Is the EU's MiCA framework forcing investors to rethink their allegiance to USDT Tether and explore alternatives such as USDC Circle and Ripple's RLUSD?
USDT under radar
For years, Tether's USDT (USDT) has been a stable for traders and investors. However, as we move into 2025, its dominance is beginning to erode, particularly in the European Union, where regulatory scrutiny is increasing and competition is challenging the reputation. his incredible.
The turning point came on December 30, 2024, with the tide implementation of European Union Markets in Crypto-Assets regulations.
Designed to bring order to the unpredictable crypto market, MiCA has imposed strict compliance requirements on stablecoin issuers, including a mandate for major players such as Tether to hold 60% of their reserves in EU banks.
As these regulations come into effect, Tether is facing a wave of liberalization, new regulatory hurdles, and intensifying competition from rivals like Circle's USDC.USDC) and RLUSD Ripple (RLUSD).
In the past, Tether CEO Paolo Ardoino raised concerns about the risks of “bank failures,” arguing that requirements such as stablecoin issuers could open up systemic vulnerabilities rather than mitigate them.
But it seems the market is less concerned about Tether's reasoning and more about its actions – or lack thereof.
In the days leading up to the implementation of MiCA, nearly $4 billion worth of USDT was redeemed, marking the largest outflow since crypto winter 2022.
Back then, scandals are the downfall FTX and industry-wide fraud revelations 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, although smaller, has a deeper impact. As of January 9, Tether's market cap is $137.5 billion, down from $141 billion just two weeks earlier.
The question now is not whether Tether can change but whether the market will wait for it to do so. With USDC consolidating its ruling base and RLUSD growing rapidly, could this be the start of a sharp decline for the world's largest stable? Let's try to decode it.
Competitors close In: USDC and RLUSD strategic advances
Tether's reluctance to adhere to 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 implement MiCA, the market is not waiting. Investors and exchanges are already resetting, and USDT's hold on the market seems to be slipping.
For context, exchanges like Coinbase and OKX are already there are listed USDT for European users, citing non-compliance with MiCA.
USDC Circle stands out as a major beneficiary of the regulatory move. After receiving MiCA approval in mid-2024, USDC has positioned itself as the stable choice for exchanges seeking to comply with EU regulations.
Binance is a coalition by Circle, which aims to accelerate the adoption of USDC globally, is a direct response to the growing demand for transparency and compliance. This move has already started to pay off; USDC's market cap has grown by $2 billion since its approval.
Meanwhile, Ripple's RLUSD, which launched on December 17, 2024, is also gaining traction as a regulatory-compliant alternative.
Designed to work quickly 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 changing times
The year 2025 could be a turning point for Ripple, as a convergence of legal advantages, strategic partnerships, and a crypto-friendly administration in the US creates ideal conditions for expanding its base in the stablecoin market.
With Donald Trump as president expectation to adopt crypto-friendly policies, Ripple may finally resolve its long-running legal battle with the Securities and Exchange Commission, raising a major obstacle to its growth.
Already, Ripple has won major victories in the SEC case, including reducing a potential $2 billion penalty to just $125 million. This resolution gives the company the breathing room it needs to focus on innovation and the rollout of RLUSD.
Monica Long, president of Ripple, has mentioned ambitious plans for RLUSD, including upcoming listings on major exchanges to expand its reach and utility.
“We continue to expand the distribution and availability of Ripple dollars on other exchanges. So, I think you can expect to see more access, more releases coming soon,” Long said in a recent Bloomberg interview.
Ripple's established payment business is also a critical driver of RLUSD adoption. Over the past year, Ripple's payment solutions have doubled their transaction volume, demonstrating their value in enabling seamless cross-border transactions.
Stables like RLUSD could improve this ecosystem by offering businesses an efficient alternative to traditional banking systems.
As Ripple expands the availability of RLUSD, businesses that already rely on their payment solutions could adopt the stable, accelerating further growth.
In addition to payments, a coalition with Chainlink, a leader in blockchain oracles, could move into the decentralized financial space.
The Chainlink infrastructure, which has supported more than $18 trillion in transaction value, positions RLUSD to effectively integrate with DeFi ecosystems, offering new opportunities for traditional users and DeFi.
The stable market, now worth $206.2 billion, is still dominated by USDT, which has 66% of the market share.
What to expect next?
USDT's struggle has been years in the making, marked by its unparalleled leadership but overshadowed by lingering questions about transparency.
While Tether has consistently maintained its peg to the US dollar, reluctance to provide full-scale audits and ongoing allegations of misalignment have dampened confidence.
Amidst this, USDC has positioned itself as the “safe” choice, building its reputation on monthly certifications and a compliance-first approach. Its recent approval under Europe's MiCA regulations has further strengthened its position in the sector.
At the same time, Ripple's RLUSD, although a newer entrant, also gets hold of Ripple's strong payment infrastructure, fast exchange listings, and seamless integration in DeFi markets.
As MiCA sets a clear regulatory benchmark in the EU, the US would soon follow suit. Signs from the Trump administration suggest an acceleration of crypto-friendly policies, perhaps pushing the US toward a responsible regulatory framework.
With these trends, 2025 may mark the beginning of a power shift in the stable market. While USDT remains the leader, for now, the trend of its competitors signals that change is coming.
Disclosure: This article does not constitute investment advice. The content and materials on this page are for educational purposes only.
