Robinhood and Revolut Eye the $170 Billion Stablecoin Market

As the global stablecoin market swells to $170 billion, fintech giants Robinhood Markets Inc. and Revolut Ltd. are considering joining the fray, potentially launching their own stablecoins. This move comes as stricter regulations, particularly in Europe, threaten to loosen Tether’s longstanding dominance.

Tether’s USDT currently holds a commanding two-thirds of the market, but with the European Union set to implement broad crypto regulations by the end of this year, the landscape is likely to shift. The Markets in Crypto-Assets (MiCA) framework could force exchanges to delist stablecoins from issuers without the necessary licenses—posing significant challenges for Tether, which lacks an e-money license in the EU.

Robinhood and Revolut are exploring the opportunity but remain undecided, according to inside sources. Despite the dominance of Tether, whose circulation has reached nearly $120 billion, competitors like USDC (backed by Circle) are gaining ground. USDC, now at $36 billion, has the advantage of already being MiCA-compliant, which could make it more attractive to EU exchanges.

Regulatory Shifts and Financial Incentives

With the impending regulations, Tether faces increased pressure. Paolo Ardoino, CEO of Tether, has voiced concerns about the risks posed by MiCA, particularly if the company faces mass redemptions. In response, Tether is working on technological solutions to maintain its foothold in the EU market.

Meanwhile, other stablecoin issuers like PayPal, which launched a token last year, are struggling to gain traction. PayPal’s stablecoin circulation hit $1 billion at its peak but has since declined by 30%, underscoring the difficulty of challenging Tether’s lead.

The financial incentives for entering the stablecoin market are enormous. Tether earned $5.2 billion in profit from its reserves in the first half of 2024, a lucrative business model that has attracted interest from other fintech players. Swiss crypto bank Sygnum’s Chief Product Officer, Thomas Eichenberger, noted that many companies are eyeing Tether’s success and considering replicating it.

Expanding Use Cases for Stablecoins

Traditionally, stablecoins have been used primarily for moving funds between crypto exchanges. However, their usage is expanding. In countries like Brazil, Turkey, and Nigeria, stablecoins are increasingly being used for everyday payments and even salaries. USDT, for example, is being used by Russian companies to bypass sanctions and facilitate imports.

This growing acceptance is paving the way for what BitGo's head of product, Nuri Chang, describes as a potential "hyper-fragmentation" of stablecoins. As more issuers enter the market, different apps and financial platforms could launch their own tokens, making the process of swapping between stablecoins seamless for consumers.

The Future of Stablecoins in the EU

The first phase of MiCA came into effect in June 2024, requiring stablecoin issuers to hold e-money licenses and adhere to stringent regulations. As a result, exchanges like OKX, Uphold, and Bitstamp have already begun partially delisting Tether in the EU, although others, like BVNK, are waiting for clearer guidance before making similar moves.

As the deadline for full MiCA implementation approaches, the stablecoin market is poised for significant reshaping, particularly in Europe. Traditional financial institutions, such as Societe Generale's SG-Forge, are seizing the opportunity to expand their presence in the retail market, bolstered by new licenses and regulatory compliance.

With Robinhood, Revolut, and others weighing their options, the battle for stablecoin supremacy is far from over. Whether Tether maintains its dominance or new players disrupt the market, the next few years will undoubtedly be pivotal for the future of digital finance.