The stablecoin market has more than doubled in size in under two years, going from $120 billion in October 2023 to $288 billion (as of Aug. 19). Nearly 60% of that is Tether (USDT 0.02%), a U.S. dollar stablecoin with a market cap of $167 billion.
However, there are some valid concerns about Tether. In 2021, the Commodity Futures Trading Commission fined Tether $41 million for misleading claims that its stablecoin was fully backed by U.S. dollars. Tether also doesn't currently meet the requirements of the Genius Act, which passed last month. The Genius Act requires that stablecoin issuers publish monthly disclosures of their reserves. Tether publishes reserve reports on a quarterly basis.
This could give other stablecoins the chance to take a portion of Tether's sizable market share. Three stablecoins, in particular, stand out as strong competition to Tether.
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1. USDC
USDC (USDC 0.01%) is the second-largest stablecoin with a market cap of $68 billion. Like Tether, it's a fiat-backed stablecoin with cash and cash equivalents in its reserves. Unlike Tether, USDC hasn't had any controversies related to its reserves. The issuer, Circle, has published monthly attestations by a Big Four accounting firm dating back to USDC's launch in 2018.
USDC is Tether's biggest competition, and regulatory compliance could help the stablecoin gain on its rival. Tether CEO Paolo Ardoino has floated the possibility of creating a U.S.-specific version of Tether to comply with Genius Act requirements, in which case USDT may end up on the outside looking in. Circle CEO Jeremy Allaire sees the passage of the Genius Act as beneficial for USDC because it's already meeting the regulatory requirements.
While USDC and Tether may both remain available in the U.S., that's not the case in Europe. The European Union's Market in Crypto-Assets Regulation (MiCA), which came into effect at the end of 2024, requires that stablecoin issuers get regulatory approval and meet reserve requirements. Circle achieved compliance with USDC and EURC, its Euro stablecoin. Tether chose to withdraw from the European Union.
2. Dai (now USDS)
While Tether and USDC are the most successful stablecoins, they don't exactly fit the crypto ethos of decentralization. They both have companies that serve as a central governing body. Dai (DAI -0.00%) is a different type of cryptocurrency.
There are no big businesses managing Dai. It's run by Sky, formerly known as MakerDAO, a decentralized, autonomous organization (DAO). Sky allows anyone who holds SKY governance tokens to vote on decisions related to Dai and make proposals for it.
Instead of fiat currency reserves, Dai is a crypto-backed stablecoin. Overcollateralized crypto loans back DAI tokens. Some would consider that more of a risk, but for those who don't want a centralized stablecoin, Dai is one of the most reliable options. The lack of a central authority also means nobody can freeze or confiscate Dai.
When MakerDAO rebranded to Sky last year, it also launched an upgraded version of Dai, USDS (CRYPTO: USDS). They work the same way, and both are exchangeable for the other. You can convert DAI tokens to USDS tokens or vice versa.
3. Ripple USD
Ripple USD (RUSD -0.16%) is one of many smaller stablecoins. It has a market cap of about $667 million, so it's nowhere near Tether in that regard. The reason it makes this list is because of its ties to XRP (CRYPTO: XRP), currently the third-largest cryptocurrency.
Ripple, the company behind XRP, is also the issuer for Ripple USD. Ripple offers blockchain solutions to businesses, and in particular, to financial institutions handling cross-border payments. Its payment network offers affordable, fast transactions, with processing times of just three-to-five seconds. XRP is part of the network's on-demand liquidity (ODL) feature. Financial institutions can use XRP as a bridge currency in international transactions, eliminating the need for the sender or recipient to have pre-funded accounts with foreign currencies.
Ripple launched Ripple USD in December 2024 and is integrating the stablecoin into its payment network. Clients that want to quickly transact in U.S. dollars can do so using Ripple USD.
The Genius Act is also likely to be a tailwind for this stablecoin. Ripple USD received approval from the New York State Department of Financial Services, which is known for its high regulatory standards, and Ripple publishes monthly reserve attestations. Ripple USD's compliance with regulations and connection to XRP could help it climb up the list of stablecoins.
