How Circle Might Overtake Tether as the King of Stablecoins

In our previous post, “Stablecoins, the Eurodollar System, and U.S. Monetary Sovereignty,” we explored how foreign-issued stablecoins like Tether (USDT) act as tokenized Eurodollars, eroding U.S. control by minting dollar-denominated IOUs offshore. With the $250 billion stablecoin market projected to hit $3.7 trillion by 2030, Tether’s $143 billion market cap leads, but its El Salvador base draws scrutiny for enabling money laundering, drug trafficking, and human trafficking. Lawmakers are pushing to ban foreign dollar-denominated stablecoin issuance, exclude Tether from the GENIUS and STABLE Acts, or force profit disgorgement to ensure U.S. taxation and oversight. If Tether resists reincorporation in the U.S., facing KYC/AML laws and IRS scrutiny, Circle’s USDC—#2 with $187 billion in Q1 2025 transactions—could seize the top spot in this winner-take-most market. This post examines how regulatory actions could sideline Tether and elevate Circle, strengthening U.S. control over the digital dollar.

Tether’s Vulnerability: The Digital Eurodollar Threat

The $12 trillion Eurodollar system dilutes U.S. monetary sovereignty, and Tether’s USDT extends this problem digitally. Its $13 billion in 2024 profits from reserve investments escape U.S. taxation due to its offshore status. Lawmakers, citing illicit finance risks, aim to ban foreign stablecoin issuance or force compliance to reclaim seigniorage, ensure KYC/AML adherence, and tax profits. Under the GENIUS Act, Tether has 3 years to conform to the act, we’ll see how they proceed.

Lawmakers’ Moves: Targeting Tether

Key figures are pushing policies that could cripple Tether, boosting Circle:

• Senator Elizabeth Warren (D-Mass.): Warren criticized Tether’s role in illicit finance, posting on X on June 10, 2025: “The DOJ charged a Russian national with moving millions via Tether. The GENIUS Act’s loophole lets Tether evade safeguards”. She seeks amendments to restrict Tether unless it reincorporates.
• Representative Maxine Waters (D-Calif.): Waters’ McHenry-Waters bill bans unlicensed stablecoin issuance, targeting Tether with penalties unless it registers in the U.S.
• Senator Sherrod Brown (D-Ohio): Brown links Tether to “Iran, Russia, and dark alleyways,” pushing GENIUS Act provisions requiring U.S. court compliance, pressuring Tether to reincorporate.
• Legislative Frameworks: The GENIUS Act bars unlicensed foreign stablecoins from being “cash equivalents,” downgrading USDT unless Tether complies with U.S. incorporation. The STABLE Act’s 18-month grace period for offshore issuers is deemed weak, with calls for immediate compliance.

These actions could force Tether to reincorporate or face U.S. market exclusion, opening the door for Circle.

Circle’s Rise: Poised for #1?

Stablecoin markets are winner-take-most: Tether (#1, 60% share) and USDC (#2, 25% share) dominate. Circle’s U.S. base, FinCEN registration, and KYC/AML compliance align with regulatory demands. If Tether falters:

• Regulatory Edge: Circle faces no hurdles under the GENIUS/STABLE Acts, unlike Tether.
• Network Effects: USDC’s DeFi and exchange integration positions it to absorb Tether’s users. Circle is actively buying market share because they realize it is a winner-takes-most market.
• Tax Compliance: Circle’s profits are taxable, aligning with lawmakers’ goals, unlike Tether’s untaxed $13 billion.
• Momentum: USDC’s $187 billion Q1 2025 transactions show growth, ready to capitalize on Tether’s woes.

Reclaiming Sovereignty

Treasury Secretary Scott Bessent’s March 7, 2025, pledge to maintain dollar dominance via stablecoins underscores the stakes. Banning Tether or forcing profit disgorgement ensures seigniorage, taxation, and compliance, redirecting control to U.S. issuers like Circle. If Tether resists reincorporation, losing the U.S. market could erode its lead, crowning USDC #1.

What do you think? Will Circle overtake Tether? Share your thoughts below!