoin exchange-traded funds earlier this year, the crypto market has evolved significantly over the years. .

The crypto market has grown and perhaps entered a “new phase where compliance is extremely important,” as former Binance CEO Changpeng Zhao posted on X on May 2.

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This is opening up competition among companies looking to attract a new wave of investors into the compliance-focused crypto market – that is, the rise of compliant stablecoins.

In this regard, the USDT – which has previously been the target of reports that cast doubt on the integrity of reserves – faces a challenge.

Ruslan Leinka, head of marketing at fintech company and crypto exchange Uhodler, told Cointelegraph:

“USDT is an offshore coin with a lack of transparency and regulation, while USDC is closely monitored by US authorities.”

Tether is based in the British Virgin Islands, which is considered a tax haven for offshore banking. In contrast, the USDC issuing club is based in Boston, Massachusetts, so it is under American jurisdiction.

The USDC's strategy of issuing itself as a stable coin with full control and transparency may be pushing Tether to try to clean up its public image. On April 1, he completed a “Gold Standard” independent audit from the American Institute of Certified Public Accountants.

Emerging regulatory frameworks in the United States and Europe may be factors that attract regulator-compliant users to use USDC over USDT.

On April 17, the Loomis-Gillibrand Payment Stablecoin Act was introduced in the United States Congress. If it becomes law, it will affect all stablecoins in the US market.

If Tether wants to get the seal of approval from US officials, it will have to switch its offshore facility to avoid missing out on one of the world's largest markets.

Markets that come under the regulatory framework of Crypto-Assets in the European Union will have to register as e-money issuers from June 30.

In anticipation of the rules being fully implemented later this year, Circle has positioned EURC — a sister version of USDC, pegged to the euro — for good.

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In the year On March 21, 2023, Circle applied for a digital asset service provider license from French regulatory authorities.

The licenses will allow Circle to become a registered digital asset service provider, which will “enable Circle to offer its core product to the European market” and “under the new regime, Mica will begin the process of becoming an electronic currency token.” According to the press release. Tether has not yet applied to become an e-money issuer in the EU.

Strengthening USDC trading volume may be a sign Tether should not ignore. If this is normal, Tether may have already lost its crown as the king of the stable coin.