Stablecoin War Heats Up as Market Growth Stalls

JPMorgan analysts have warned that the U.S. stablecoin market is poised to become a zero-sum game, with new entrants unlikely to expand the total market size but instead compete to redistribute existing market share. The global stablecoin sector, valued at $270–$291 billion, has grown since 2020 but remains a stagnant 7–8% of the broader crypto market cap, a proportion that has not shifted despite increased competition. This dynamic, the bank argues, means that unless the overall crypto market expands significantly, the influx of new stablecoin issuers will merely intensify rivalry rather than drive growthU.S. Stablecoin Battle Could Be Zero-Sum Game: JPMorgan^[1]Circle’s USDC at Risk? JPMorgan Warns of Intense Stablecoin War …^[2]JPMorgan Predicts Intense Competition for Circle in Stablecoin Market^[3].

Key players in this emerging contest include Tether, which plans to launch USAT, a fully U.S.-compliant stablecoin designed to meet the requirements of the newly enacted GENIUS Act. Unlike its existing USDT, which analysts estimate is only 80% compliant, USAT will be backed by reserves held at Anchorage Digital, a federally chartered bank. This move aims to build institutional trust, reduce reliance on traditional banks, and mitigate risks akin to those faced by Circle during the 2023 Silicon Valley Bank collapseU.S. Stablecoin Battle Could Be Zero-Sum Game: JPMorgan^[1]Circle’s USDC at Risk? JPMorgan Warns of Intense Stablecoin War …^[2]. Hyperliquid, a crypto futures exchange, is also developing USDH, a native stablecoin that could capture market share from Circle’s USDC. Hyperliquid’s exchange already accounts for 7.5% of USDC usage, suggesting a potential erosion of Circle’s dominanceU.S. Stablecoin Battle Could Be Zero-Sum Game: JPMorgan^[1]JPMorgan Predicts Intense Competition for Circle in Stablecoin Market^[3].

Fintech giants are further complicating the landscape. Robinhood, Revolut, and PayPal are reportedly developing their own stablecoins, targeting both retail and institutional users. These platforms aim to leverage their existing user bases and infrastructure to challenge USDC’s position as the leading U.S. stablecoin. JPMorgan noted that USDC’s market share is already under pressure, with its supply surging to $72.5 billion—25% above Bernstein’s 2025 forecasts—while competitors gain tractionU.S. Stablecoin Battle Could Be Zero-Sum Game: JPMorgan^[1]JPMorgan Predicts Intense Competition for Circle in Stablecoin Market^[3].

In response, Circle is investing in Arc, a blockchain tailored to USDC transactions, to enhance speed, interoperability, and security. The firm aims to maintain USDC’s centrality in the crypto ecosystem despite growing competition. However, JPMorgan analysts caution that Arc’s success hinges on broader adoption and innovation, as rivals like Tether and Hyperliquid gain regulatory and operational advantagesU.S. Stablecoin Battle Could Be Zero-Sum Game: JPMorgan^[1]Circle’s USDC at Risk? JPMorgan Warns of Intense Stablecoin War …^[2].

Regulatory developments are also reshaping the competitive landscape. The U.S. GENIUS Act, which mandates 1:1 reserve backing for stablecoins, has spurred compliance efforts among issuers. Tether, the largest stablecoin provider with a 60% global market share, faces challenges under these rules, as its reserves are currently only 83% compliant. The proposed STABLE Act, with stricter reserve requirements, could further complicate operations for non-compliant entitiesProposed US stablecoin regulations could pose a more significant challenge to Tether: JPMorgan^[5]. Meanwhile, the European Union’s MiCA regulations have already led to Tether’s delisting from several exchanges, foreshadowing potential U.S. regulatory pressuresProposed US stablecoin regulations could pose a more significant challenge to Tether: JPMorgan^[5].

The zero-sum nature of the stablecoin market raises critical questions about its long-term sustainability. JPMorgan emphasized that without substantial growth in the crypto market—driven by new capital inflows or technological adoption—the sector will remain constrained. This scenario could lead to fragmented liquidity, higher operational costs for issuers, and reduced incentives for innovation. For users, the competition may yield benefits like lower fees and improved features, but it also necessitates heightened due diligence to navigate a crowded and volatile landscapeU.S. Stablecoin Battle Could Be Zero-Sum Game: JPMorgan^[1]Stablecoin Market: Urgent Warning of a Zero-Sum Future^[4].