According to a Bloomberg report, the crypto trading platform Robinhood and the financial technology company Revolut are considering launching their own stablecoins. This potential move comes as regulatory pressures in Europe intensify, potentially challenging the dominance of Tether, the largest stablecoin issuer in the market.
Tether and Circle Brace for Regulatory Changes
Tether’s USDT has long maintained a stronghold in the stablecoin market with a circulation nearing $120 billion, accounting for over two-thirds of the total market. In contrast, Circle Internet’s USDC, its closest competitor, has a circulation of approximately $36 billion. Despite multiple attempts by various startups to carve out market share, most challengers have struggled to make significant inroads.
However, the landscape is poised for change as the European Union prepares to implement comprehensive regulations under the Markets in Crypto-Assets (MiCA) framework by the end of the year. These impending regulations could serve as a catalyst for both Robinhood and Revolut to venture into the stablecoin space.
The new regulations could compel crypto exchanges in the EU to delist stablecoins from issuers like Tether that lack the necessary permits, thereby creating an uncertain environment for Tether’s operations. Circle has already secured the required EU license, positioning itself advantageously as regulations tighten. The company has even confidentially filed for a US initial public offering (IPO), signaling its confidence in the evolving regulatory landscape.
On the other hand, Tether’s CEO, Paolo Ardoino, has raised concerns about the risks that EU regulations could pose, particularly in scenarios involving mass redemptions. Tether is exploring a “technology-based solution” to adapt to the EU market, although it currently does not hold an e-money license in the region.
Robinhood and Revolut Explore Stablecoin Opportunities
While Robinhood has stated that it has “no imminent plans” to launch a stablecoin, Revolut has expressed its intentions to expand its crypto product offerings. The potential for profitable ventures in this sector is significant; Tether reported earning $5.2 billion from its reserves in the first half of 2024, illustrating the lucrative nature of this business model.
Despite the competitive landscape, experts warn of potential “hyper-fragmentation” of the stablecoin market. Nuri Chang, head of product at BitGo, noted that multiple financial applications might develop their own stablecoins, leading to seamless transactions that users may not even notice.
The MiCA regulations, already partially in place, require stablecoin issuers to hold an e-money license and ensure that a significant portion of their assets is held in independent banks. The second phase of these regulations, which will cover all crypto platforms, is expected to provide a clearer compliance framework.
Exchanges such as OKX, Uphold, and Bitstamp have already started delisting Tether’s stablecoins in anticipation of these regulations, creating competitive disadvantages for those still supporting Tether. It remains to be seen whether Robinhood and Revolut will seize this opportunity to enter this sector of the market.
As the regulatory environment evolves, the total crypto market cap valuation stands at $2.23 trillion, indicating the significant potential and ongoing shifts in the market dynamics. The entry of new players like Robinhood and Revolut could further reshape the landscape, offering new opportunities and challenges in the burgeoning stablecoin market.
