As a result, the market cap of USDT, which is issued by Tether, has surpassed the $144 billion level, while Circle’s USDC exceeded the $60 billion market cap mark.
In the near term, the upcoming U.S. stablecoin law will serve as the key driver for stablecoin markets. The U.S. is worried that demand for Treasuries could decline amid trade war with China as the latter is the second biggest foreign holder of U.S. debt. At some point, China may want to aggressively sell its Treasuries holdings, and the U.S. must ensure that there is a new buyer of a similar size.
Stablecoins that hold U.S. debt in their reserves are a perfect tool to fill the gap when China leaves the Treasuries market. At this point, the market expects that the U.S. could require stablecoins to hold their reserves exclusively in Treasuries. Stablecoins that do not do this could be barred from entering the U.S. market. Such a law could put USDT, which has other reserves in addition to U.S. debt, in a challenging situation.
Tether has already started to prepare for such a scenario. The company’s CEO has recently stated that Tether did not see any risks from the upcoming U.S. legislation. Tether plans to wait for the final version of the stablecoin bill and aims to create a separate coin that would be fully compliant with the new law. In this scenario, USDT will focus on emerging markets, while the new coin will be marketed to U.S. – based users.
It should be noted that there are competing versions of the stablecoin law and it is unclear how the ultimate bill would look like. For example, one of the versions bans direct marketing to U.S. users, which will allow USDT to stay on U.S. crypto exchanges.
Tether’s key competitor, Circle, also prepares for the upcoming stablecoin law. The company plans to raise money via an IPO. Its recent report showed that it generated revenue of $1.16 billion and profit of $156 million in 2024.
Last year, Circle was valued at $9 billion. Industry players will have to wait for the 2025 valuation as the IPO was postponed due to current market conditions. There is just too much uncertainty in the markets amid trade wars, so multiple companies have delayed their plans to go public.
The postponement of the IPO would not put pressure on Circle as USDC has boosted its market cap amid expectations of the new stablecoin law (Circle keeps its reserves in the U.S.).
Ordinary users will likely feel no material impact from the stablecoin law. While the U.S. can limit the use of USDT inside the country, the stablecoin will remain available in the rest of the world. Also, the ultimate version of the stablecoin bill may not contain maximum restrictions as the current U.S. administration is focused on the development of the crypto industry.