Is USDT Losing to RLUSD and USDC?

Is the EU’s MiCA framework forcing investors to rethink their commitment to Tether’s USDT and explore alternatives like Circle’s USDC and Ripple’s RLUSD?

USDT under the radar

Tether’s USDT (USDT) has been the stablecoin of choice for traders and investors for years. But as we move into 2025, its dominance is beginning to falter, especially in the European Union, where increased regulatory scrutiny and growing competition are challenging its unshakable reputation.

The turning point came on December 30, 2024, with the full implementation of the European Union’s Crypto Asset Markets regulations.

Designed to bring order to the unpredictable crypto market, MiCA imposed strict compliance requirements on stablecoin issuers, including a requirement for major players such as Tether to keep 60% of their reserves in EU banks.

As these regulations come into effect, Tether grapples with a payment wave, new regulatory hurdles, and intensifying competition from rivals such as Circle’s USDC (USDC) and Ripple’s RLUSD (RLUSD).

In the past, Tether CEO Paolo Ardoino has expressed concern about the risks of “bank failures,” suggesting that such requirements could expose stablecoin issuers to systemic vulnerabilities rather than reduce them.

To correct wording: We are still consulting with the regulator about the concerns I raised in our interview that could pose serious risks to stablecoins regulated in the EU.

Uninsured cash deposits are not a good idea.

We must learn from what happened…

— Paolo Ardoino 🤖🍐 (@paoloardoino) April 11, 2024

But the market seems less interested in Tether’s logic and more in its actions, or lack thereof.

In the days before MiCA was implemented, approximately $4 billion worth of USDT was redeemed, marking the largest outflow since the crypto winter of 2022.

At the time, scandals like the collapse of FTX and the revelations of fraud in the industry sent shockwaves through cryptocurrencies, dropping the market value of USDT from $83 billion in May to $65 billion by November, a 21% decline.

Although the recent decline is smaller, it carries deeper consequences. As of January 9, Tether’s market capitalization fell to $137.5 billion, from $141 billion two weeks ago.

The question now is not just whether Tether can adapt, but also whether the market will expect it. With USDC strengthening its regulatory footing and RLUSD rapidly gaining momentum, could this be the beginning of a sharp decline for the world’s largest stablecoin? Let’s try to decipher the password.

Converging rivals: USDC and RLUSD’s strategic advances

While Tether’s reluctance to comply with strict reserve requirements has raised red flags among investors, its rivals are thriving under the new framework.

Although EU member states have up to 18 months to fully implement MiCA, the market is not waiting. Investors and exchanges are already repositioning and USDT’s dominance in the market appears to be shifting.

For context, exchanges like Coinbase and OKX had delisted USDT for European users due to non-compliance with MiCA.

Circle’s USDC stands out as one of the biggest beneficiaries of the regulatory change. Receiving MiCA approval in mid-2024, USDC has positioned itself as the stablecoin preferred by exchanges seeking to comply with EU rules.

Binance’s partnership with Circle, which aims to accelerate the adoption of USDC globally, is a direct response to the growing demand for transparency and compliance. This move is already bearing fruit; Since receiving the license, USDC’s market cap has increased by $2 billion.

Meanwhile, Ripple’s RLUSD, launched on December 17, 2024, is also gaining attention as a regulatory alternative.

Designed to run seamlessly on XRP Ledger (XRP) and Ethereum (ETH), RLUSD processed 33,953 transactions on XRP Ledger and 1,690 transactions on Ethereum during the testing phase alone.

Ripple’s big moment as RLUSD gains momentum in a changing era

The year 2025 could be a turning point for Ripple, as a combination of regulatory victories, strategic partnerships, and crypto-friendly governance in the US create ideal conditions to expand its foothold in the stablecoin market.

While Donald Trump’s presidency is expected to usher in crypto-friendly policies, Ripple may finally resolve its long-running legal battle with the Securities and Exchange Commission, removing a major hurdle to its growth.

Ripple has already made significant gains in the SEC case, including a potential $2 billion fine being reduced to just $125 million. This decision provides the company with the breathing room needed to refocus on innovation and the rollout of RLUSD.

Ripple’s president, Monica Long, has hinted at ambitious plans for RLUSD, including imminent listings on major exchanges to expand its reach and utility.

“We continue to expand the distribution and availability of Ripple dollars on other exchanges. So I think you can expect to see more availability and more announcements soon,” Long shared in a recent interview with Bloomberg.

Ripple’s well-established payments business is also a major driver of RLUSD adoption. Last year, Ripple’s payment solutions doubled transaction volumes, reflecting their value in facilitating cross-border transactions.

Stablecoins like RLUSD can enhance this ecosystem by providing businesses with an effective alternative to traditional banking systems.

As Ripple expands the availability of RLUSD, businesses that already rely on payment solutions can likely further accelerate their growth by adopting the stablecoin.

Beyond payments, a partnership with Chainlink, a leader in blockchain oracles, could take it into the decentralized finance space.

Chainlink’s infrastructure supporting over $18 trillion in transaction value positions RLUSD to effectively integrate with DeFi ecosystems, opening up new opportunities for both traditional and DeFi users.

The stablecoin market, currently worth $206.2 billion, continues to be dominated by USDT, which holds 66% of the market share.

What to expect next?

USDT’s struggles have occurred over years marked by its unparalleled dominance but overshadowed by persistent questions about transparency.

While Tether remains consistently pegged to the US dollar, its reluctance to provide full-scale audits and ongoing accusations of undercollateralization have increased distrust.

In the midst of this, USDC has built its reputation on monthly approvals and a compliance-first approach, positioning itself as the “safe” alternative. Its recent approval under Europe’s MiCA regulations has further strengthened its presence in the region.

Meanwhile, Ripple’s RLUSD, despite being a newer entrant, is also gaining traction thanks to Ripple’s strong payment infrastructure, fast exchange listings, and seamless integration into DeFi markets.

While MiCA sets a clear regulatory benchmark in the EU, the US will soon follow suit. Signals from the Trump administration suggest that crypto-friendly policies are accelerating, possibly pushing the US towards an accountable regulatory framework.

With these changes, 2025 could be the beginning of a power transition in the stablecoin market. Although USDT maintains its leadership for now, the momentum of its competitors signals that change is approaching.

Disclosure: This article does not constitute investment advice. The content and materials on this page are for educational purposes only.