The Role of Stablecoins Is Expanding Beyond the Crypto Market and Attracting Attention from Traditional Financial Institutions

The role of stablecoins is expanding beyond the crypto market and attracting attention from traditional financial institutions. Meanwhile, new regulations from Europe and the US

The role of stablecoins is expanding beyond the crypto market and attracting attention from traditional financial institutions, especially with new regulations from Europe and the US that could make stablecoins more useful in the real world. However, these regulations also pose challenges for stablecoin issuers like Tether and Circle.

Currently, Tether’s USDT and Circle’s USDC dominate the stablecoin market capitalization, but many experts believe this could change in the future. A recent PitchBook report highlighted that the top 10 stablecoins have a total market capitalization of about $220 billion, up from less than $120 billion two years ago. Tether alone accounts for nearly 65% of this total, while USDC holds another 25%.

The report also noted that fiat-backed stablecoins are the most common, making up around 95% of the total supply. But this high concentration carries risks, according to PitchBook Senior Analyst Robert Le.

“Another major risk is centralization, in which a single entity such as Tether or Circle controls the minting and burning of tokens, raising concerns about decision-making and conflict of interest. An issuer might halt redemptions or freeze funds under regulator pressure, hurting legitimate holders,” Le explained.

Legal risks are also becoming more apparent as US regulators draft specific rules for stablecoins. Several bills, including FIT21, GENIUS, and STABLE, are being discussed. The US is expected to introduce stablecoin-specific legislation next year, legalizing stablecoins but imposing stricter requirements on issuers, such as higher reserve standards, mandatory audits, and increased transparency.

In contrast, the EU’s MiCA regulations require stablecoins to meet banking-like standards, which Tether has chosen to avoid by exiting the European market.

As traditional financial institutions enter the market, they might prefer cooperating with issuers like Circle, which complies with US regulations and has partnerships with traditional institutions.

A report from Ark Invest revealed that in 2024, the total annual transaction volume of stablecoins reached $15.6 trillion—equal to 119% of Visa’s volume and 200% of Mastercard’s. Despite this, the number of stablecoin transactions remains relatively low at 110 million per month, only 0.41% of Visa’s and 0.72% of Mastercard’s.

This suggests that the average stablecoin transaction value is significantly higher than those of Visa and Mastercard.

Moreover, major banks like BBVA and Standard Chartered are considering launching their own stablecoins. PayPal has already introduced PYUSD, while Visa is developing the Visa Tokenized Asset Platform (VTAP) to help banks issue stablecoins. Notably, Bank of America (BoA) recently pledged to launch a stablecoin if new US regulations permit.

In addition, investment giants such as BlackRock, Franklin Templeton, and Fidelity are offering tokenized money market funds. These funds function similarly to stablecoins and could directly compete with USDC and USDT.

“We further expect that every major financial platform or fintech app will seek to launch its own stablecoin, hoping to lock users into seamless payment ecosystems. However, we believe only a handful of trusted issuers—those with regulatory greenlights, recognized brands, and proven technological reliability—will ultimately capture the majority of market share.”