JPMorgan: US Stablecoin Regulation Sparks Zero-Sum Competition Among Tether USDT, Circle USDC

The $270 billion stablecoin market has experienced substantial growth yet remains under 8% of total cryptocurrency market capitalization—a level consistent since 2020, according to a JPMorgan analysis. This trend suggests that upcoming U.S. stablecoin launches may lead to a zero-sum competition unless the broader crypto market expands significantly, wrote analysts led by Nikolaos Panigirtzoglou. Tether, whose USDT is predominantly used internationally, is preparing to launch a fully U.S.-compliant stablecoin, USAT. Unlike USDT, which is approximately 80% compliant with U.S. reserve requirements, USAT will fully adhere to new regulatory standards. Stablecoins are cryptocurrencies pegged to stable assets like the U.S. dollar or gold. They serve critical roles in crypto markets, including payment infrastructure and cross-border money transfers. Tether's USDT is the largest stablecoin, followed by Circle’s USDC. The recent passage of U.S. stablecoin legislation in July has already triggered a new wave of launches targeting Circle’s USDC, which currently dominates the U.S. market. As new entrants position themselves ahead of regulatory implementation, the stablecoin sector’s growth remains linked to the overall crypto market cap. Circle is facing increased competition from platforms like Hyperliquid—whose exchange alone accounts for nearly 7.5% of USDC usage—as well as fintech giants such as PayPal (PYPL), Robinhood (HOOD), and Revolut, all introducing their own tokens. In response, Circle is developing Arc, a blockchain optimized for USDC transactions, aimed at enhancing speed, security, and interoperability to maintain USDC’s central role in crypto infrastructure. Without significant market expansion, new stablecoin competition may merely redistribute existing market share rather than drive overall growth. USDC supply has already surged to $72.5 billion, exceeding Bernstein’s 2025 estimates by 25%.