Main Points:
- Phase III Competition: Stablecoin market enters its “third phase,” with banks and payment firms integrating tokens into core services.
- Regulatory Catalysts: EU’s MiCA and proposed U.S. legislation are unlocking bank-issued stablecoins, challenging incumbents Tether (USDT) and Circle (USDC).
- Incumbents Hold Strong: USDT ($145 billion mkt cap) and USDC ($60 billion+) remain dominant, but face competitive pressures.
- New Issuers on Deck: From traditional banks (ING, Standard Chartered) to DeFi protocols (Frax Finance’s frxUSD backed by BlackRock).
- B2B & Cross-Border Use Cases: PSPs like Stripe-acquired Bridge and Circle Payments Network fuel corporate adoption and instant settlement.
- Outlook: By late 2025, stablecoins could exceed $2 trillion, reshaping payments but raising questions on reserve transparency and fragmentation.
1. The Third Phase of Stablecoin Competition
Since their inception, stablecoins have evolved through two major battlegrounds. Phase I saw nascent USD-pegged tokens emerge as crypto on- and off-ramps. Phase II featured the high-stakes duel between Paxos-backed BUSD (via Binance) and Circle’s USDC, culminating in BUSD’s voluntary winding down under U.S. regulatory pressure—a victory for Circle that solidified USDC’s standing.
Now, Phase III is underway. Fireblocks’ Senior VP Ran Goldi projects that up to 50 new stablecoins—from banks, payment firms, and fintechs—will launch by year-end, marking stablecoins’ integration into mainstream financial services. In this phase, incumbents Tether (USDT) and Circle (USDC) must defend their positions against deep-pocketed entrants.
1.1 Incumbent Dynamics
- USDT (Tether): Maintains a $145 billion market cap, dominant outside the U.S., with rapid growth in Asia and Latin America.
- USDC (Circle): At ~$60 billion+, USDC benefits from full reserves, monthly attestation reports, and MiCA compliance, granting EU market access to 450 million consumers.
However, both face headwinds: USDT must navigate MiCA’s non-recognition in Europe, while USDC grapples with U.S. banking relationships and broader regulatory scrutiny.
2. Regulatory Catalysts: MiCA, U.S. Proposals, and Bank Charters
2.1 EU’s MiCA Opens Doors
The Markets in Crypto-Assets Regulation (MiCA) became fully effective December 2024, imposing rigorous reserve requirements, audit schedules, and licensing for stablecoin issuers across the EEA. Under MiCA, licensed entities—banks and fintechs alike—can issue “asset-referenced tokens” (ARTs) and “e-money tokens” (EMTs), paving the way for euro- and dollar-pegged offerings.
Implications for Banks
- Issuance Rights: Banks can issue stablecoins directly, leveraging existing PFM infrastructure.
- On-/Off-Ramps: MiCA clarifies on-chain mint/burn processes.
- Consumer Trust: EU approval serves as a quality mark, enhancing adoption.
2.2 U.S. Regulatory Environment
In the U.S., bank regulators recently rolled back prior guidance that discouraged bank crypto activities, signaling a more permissive stance toward on-balance-sheet stablecoin issuance. Concurrently, legislative proposals in Congress (e.g., the Stablecoin Innovation and Protection Act) aim to establish a federal framework, potentially preempting state laws and clarifying reserve custody.
2.3 Bank Charters and Fintech Entry
Major firms are chasing bank charters to secure stablecoin issuance rights. Circle’s push for a bank charter and the launch of its Stablecoin Orchestration Layer demonstrate the convergence of traditional banking licenses and crypto issuance.
3. New Issuers on the Horizon
A burgeoning cohort of new stablecoin projects is set to hit the market by December 2025.
3.1 Traditional Banks
- Standard Chartered & ING: Both explore euro and dollar stablecoins under MiCA, awaiting regulatory green lights.
- Braza Bank, BTG, DBS: Already offering stablecoin-friendly accounts for corporate clients in Brazil and Singapore.
3.2 Fintech and PSPs
- Circle Payments Network: Launching in May 2025, enabling real-time cross-border settlements in USDC and euro-pegged tokens.
- Stripe’s Bridge (acquired): Moves billions in stablecoins for enterprises, marking the “second wave” of PSP-driven B2B adoption.
3.3 DeFi-Native Protocols
- Frax Finance & BlackRock: Frax’s frxUSD is backed by BlackRock’s USD Institutional Digital Liquidity Fund (BUIDL), hybridizing DeFi yields with institutional reserves.
- Ethena’s USDtb: Similarly taps BlackRock’s tokenized fund share as collateral, underscoring tokenized money market funds’ role.
4. Stablecoins in B2B and Cross-Border Payments
4.1 Corporate Payment Flows
Stablecoins have matured from retail on-ramps to critical infrastructure for enterprise payments. In cross-border trade, importers can convert local currency into USD-pegged tokens and execute instant settlements, circumventing traditional correspondent banking delays.
Example: A Brazilian importer uses USDC to pay a Turkish supplier immediately, settling the trade in minutes rather than days.
4.2 PSP Market Evolution
- First Wave: Retail-focused PSPs enabling crypto checkout options.
- Second Wave: B2B PSPs (Bridge, Zero Hash, Conduit) quietly routing $ billions in corporate stablecoin transfers.
- Third Wave: Fully integrated payment networks (Circle Payments Network) connecting banks, wallets, and fintechs for seamless cross-border transfers.
5. Challenges and Risks
5.1 Reserve Transparency
With dozens of issuers, ensuring 100% liquid reserves and transparent audits is paramount. MiCA’s monthly attestation regime sets a high bar, but enforcement consistency remains untested.
5.2 Market Fragmentation
An influx of up to 50 stablecoins may fragment liquidity, driving up on-chain conversion costs and complicating treasury operations for corporates.
5.3 Regulatory Uncertainty
While MiCA and U.S. proposals provide frameworks, gaps remain—for instance, stablecoin treatment under Basel III capital rules and tax implications across jurisdictions.
6. Outlook: A $2 Trillion Market by 2028?
Standard Chartered forecasts a stablecoin market of $2 trillion by 2028, fueled by bank issuances, fintech adoption, and DeFi integration. As incumbent issuers fortify their positions, new entrants will compete on regulatory pedigree, reserve yield, and ecosystem partnerships.
- Short Term (6–12 months): Rapid launches under MiCA; bank pilot programs; Circle’s payments network rollout.
- Medium Term (2026–2027): U.S. federal stablecoin legislation; institutional custody solutions; interoperability standards emerge.
- Long Term (2028+): Stablecoins integral to cross-border trade, programmable finance, and central bank digital currency (CBDC) interoperability.
Conclusion
The stablecoin arena stands on the cusp of unprecedented expansion. Fireblocks’ forecast of 50 new stablecoins by year-end underscores banks and payment firms’ eagerness to embed tokens into core financial services. Regulatory frameworks like MiCA and evolving U.S. guidance will shape which issuers thrive. Incumbents Tether and Circle must innovate to maintain dominance, while new entrants—from global banks to DeFi protocols backed by BlackRock—seek to carve out market share.
For crypto investors and blockchain practitioners, this third phase heralds both opportunity and complexity. Navigating reserve transparency, regulatory compliance, and liquidity fragmentation will be critical. Yet, as stablecoins scale toward a potential $2 trillion market, they promise to redefine payments, treasury operations, and decentralized finance for years to come.
