Stablecoin shake-up: USDT and USDC lose ground to yield-bearing rivals—and banks

Shifting ground in stablecoins: USDT and USDC lose share as yield-bearing rivals and banks move in

For most of the past several years, Tether’s USDT and Circle’s USDC all but defined the stablecoin market, dominating liquidity, listings, and use in crypto trading and payments. That grip is loosening. Their combined lead is shrinking as a new wave of competitors, evolving regulatory frameworks, and potential bank-backed entrants begin to redraw the competitive map.

By the numbers, the change is already visible. In March 2024, the global stablecoin supply stood above $140 billion, with USDT around $103 billion and USDC near $29 billion—together representing approximately 91.6% of the market. Today, data tracked by DefiLlama shows their joint share has fallen to roughly 83.27%, a decline of more than eight percentage points. While USDT and USDC remain the most liquid and widely integrated options, the erosion suggests a steady redistribution of market power. Analyst Nic Carter argues the trend is unlikely to reverse soon, citing structural and competitive headwinds that favor a broader mix of issuers.

A richer field of alternatives is one of the most notable shifts from prior cycles. Beyond the incumbents, several new or newly scaled offerings have arrived: PayPal’s PYUSD, World Liberty’s USD1, Ethena’s USDe, and Sky’s USDS are among the headline entrants. Other names gaining traction include Ondo’s USDY, Paxos’ USDG, and Agora’s AUSD. Collectively, these projects have diversified both supply and design choices. Compared with the last bull market, Carter notes, the roster of credible, institutionally minded stablecoins is larger, and their combined float is meaningfully higher—even as USDT and USDC still command the deepest liquidity and the broadest network effects.

One differentiator helping newcomers win mindshare is yield. Many of the rising challengers are structured so that holders, or the platforms serving those holders, can capture a portion of the interest generated by reserve assets. Tether does not pay yield to holders, and Circle’s approach remains limited—typically channeled through partners such as Coinbase rather than direct distribution. That contrast matters in an environment where stablecoin reserves are generally invested in cash and short-duration government securities that currently earn meaningful returns.

Policy details also play a role. The GENIUS Act framework, as described by market observers, constrains stablecoin issuers from paying interest directly to holders. However, it leaves room for third-party platforms and intermediaries to structure rewards programs, often supported by arrangements with issuers. In practice, that means a compliant path still exists for yield-bearing experiences, even if the issuers themselves are not the entities disbursing the income. This regulatory nuance has opened a lane for creative product design, giving newer tokens a way to compete for capital without running afoul of the letter of the law.

Yield alone does not guarantee durability, but it does sharpen the value proposition for users who hold stablecoins for extended periods rather than only for trading. As more wallets, exchanges, custodians, and fintechs integrate yield-enabled models, the convenience gap relative to the incumbents narrows. That, in turn, can attract both retail and institutional flows that historically defaulted to USDT and USDC because of liquidity and brand familiarity.

Banks represent the other major wildcard. Recent regulatory developments have made it more feasible for chartered financial institutions to issue tokenized deposits or fully compliant stablecoins. Despite ongoing concerns about deposit flight and liquidity management, large U.S. banks are exploring how to participate without undermining their core funding base. Earlier this year, JPMorgan, Bank of America, Citigroup, and Wells Fargo reportedly engaged in early-stage talks about forming a consortium to launch a shared stablecoin. The logic is straightforward: no single bank is likely to achieve the distribution, cross-platform acceptance, and global reach necessary to challenge Tether on its own. A consortium could aggregate distribution and credibility, accelerating network effects across payments, settlements, and tokenized asset markets.

If major banks enter in force, the stablecoin category could scale far beyond its current size. Carter has suggested that bank participation could expand the addressable market enough to overshadow today’s roughly $300 billion crypto-dollar segment, introducing a fresh layer of competition for existing players. With banks bringing established compliance regimes, existing merchant relationships, and direct ties to the fiat banking rails, their tokens could see rapid integration into mainstream financial workflows, from corporate treasuries to cross-border settlement.

That said, incumbents maintain real advantages. USDT’s ubiquity across centralized and decentralized venues, especially outside the United States, remains unmatched. USDC continues to invest in transparency, regulatory relationships, and enterprise integrations, making it a preferred choice for many institutions and fintechs. Liquidity depth, redemption reliability, network integrations, and proven uptime are moats that cannot be replicated overnight. Even with their slipping market share, USDT and USDC still anchor the vast majority of stablecoin