How the Tether and Circle Clash Will Define the Future of Stablecoins
Alexander Lubnevsky
Mar 21, 2025If in 2025 you want to invest in a hedge fund or place a large sum of money in an account at a good European bank, you will have to deal with compliance. With a high probability, compliance officers will ask you to show bank statements demonstrating the full chain of movement of funds from the source of their origin to the bank account from which you plan to make the transfer. If it turns out in the chain of money flow that they were at some point converted into stablecoins or any other crypto asset, there is a significant likelihood that investing such funds in a fund or depositing them in a bank will not be possible, as compliance will not be able to recognize them as fully compliant with all international standards. Thus, the issue of transparency and regulatory status of stablecoins often becomes a problem not only for regulators but also for the investors themselves. Unfortunately, we occasionally encounter such cases. If today the traditional financial system constantly questions the origin of funds associated with crypto assets, in the future this practice may change. This largely depends on which model prevails — regulated (USDC tokens from Circle) or free but less transparent (USDT, issued by Tether). We explain how this confrontation is changing the market and what it may lead to.
During Donald Trump's presidential campaign, he constantly interacted with the cryptocurrency sector, promising active support for digital currencies after taking office. Already in January 2025, he signed an order on his administration's policy regarding digital assets, which was dedicated to several priorities, including "ensuring regulatory clarity and certainty for the crypto industry," and the SEC formed a working group to create a "clear regulatory framework in the field of cryptocurrencies." For many, it is not entirely obvious that behind the scenes of active work by officials on regulating the crypto industry, there is an uncompromising struggle between two irreconcilable competitors in the stablecoin market — Tether and Circle.
What are these companies anyway
According to CoinMarketCap, in mid-March 2025, the total capitalization of stablecoins reaches $233 billion. For comparison: the volume of the entire digital asset market is $2.7 trillion. At the same time, the first place in the ranking is occupied by USDT tokens with a capitalization of more than $143 billion — it occupies more than 61% of the market. And the second — USDC, the total value of which is almost $59 billion — this is 25% of the total capitalization.
USDT is issued by Tether Limited, and USDC by Circle Internet Financial Limited. The value of stablecoins is tied to a traditional asset, in this case, the US dollar. These tokens are widely used by all participants in the cryptocurrency market as a settlement tool, including international ones, without the involvement of the banking system and allow capital to be stored without the risk of volatility of such assets as, for example, Bitcoin or Ethereum. The value of 1 USDT or 1 USDC almost always equals one US dollar, with a few exceptions. For example, during the collapse of Silicon Valley Bank in March 2023, the USDC rate briefly fell to 87 cents: Circle held about $3 billion in SVB, causing panic among token holders.
The previous cycle of Fed interest rate hikes turned stablecoin issuers into major beneficiaries. They invest fiat money received from their token holders in US Treasury bonds and other assets, earning billions in interest income. For instance, Tether reported a profit of $13 billion last year, which is twice the profit of the largest asset manager by funds, BlackRock. This is a remarkable result: a startup founded just over 10 years ago now earns profits on par with the largest players in the financial market. Circle also benefits from interest income, but on a smaller scale, as its market share is inferior to USDT. Nevertheless, both issuers hold tens of billions of client dollars and invest them in reliable assets.
In terms of transparency and disclosure of reserves, Circle traditionally acts more openly — the issuer publishes monthly reserve reports, the data of which are verified by reputable auditing firms. Circle holds about 80% of reserves in short-term US Treasury bonds (treasuries), the rest — cash in accounts of major banks, such as Bank of New York Mellon.
Two opposing strategies
The disagreements between Circle and Tether are largely ideological. Circle bets on cooperation with regulators, promoting the idea of a "legitimate digital dollar" under US control. Jeremy Allaire, head of Circle, regularly speaks in Congress and calls for clear rules for stablecoins, stating, that USDC is "America's first digital dollar". He is convinced that clear laws will not only protect consumers but also strengthen the global position of the dollar, giving the US a "technological superweapon" and helping in competition with China and the yuan.
In an interview with Bloomberg, Allaire emphasized, that stablecoin issuers must necessarily register in the US if they want to serve the American market — you cannot just ignore the laws by working from offshore. According to him, the administration's priority is precisely the stablecoin law. Simply put, Circle seeks to turn USDC into a fully regulated, government-approved version of the crypto dollar.
Tether, on the other hand, has historically operated outside US jurisdiction — it is registered in the British Virgin Islands and chooses offshore jurisdictions with minimal regulation. Tether's main owner Giancarlo Devasini and his team see the mission of USDT in preserving the independent, "fearless and anti-system" spirit of cryptocurrencies. In their eyes, Circle is trying to tame and regulate the crypto market, turning it into a semblance of the traditional financial system, against which Tether intends to fight to the end. Devasini is confident that Circle is conducting a behind-the-scenes campaign to discredit Tether in the eyes of politicians and law enforcement, lobbying for bans on USDT. "As long as USDT exists, Circle will not win," — he said to one of his employees a few months ago. Tether positions USDT as a freer and globally accessible alternative to the traditional dollar, especially important for developing markets with high inflation and unstable national currency exchange rates.
