In today’s Finshots, we explore the challenges to Tether’s dominant position in the stablecoin market.

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The Story

Last week, Binance, the world’s top crypto exchange, dropped a bombshell. It announced that by the end of the financial year (FY25), it will delist Tether’s stablecoin, USDT, from its platform for users in the European Economic Area (EEA).

Wait… what on earth are stablecoins?

Let’s say you love the idea of crypto. You want to buy and sell things using digital currencies, but there’s one big problem — volatility. Bitcoin might touch $100,000 one minute and drop to $99,000 in the next. That’s not exactly ideal for everyday transactions.

And that’s where stablecoins step in.

It’s like someone taking a dollar from you, parking it in a bank and giving you a digital token in return. This token promises to always be worth $1. There are no wild swings or unexpected crashes — just pure stability. In the crypto world, you can use it for payments, trading, or even lending. So in simple terms, stablecoins are digital assets pegged to the US dollar, and their value is maintained through reserves that include US Treasury bills, gold, Bitcoin and various other assets.

And no prizes for guessing who the biggest player in this space is.

It’s Tether!

Tether is the most traded stablecoin with a market cap of almost $140 billion and the third-largest cryptocurrency after Bitcoin and Ethereum.

So then why would Binance delist it in Europe, you ask?

Well, it all boils down to new European regulations under the Markets in Crypto-Assets (MiCA) framework, a rulebook designed to bring order to the chaotic crypto world. It lays down three strict rules for crypto issuers:

1. The issuers must have sufficient liquid reserves to back them fully.
2. They must obtain regulatory approval from the EU’s national markets regulators to operate in the EEA.
3. Absolute transparency is non-negotiable. Issuers must make regular disclosures and ensure complete consumer protection. Coin holders must have clear rights to redeem their stablecoins for fiat currencies.

The regulation also aims to crack down on money laundering, terrorist financing and evasion of sanctions, which some coins enable due to their decentralised nature. Which means that stablecoins would naturally have to abide by these rules, too.

But it turns out that Tether’s USDT didn’t quite make the cut. So Binance had no choice but to drop it in Europe.

But again, here’s something you should know. Stablecoins aren’t just an alternative cryptocurrency. They’re quietly replacing traditional banking systems, mostly in unstable economies.

Take Argentina, for instance. Inflation here is at a staggering 80%. And many times last year, it shot past 200%. That means the peso loses value faster than a melting ice cream cone on a summer afternoon. So, people are always looking for ways to safeguard their money, and Tether (USDT) is filling that role. Businesses and consumers alike have started using USDT for everyday transactions  — buying groceries, paying bills and even receiving salaries in USDT instead of pesos. Many Argentinians also convert their savings into USDT, treating it like a digital dollar that won’t lose value overnight.

In Turkey too, merchants trading across borders use stablecoins to sidestep currency fluctuations and ensure smoother, more predictable transactions.

The reason people trust them? Stablecoins, particularly Tether, is one of the world’s biggest holders of US government securities, giving it credibility and making it accessible to those who can’t easily get US dollars.

Here’s the catch though. Despite its dominance, over the years, Tether has been embroiled in controversies and even fined for flouting regulations.

Unlike a bank deposit, where regulators ensure your money is safe, stablecoins operate in a grey area. While Tether claims it is fully backed by cash, bonds and other reserves, regulators have often questioned how much of it is actually liquid and accessible.

In 2021 for instance, the US Commodity Futures Trading Commission (CFTC) fined Tether $41 million for falsely claiming that every USDT was backed 1:1 by cash reserves. For years, Tether had been using a mix of assets, including commercial paper (short-term debt), which isn’t risk-free.

That’s not all. Tether’s also found itself entangled in some shady business, used by criminals for illicit operations.

That’s because unlike Bitcoin, which jumps up and down in value, Tether is pegged to the US dollar, making it stable. This makes it the perfect substitute for people who can’t access real dollars. Terrorist groups, drug cartels, sanctioned governments; they all love Tether.

Reports even say that it’s helping fund North Korea’s nuclear weapons program, moving money for Mexican drug cartels and also being used by Russian arms dealers and Chinese chemical manufacturers making fentanyl (a pain treatment drug that can be dangerous even in small doses).

Another interesting bit? Tether started in the British Virgin Islands and then moved to El Salvador. This keeps it away from strict banking regulations. No one is watching it the way they watch traditional banks. And because it’s a cryptocurrency, people can move millions in seconds, without dealing with banks or paperwork.

That’s why for years, regulators have been trying to pin it down. The company even paid fines for misleading people about its reserves. But it kept growing, which is why regulators are worried.

In February 2025, Turkey introduced new licensing requirements for crypto exchanges, enforced anti-money-laundering controls, and mandated user verification. In Nigeria, authorities revoked the licenses of over 4,000 exchanges, blaming them for the naira’s (Nigeria’s currency) decline. Meanwhile, the US has also proposed stricter stablecoin regulations, calling for issuers to hold only cash or highly liquid assets and operate under bank-like oversight.

And now, with the EU tightening the noose under MiCA, Tether faces more scrutiny than ever. It has even passed another bill that restricts the use of Tether tokens issued offshore.

If such rules are enforced globally, Tether may have to change how it manages its operations or risk being phased out of major markets.

So, what does this mean for its dominance?

For now, undoubtedly, Tether remains the undisputed king of stablecoins, with over 80% market share. It’s widely used, deeply integrated into crypto markets and still trusted by millions.

But its future depends on regulation.

If Tether fails to meet stricter compliance standards, competitors like Circle’s USDC, which is already more transparent and regulated and also apparently lobbying to make the rules stricter for stablecoins’ transparency, could start eating into its dominance. 

Sure, Tether has come a long way overcoming a multitude of hurdles and isn’t disappearing overnight. But its iron grip on the stablecoin market might be loosening!

And if regulations continue to tighten, the future of stablecoins may look very different because Tether has thrived largely due to its elusive nature, keeping regulators at bay. But if users no longer find this advantage, they may switch to another cryptocurrency.

What do you think?

Until then…

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