Tether’s USDT stablecoin has achieved a remarkable milestone, reaching a new all-time high (ATH) market capitalization of over $83 billion. This achievement comes at a time when other stablecoin issuers are grappling with regulatory challenges, highlighting the dominance of USDT in the market.
Changpeng “CZ” Zhao, the CEO of cryptocurrency exchange Binance, recently drew attention to Binance USD (BUSD), a regulated stablecoin issued by Paxos.
In a tweet, CZ revealed that the New York Department of Financial Services (NYDFS) had capped BUSD at $23 billion, with its current market cap sitting at $5 billion. Since this cap was imposed, USDT has experienced significant growth.
BUSD, a fully regulated stablecoin, was “capped” (no new minting) by NYDFS at $23b. Now at $5b market cap.
Since then, USDT has seen tremendous growth. https://t.co/KqBkDK71WS
— CZ 🔶 Binance (@cz_binance) June 1, 2023
The NYDFS previously ordered Paxos to cease new issuances of BUSD due to violations of security laws. This regulatory scrutiny has put stablecoin competitors, including Circle’s USD Coin (USDC) and BUSD, at a disadvantage.
Circle-issued USD Coin (USDC), the second-largest stablecoin, currently has a market cap of $28.8 billion, representing a substantial difference of over $50 billion compared to USDT. It is worth noting that USDC briefly approached the market dominance of USDT in June 2022, reaching an ATH market cap of $55.8 billion.
Both USDT and USDC faced challenges during the prolonged bear market of 2022, resulting in declines in their market caps following their previous highs. However, USDT has demonstrated resilience and regained higher market dominance, while USDC’s market cap has decreased by almost half.
The primary reason for the decline in market share of these stablecoins is increased regulatory scrutiny from the United States and the U.S. banking crisis. After the ban on new BUSD minting, its market cap fell dramatically.
USDC faced its own crisis when the Silicon Valley Bank, where the stablecoin issuer held approximately $3.3 billion in reserves, collapsed. This event led to market panic and a temporary depegging from the U.S. dollar. Although USDC regained its peg the following day, the incident had a lasting impact on its market cap as users converted their USDC to other stablecoins out of fear.
As Tether’s USDT reaches new heights, the challenges faced by its competitors serve as a stark reminder of the regulatory hurdles that can significantly impact the stablecoin market.