Unlike its competitor, Tether has worked for many years without a full audit, publishing only brief reserve statements. It is known that in the USDT reserve, in addition to treasury papers and cash, there were bitcoins, gold, and other assets. Tether has been repeatedly accused of the real reserves not matching the declared ones, and in October 2021, the company even paid a $41 million fine to the Commodity Futures Trading Commission for misrepresenting information about its reserves. After that, in 2022, under market pressure, the company reported, that it changed the structure of reserves and holds about 85% of reserves in treasury bonds and cash equivalents, and the total reserves exceed liabilities by hundreds of millions. Moreover, in mid-2024, Tether claimed to own $115 billion in treasuries, ranking among the largest holders of US government debt (18th place in the world, at the level of countries like Germany or South Korea).
Interestingly, the image of the leaders of each of the two companies somewhat reflects the essence of their strategy. Tether owner Giancarlo Devasini is a 60-year-old Italian who worked as a plastic surgeon in Milan and was involved in importing electronics to Hong Kong. In 1995, he was even accused of fraud for participating in the activities of a software piracy group, after which he made a plea deal and paid compensation to Microsoft. Devasini leads a private life in Switzerland and rarely gives interviews.
Circle CEO Jeremy Allaire is a 53-year-old American who quickly gained a reputation as a "grown-up" in a young industry full of fraudsters. Allaire's career began in Silicon Valley: he was a co-founder of Macromedia, which many remember for Flash technologies, and successfully sold it. In 2013, he believed in bitcoin and decided to create his own fintech company — thus Circle was born. Allaire from the very beginning bet on working within the legal framework: his company obtained licenses, worked closely with regulators, for which he was quickly considered a reliable and open entrepreneur, especially compared to many businessmen in the crypto industry. Circle's circle of investors speaks for itself: Goldman Sachs, BlackRock, Fidelity, Coinbase, etc. Allaire regularly appears in Congress, testifies in the US Senate, and speaks at the World Economic Forum in Davos.
How the struggle between the two companies unfolds
The confrontation between Tether and Circle originated back in 2018–2019 when USDC began to actively position itself as a more transparent and regulated alternative to Tether. However, open war between them began in 2020 when the cryptocurrency market sharply grew, and stablecoin issuers became key players in the ecosystem. Circle began promoting the idea that Tether is an opaque stablecoin associated with gray schemes, while USDC is a white alternative, regulated in the US. In response, Tether began accusing Circle of lobbying for laws that could push USDT out of the market.
In recent years, the confrontation between Tether and Circle has reached a new level. Both companies are actively fighting for market control, using not only business strategies but also political and regulatory pressure. The founder of Circle and his team actively advocate for strengthening stablecoin regulation, which effectively threatens Tether's position. Circle regularly appeals to American and international regulators, claiming that Tether creates risks for the financial system. In addition to direct indications of the opacity of financial reports and the lack of serious audits, Circle representatives stated that USDT is actively used to finance illegal operations, including terrorist organizations and drug cartels. At the end of 2024, a new law MiCA (Markets in Crypto Assets Regulation) gradually comes into effect in Europe, which limits the use of stablecoins issued outside the EU. As a result, Tether received a significant blow and is likely will not be available to users in Europe, and Circle is actively lobbying for similar laws in the US.
In response, the head of Tether claimed that Circle is financing information attacks against his company. For example, in June 2024, billboards with the slogan “Tethered to Corruption” appeared in Washington and New York, hinting at the company's dubious operations. In addition, Tether secured the support of US Commerce Secretary Howard Lutnick, whose bank Cantor Fitzgerald manages part of Tether's reserves. Devasini claimed that Lutnick is helping to block bills that could harm USDT.
What will happen next
In February 2025, Senators Kirsten Gillibrand and Cynthia Lummis introduced the GENIUS Act, banning uncontrolled stablecoins, which Circle actively supports. Gillibrand stated that Tether in its current form does not meet the requirements.
As a result, the growth of USDT capitalization is slowing, while USDC has regained its position after the 2023 crisis. The largest cryptocurrency exchange Binance announced a strategic partnership with Circle in December 2024, effectively abandoning support for Tether.
If the market follows Circle's path, this could lead to the gradual integration of stablecoins into the traditional financial system. Support from regulators and major banks will create a new type of stablecoins — fully transparent, regulated, and controlled by government structures. This will provide legal predictability but will make the ecosystem less independent and free.
If Tether wins, the market will retain maximum financial independence, especially for developing countries where access to the dollar is limited. USDT will remain a key tool for bypassing traditional banking restrictions, maintaining its semi-offshore status. However, if regulators continue a full-scale offensive, as has already happened in the EU and is being discussed in the US, Tether may find itself under threat of being blocked from accessing the US financial system, and its token may begin to lose market share.
