According to a Bloomberg report, crypto trading platform Robinhood and financial technology company Revolut are exploring the launch of their own stablecoins. The potential move from Robinhood and Revolut comes amid growing pressure from regulators in Europe, which could loosen the dominance of Tether, the largest stablecoin issuer in the market.

Various startups have attempted to challenge Tether’s USDT, which has maintained a stronghold in the stablecoin market, with a circulation close to $120 billion—over two-thirds of the total market. 

In contrast, its closest competitor, USDC, issued by Circle Internet, has a circulation of approximately $36 billion. Despite numerous attempts to carve out market share, most challengers have struggled to make significant inroads.

Despite this, the report notes that the landscape is changing, as the European Union prepares to implement comprehensive regulations known as the Markets in Crypto-Assets (MiCA) framework by the end of the year, which could be one of the potential catalysts for both Robinhood and Revolut to enter the stablecoin space. 

These regulations could compel crypto exchanges in the EU to delist stablecoins from issuers like Tether that lack the necessary permits, creating an uncertain environment for Tether and its operations.

Circle has already secured the required EU license, positioning itself advantageously as regulations tighten. The company has even confidentially filed for a US initial public offering (IPO), signaling its confidence in the regulatory landscape.

However, Tether’s CEO, Paolo Ardoino, has voiced concerns regarding the risks that EU regulations could pose, especially in scenarios involving mass redemptions. Tether is now exploring a “technology-based solution” to adapt to the EU market, although it currently does not hold an e-money license in the region.

While Robinhood has stated that it has “no imminent plans” to launch a stablecoin, on the other hand, Revolut has expressed intentions to expand its crypto product offerings. The potential for profitable ventures is significant; Tether reported earning $5.2 billion from its reserves in the first half of 2024, illustrating the lucrative nature of this business model.

Nonetheless, as competition in the stablecoin space heats up, experts warn of potential “hyper-fragmentation” of the market. Nuri Chang, head of product at BitGo, noted that various financial applications may develop their own stablecoins, leading to seamless transactions that users may not even notice.

The MiCA regulations, which are already partially in place, require stablecoin issuers to hold an e-money licence and ensure that a significant portion of their assets are held in independent banks. The second phase of these regulations, which will cover all crypto platforms, is expected to provide a clearer compliance framework.

Exchanges such as OKX, Uphold and Bitstamp have already begun delisting Tether’s stablecoins in anticipation of these regulations, creating competitive disadvantages for those still supporting Tether. It remains to be seen whether Robinhood and Revolut will seize this opportunity to finally enter this sector of the market.

Featured image from DALL-E, chart from TradingView.com 

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