Historically, Tether’s USDT has dominated the cryptocurrency market as the primary source of crypto liquidity. However, data cited by on-chain tools have noticed an apparent shift in trader preferences as USDT loses some of its market grip to Circle’s USDC and Binance’s FDUSD.
Tether’s closest competitor, Circle, has a lot of catching up to do on USDT. Its USDC stablecoin is still almost $100B behind the leader in the category.
Then there’s FDUSD, the stablecoin that steps into the void left by BUSD’s collapse, which has also enjoyed rapid acceptance as a reliable USD-pegged stablecoin in high-volume BTC markets.
Trading sentiments in a post-MiCA world
In the past month alone, $USDC’s supply surged by $954M. The supply growth outpaced $USDT’s, which only grew by $792M over the same period. Analysts believe USDC may have gained an advantage thanks to the MiCA regulations, which have been in full effect across Europe since December 30, 2024.
FDUSD is also having a great run, commanding an impressive 48% of the trading volume in BTC pairs on Binance. This is yet another trading sub-category where USDT has lost ground to another stablecoin as it was responsible for a 42% share in BTC trading.
CryptoQuant analysts believe the growth in FDUSD trading activity highlights the token’s growing reputation as a stable, USD-pegged cryptocurrency.
Crypto-asset service providers must obtain MiCA authorization to operate within the EU. FDUSD and USDC appear to be benefitting the most from the new regulations.
On the other hand, the new regulations have brought a storm for USDT, which has been dropped by exchanges operating within the EU region.
USDT has MiCA problems
MiCA, which stands for Markets in Crypto-Assets (MiCA), is a regulation supported by a comprehensive framework established by the European Union to regulate cryptocurrencies, including stablecoins, to ensure financial stability and consumer protection.
The European Securities and Markets Authority (ESMA) and the European Banking Authority (EBA) oversee compliance with MiCA.
MiCA was proposed in 2020 and has been gradually implemented, but full compliance was required by the end of 2024. MiCA’s purpose is to replace fragmented national regulations with a single EU-wide framework that will impact all stablecoin issuers operating in the European region.
Tether appears to be making changes to its company. On Monday, it announced its registration in El Salvador. The announcement also added that the company will migrate its operations from the British Virgin Islands to the Nayyib Bukele-led, crypto-friendly Central American country.
USDT operates globally, with significant involvement in various international markets and blockchains. However, it has always been plagued by regulatory hurdles and a lack of transparency regarding its reserves and financial audits.
In the US alone, USDT has faced various legal challenges including a significant case involving the New York Attorney General. In 2021, Tether and Bitfinex were forced to pay an $18.5 million fine to settle allegations of misleading statements about its reserves.
Tether’s USDT continues to dominate the stablecoin category even though it has chosen not to comply with MiCA regulations in Europe so far. It still enjoys a lot of usage in other regions with extensive crypto adoption and massive trading activity, including Asia, Africa, and North America.
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