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Is the EU’s MiCA framework forcing investors to rethink their allegiance to Tether’s USDT and explore alternatives like Circle’s USDC and Ripple’s RLUSD?
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USDT under radar
For years, Tether’s USDT (USDT) has been the go-to stablecoin for traders and investors. Yet, as we step into 2025, its dominance is starting to waver, particularly in the European Union, where mounting regulatory scrutiny and growing competition are challenging its unshakable reputation.
The turning point came on December 30, 2024, with the full implementation of the European Union’s Markets in Crypto-Assets regulations.
Designed to bring order to the unpredictable crypto market, MiCA has imposed stringent compliance requirements on stablecoin issuers, including a mandate for major players like Tether to hold 60% of their reserves in EU banks.
As these regulations take effect, Tether is grappling with a wave of redemptions, new regulatory hurdles, and intensifying competition from rivals like Circle’s USDC (USDC) and Ripple’s RLUSD (RLUSD).
In the past, Tether’s CEO, Paolo Ardoino, raised concerns over the risks of “bank failures,” arguing that such requirements could expose stablecoin issuers to systemic vulnerabilities rather than reducing them.
But the market seems less concerned with Tether’s reasoning and more with its actions — or lack thereof.
In the days leading up to MiCA’s implementation, nearly $4 billion worth of USDT was redeemed, marking the largest outflow since the 2022 crypto winter.
Back then, scandals like the collapse of FTX and revelations of fraud across the industry sent shockwaves through crypto, shrinking USDT’s market cap from $83 billion in May to $65 billion by November — a 21% drop.
The recent decline, while smaller, carries deeper implications. As of Jan. 9, Tether’s market cap stands at $137.5 billion, down from $141 billion just two weeks earlier.
The question now is not just whether Tether can adapt but whether the market will wait for it to do so. With USDC cementing its regulatory foothold and RLUSD rapidly gaining momentum, could this be the beginning of a sharp decline for the world’s largest stablecoin? Let’s try to decode.
Competitors closing In: USDC and RLUSD’s strategic advances
Tether’s reluctance to comply with its strict reserve requirements has raised red flags among investors, while its competitors are thriving under the new framework.
Even though EU member states have up to 18 months to fully enforce MiCA, the market isn’t waiting. Investors and exchanges are already repositioning, and USDT’s grip on the market appears to be slipping.
For context, exchanges like Coinbase and OKX have already delisted USDT for European users, citing non-compliance with MiCA.
Circle’s USDC stands out as a prime beneficiary of the regulatory shift. Having secured MiCA approval in mid-2024, USDC has positioned itself as the stablecoin of choice for exchanges looking to align with EU rules.
Binance’s partnership with Circle, aimed at accelerating USDC adoption globally, is a direct response to growing demand for transparency and compliance. This move has already begun to pay off; USDC’s market cap has grown by $2 billion since securing the license.
Meanwhile, Ripple’s RLUSD, launched on December 17, 2024, is also gaining traction as a regulatory-compliant alternative.
Designed to operate seamlessly on the XRP Ledger (XRP) and Ethereum (ETH), RLUSD processed 33,953 transactions on the XRP Ledger and 1,690 on Ethereum during its testing phase alone.
Ripple’s big Moment as RLUSD gains momentum in a changing era
The year 2025 could be a turning point for Ripple, as a convergence of legal victories, strategic partnerships, and a crypto-friendly administration in the U.S. creates ideal conditions for expanding its foothold in the stablecoin market.
With Donald Trump’s presidency expected to usher in crypto-friendly policies, Ripple may finally resolve its long-standing legal battle with the Securities and Exchange Commission, lifting a major obstacle to its growth.
Already, Ripple has scored key wins in the SEC case, including reducing a potential $2 billion penalty to just $125 million. This resolution provides the company with the breathing room needed to refocus on innovation and the rollout of RLUSD.
Monica Long, Ripple’s president, has hinted at ambitious plans for RLUSD, including imminent listings on major exchanges to broaden its reach and utility.
“We are continuing to expand distribution and availability of Ripple dollars on other exchanges. So, I think you can expect to see more availability, more announcements coming soon,” Long shared in a recent Bloomberg interview.
Ripple’s well-established payments business is also a crucial driver for RLUSD’s adoption. Over the past year, Ripple’s payment solutions have doubled their transaction volume, reflecting their value in facilitating seamless cross-border transactions.
Stablecoins like RLUSD could enhance this ecosystem by offering businesses an efficient alternative to traditional banking systems.
As Ripple expands RLUSD’s availability, businesses already relying on its payment solutions could likely adopt the stablecoin, further accelerating its growth.
Beyond payments, partnership with Chainlink, a leader in blockchain oracles, could propel it into the decentralized finance space.
Chainlink’s infrastructure, which has supported over $18 trillion in transaction value, positions RLUSD to integrate effectively with DeFi ecosystems, offering new opportunities for both traditional and DeFi users.
The stablecoin market, now valued at $206.2 billion, continues to remain dominated by USDT, which holds 66% of the market share.
What to expect next?
USDT’s struggles have been years in the making, marked by its unmatched dominance but shadowed by persistent questions about transparency.
While Tether has consistently maintained its peg to the U.S. dollar, its reluctance to provide full-scale audits and ongoing accusations of under-collateralization have fueled mistrust.
Amid this, USDC has positioned itself as the “safe” alternative, building its reputation on monthly attestations and a compliance-first approach. Its recent approval under Europe’s MiCA regulations has further strengthened its foothold in the region.
Meanwhile, Ripple’s RLUSD, though a newer entrant, is also gaining traction with Ripple’s strong payment infrastructure, rapid exchange listings, and seamless integration into DeFi markets.
As MiCA sets a clear regulatory benchmark in the EU, the U.S. would soon follow suit. Signals from the Trump administration suggest an acceleration of crypto-friendly policies, likely pushing the U.S. toward an accountable regulatory framework.
With these shifts, 2025 may mark the beginning of a power transition in the stablecoin market. While USDT remains the leader, for now, the momentum of its competitors signals that change is upcoming.
Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.
This article first appeared at crypto.news
