How Stablecoin Issuers Are Shaping the Global Financial Landscape: The Power Centers of Tether and Circle

Market Breakthroughs by Stablecoin Issuers

When we talk about the revolution in crypto finance, it’s hard to ignore a fact: Stablecoin issuers have become key players in the global financial system. The asset holdings controlled by the two major issuers, Tether and Circle, are now comparable to the foreign exchange reserves of many countries.

Taking Tether (USDT) and Circle’s USD Coin (USDC) as examples, these digital assets, pegged 1:1 to the US dollar, create a bridge between traditional finance and the blockchain world. As early as the beginning of 2024, the transaction volume processed by stablecoins has surpassed Visa, marking a fundamental shift in financial infrastructure.

Why Stablecoins Are Reshaping the Payment Landscape

Issues with the inefficiency of traditional payment systems

Payment networks like Visa and Mastercard once held a monopoly over cross-border transactions. But what do stablecoins offer? Lower costs, near-instant settlement, and global accessibility without intermediaries.

This means savings for merchants and individuals alike. A cross-border remittance that might cost 3-5% in traditional banking fees could cost less than 1% with stablecoin transfers. When dealing with large volumes, this difference translates into real money.

Core Competitiveness of Stablecoins

The rise of stablecoins is not accidental:

• Cost Advantage: Eliminating intermediaries significantly reduces fees
• Instant Settlement: 24/7 continuous transactions without waiting for bank hours
• Global Reach: Anyone with internet access can participate
• Transparency: Every transaction on the blockchain is verifiable

How the GENIUS Act Is Changing the Rules of the Stablecoin Game

The emergence of the GENIUS Act signals that regulators are no longer taking a wait-and-see approach. This legislation explicitly requires:

Stablecoins must be backed 1:1 by high-quality assets, primarily US Treasuries. This requirement may seem simple but carries deep implications—it links stablecoins to government credit, while also constraining issuers’ operational flexibility.

Users have the right to redeem stablecoins at a fixed value. This sounds like a safeguard, but under market pressure, such commitments can sometimes be difficult to fulfill.

Regulatory transparency is greatly enhanced. Issuers must undergo stricter audits and reporting requirements.

Tether and Circle: From Margins to the Center

These two companies now hold US Treasuries close to the foreign exchange reserves of some middle-sized countries. South Korea, Saudi Arabia—these nations’ foreign reserves are now on the same scale as the reserves held by these stablecoin issuers.

This concentration of power raises questions: Are the reserves of these issuers truly of such high quality?

Questions About Reserves

Tether and Circle claim their reserves are 100% backed by high-quality assets, but criticism persists. Multiple regulators and research institutions call for more in-depth independent audits. Over the years, disputes over the authenticity of Tether’s reserves have never truly subsided, and while Circle is more transparent, it faces similar trust challenges.

Weak Moments for Stablecoins: Warnings from Decoupling Events

Stablecoins may seem stable, but history tells a different story.

In 2018, Tether dipped to $0.90. Although it eventually recovered, this event exposed the fragility of stablecoins.

Even more concerning was the Silicon Valley Bank collapse in 2023, during which Circle’s USDC briefly fell to $0.87. The scenario was: large institutional investors rushed to redeem, causing a short but deadly liquidity crisis.

Why Decoupling Happens

During market stress, institutional investors may prefer holding cash over maintaining confidence in stablecoins.

If reserves are insufficient to meet redemption demands—whether due to actual shortages or liquidity issues—stablecoins can lose their peg.

Regulatory uncertainty can weaken market confidence. When policy signals are unclear, people tend to flee.

DeFi Lending and Stablecoins: A Dangerous Combination

Decentralized finance (DeFi) platforms like Aave use stablecoins as lending assets, attracting users to provide liquidity and earn high yields. Sounds good, but systemic risks lurk behind.

Why This Is Dangerous

DeFi platforms operate under entirely different rules—no FDIC insurance, no safety net of traditional finance.

High leverage amplifies the impact of market swings. When prices fall, automatic liquidations can trigger cascade effects, further depressing prices.

Sudden large withdrawals can lead to liquidity shortages, trapping later participants.

The Prosperity and Concerns of Stablecoins on Solana

Solana, with its extremely high transaction throughput and very low fees, has become one of the most active blockchains for stablecoin activity. Circle issued $125 million USDC on the Solana network in a single day, reflecting the market’s reliance on Solana as a stablecoin platform.

But this concentration brings risks:

If the Solana network experiences failures or performance issues, stablecoin transactions relying on it could grind to a halt.

Over-reliance on a single chain creates systemic vulnerability. A network-level problem can immediately turn into a financial crisis.

Threats and Opportunities of Stablecoins to the Traditional Banking System

As more funds flow into the stablecoin ecosystem, what challenges do traditional banks face?

Deposit Loss Crisis

Stablecoins offer a relatively safe alternative without banks. If people start converting bank deposits into stablecoins, the bank’s funding base could be eroded. This would severely impact banks’ lending capacity and economic growth.

How to Find Balance

Regulators are working to design a framework that allows the benefits of stablecoin innovation while safeguarding financial stability:

Reserve Transparency must reach unprecedented levels. Regular third-party audits should become standard.

Regulatory Framework needs to clarify the obligations and restrictions on stablecoin issuers.

Reserve Quality Management must be strict, ensuring backing assets can perform under pressure.

The Future of Stablecoins

Stablecoins are shaping the future of finance, but that future is not always clear. Issuers like Tether and Circle are no longer peripheral players in the crypto market—they are now critical infrastructure.

However, greater power comes with greater responsibility. We need better regulation, more transparent operations, and stronger risk management. The success of stablecoins depends on whether they can truly balance innovation with financial stability.

This game has just begun, but the chips are already down.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Stablecoins and related crypto assets involve high risks, and their values can fluctuate significantly. Please consult professionals before making any decisions.