Today’s stablecoin giants might not be walking tall forever

Today’s stablecoin giants will have to defend their hard-won turf as competitors flood the zone, that is, until everyone realizes that the bulk of stablecoin activity is driven by bots.

• Incumbents to fall? 
• Tether-USAT-Rumble; Northern Data raids
• Circle partners with Deutsche Borse, EU regulator says not so fast
• Bank of England op-ed offers stablecoin hope
• Stable bots bleep blorp

On October 1, blockchain investor Nic Carter posted a lengthy X article titled “The stablecoin duopoly is ending.” The article addressed the utter dominance exerted over the U.S. dollar-denominated stablecoin market by USDT-issuer Tether and USDC-issuer Circle (NASDAQ: CRCL).

The two tokens’ combined market caps (USDT $175.8 billion, USDC $74 billion) claim a roughly 85% share of the overall stablecoin market. Their closest competitor, Ethena’s USDe, has a cap of only $14.8 billion, and $9 billion of that only arrived in the past three months.

But the duopoly has seen better days, as their market cap peaked in March 2024 at 91.6%. Carter believes the current percentage will continue to decline due to “new assertiveness by intermediaries, a race to the bottom with yield, and new regulatory dynamics” following President Donald Trump signing the stablecoin-focused GENIUS Act into law in July.

The yield issue is prompting more and more entities to opt for white-labeled stablecoins rather than surrender the interest revenue on stablecoin fiat reserves to Tether/Circle. The number of issuing platforms/tools is multiplying by the day, meaning entities/protocols have more options than ever, allowing them a stronger position from which to negotiate with stablecoin issuers for a share of their yield.

But the willingness of new stables to share their yield sets up a ‘race to the bottom’ scenario that could cut margins to the bone, particularly if the Federal Reserve continues to cut interest rates (and these cuts will accelerate dramatically once Fed chair Jerome Powell ages out of the job next year and Trump appoints a more pliant replacement).

So for the moment, let’s check in with what the stablecoin market’s dynamic duo have been up to lately.

Tether denies knowledge of Northern Data tax shenanigans

Tether execs were all over this week’s Token2049 event in Singapore, with their primary focus being the imminent (but still unscheduled) launch of USAT, the company’s new U.S.-facing (and purportedly GENIUS-compliant) stablecoin. On October 1, Bloomberg reported that Tether would use the Rumble (NASDAQ: RUM) conservative video-streaming platform—in which Tether holds a 48% stake following a $775 million investment last December—to help distribute USAT to the masses.

Tether CEO Paolo Ardoino claimed Rumble has “51 million active users,” although Rumble has been accused in the past of inflating these stats by counting anyone who visits the site as a user rather than counting registered accounts. Moreover, Rumble’s monthly active user metric fell 14% from Q1 to Q2 2025, so this USAT distribution scheme may not prove the immediate bonanza that Ardoino forecasts.

Rumble has been promoting the launch of its in-house digital wallet for some time now and the launch was supposed to occur in Q3. Whenever it arrives, Rumble CEO Chris Pavlovski said the wallet will be “central” to growing the reach of Tether’s stablecoins, including USAT, USDT and the gold-based XAUT, as well as BTC.

Ardoino told the Singapore audience that his target for UAST’s market cap “in the next three to five years would be about $1 trillion.” Ardoino claimed this jaw-dropping figure was “realistic because of the velocity at which we are seeing USDT grow.”

In Europe, another of Tether’s major investments is not having the greatest autumn. On September 26, Bloomberg reported that German authorities had raided the offices of Northern Data AG, a former block reward miner turned artificial intelligence (AI) data center provider. Tether first invested in Northern Data in 2023, later boosting its stake in the company to a controlling 51%.

The German authorities are reportedly probing Northern Data’s former mining operations in Sweden. Swedish authorities arrested four individuals the same week as the German raids, part of an investigation into suspected “large-scale” value-added tax (VAT) fraud and money laundering by three Northern Data subsidiaries in Sweden between 2021 and 2024. The scale of this alleged fraud reportedly tops €100 million.

On October 1, Bloomberg updated its reporting to reveal that prosecutors were probing whether Northern Data illegally claimed a tax break on a €500 million purchase of high-performance computer chips.

Northern Data reportedly claimed that a 2023 purchase of 10,000 Nvidia (NASDAQ: NVDA) chips were intended for use in AI data centers, but authorities believe the chips were actually intended to boost Northern Data’s mining operations. Mining operations are subject to Swedish taxes, while AI operations enjoy tax incentives.

In September 2023, Tether promoted its strategic investment in Northern Data, as well as the purchase of the Nvidia chips. Tether said at the time that it would collaborate with Northern Data on “several initiatives that aim to leverage AI, peer-to-peer communications, and super-resilient data storage solutions.”

A Tether spokesperson told Bloomberg that the company “is not involved in the day-to-day management of [Northern Data] and was not aware of any such investigations prior to these reports.”

The German raids came shortly after Northern Data promoted COO John Hoffman to co-CEO alongside Aroosh Thillainathan. In 2024, two former senior execs at Northern Data’s U.S. division filed a civil suit accusing Thillainathan of knowingly masterminding a tax-avoidance strategy that potentially netted Northern Data “tens of millions of dollars.”

The suit also accused Northern Data of “falsely misrepresenting [its] financial position to potential auditors, tax advisors and investors” and engaging in “accounting and securities fraud.” The suit was dismissed later that year at the plaintiffs’ request and Northern Data issued a statement saying the former execs “acknowledged that they misunderstood/misstated the facts related to the complaint.”

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Circle makes EU inroads, EU says not so fast

While Circle has followed all the MiCA rules that Tether has found too onerous to comply with, some European Central Bank (ECB) officials are distinctly uneasy with the proliferation of non-euro stablecoins within the EU zone. Now the European Systemic Risk Board (ESRB) is raising concerns over ‘multi-issuance’ stablecoins, aka tokens jointly issued by a combination of EU and non-EU entities.

In early September, ECB president Christine Lagarde—who chairs the ERSB—gave a speech in which she warned that, while stablecoins remain a relatively new and “novel” technology, “we do not need to wait for them to mature to realize that they are reintroducing old risks through the back door.” Lagarde expressed particular concerns over multi-issuance stablecoins.

On September 25, the ESRB held its latest general meeting, at which it declared that “third country multi-issuer schemes–with fungible stablecoins issued both in the EU and outside–have built-in vulnerabilities which require an