Can Circle’s IPO Challenge Tether’s Dominance in the Stablecoin Market?
With Circle’s IPO filing, what effects could this have on the overall stablecoin market? Is there potential for it to rival Tether’s $160B lead?
Circle returns to the spotlight with its IPO proposal
Circle, the firm responsible for the USD Coin (USDC) stablecoin, has officially initiated its path to going public. On April 1, it presented its registration documents to the U.S. Securities and Exchange Commission, signifying a significant development for the stablecoin industry as a whole.
The company plans to list on the New York Stock Exchange, using the ticker symbol “CRCL.” However, critical information such as the number of shares and projected pricing remains undisclosed. Latest valuations suggest the company could be worth between $4 to $5 billion.
Financially, Circle had a robust revenue year in 2024, reporting $1.68 billion in revenue and reserve income, an increase from $1.45 billion in 2023 and more than double the $772 million from 2022.
However, its profit indicators present a more complex situation. Net income decreased to $155.7 million in 2024, a decline from $267.5 million the previous year. Importantly, its EBITDA (earnings before interest, taxes, depreciation, and amortization) fell by 29% to $284.8 million.
The IPO filing has raised concerns due to significant operational expenses, which included over $250 million on compensation and $140 million on various other costs.
Omar, an investor at Dragonfly, a crypto venture fund, highlights declining gross margins, potential risks of deregulation in the U.S., and a core income driver (interest rates) that is already peaking. With growth stagnating and multiple challenges on the horizon, Omar believes that Circle’s valuation at 32x its 2024 earnings may be extravagant.
This IPO occurs at a time when U.S. regulatory attitudes towards crypto appear to be evolving, particularly under the current administration.
Back in January, a notable crypto analyst indicated that the IPO could become one of the pivotal events of this cycle, potentially paving the way for stronger institutional participation in blockchain-based financial systems.
From a market share vantage, USDC remains the second-largest stablecoin by market capitalization, second only to Tether’s USDT. As of April 4, USDT commands over 61% of the stablecoin market, while USDC captures approximately 25%.
Competition is stiffening as well. New entrants like PayPal USD (PYUSD) and Ripple USD (RLUSD) are gradually solidifying their presence, particularly in the U.S. and enterprise sectors, historically strongholds for Circle.
What does this mean for the stablecoin landscape? Let’s explore how Circle’s IPO could alter the competitive dynamics of the sector — and whether it might finally pose a legitimate threat to Tether’s (USDT) dominance.
Circle’s IPO and the dawn of a new stablecoin era
Circle’s choice to go public has ignited extensive dialogue concerning transparency, regulatory compliance, and changing expectations regarding stablecoin governance and structure.
Crypto.news consulted various experts to assess how this decision could influence institutional adoption and stablecoin market dynamics moving forward.
David Robnett, Co-Founder and Managing Director of Asset Token Ventures, perceives the IPO as a critical juncture in the stablecoin landscape.
“Circle’s IPO signifies a pivotal moment for the stablecoin domain. It brings forth a level of transparency, regulatory accountability, and investor scrutiny that has never before been associated with a dollar-backed digital asset. While Tether retains its dominance in raw volume, Circle’s public status may become a crucial factor for platforms and funds focusing on compliance and risk-adjusted returns.”
Bundeep Singh Rangar, CEO of Pi Protocol, points out that the listing should particularly appeal to institutions seeking reliability over ambiguity.
“Circle’s public company status should provide a significant regulatory advantage. Investors and institutions tend to prefer products known for transparency and oversight, and USDC seems well-prepared to meet that demand. Becoming a publicly traded entity, backed by audited financials, is likely to attract more risk-averse institutions.”
Yuriy Brisov, Partner at Digital & Analogue Partners, underscores how Circle’s enhanced disclosures differentiate it from its rivals.
“The legitimacy, audited reserves, and SEC reporting of Circle could entice mainstream financial actors to USDC. Tether’s model remains significantly more opaque. This provides Circle with a competitive edge among regulated institutions, especially those under compliance pressure.”
Alexis Sirkia, Chairman of Yellow Network, takes a more cautious viewpoint, pointing out Tether’s stronghold across existing infrastructure.
“In the crypto sphere, dominance is achieved through use case and integration. Tether remains the backbone of offshore liquidity and is deeply ingrained across both centralized and decentralized trading chains. Circle’s compliance-focused method will attract institutional capital over time, but displacing Tether’s position won’t be simple.”
Joe, Co-Founder of DeAgentAI, notes that Circle’s timing aligns well with the evolving policy landscape in Washington.
“Regulatory clarity is definitely a favorable factor for Circle. With the growing endorsement from U.S. institutions, especially as the government becomes more pro-crypto, it creates a substantial tailwind. For major banks and fintechs venturing into Web3, USDC presents itself as a safer alternative.”
Eneko Knörr, CEO and Co-founder of Stabolut, views the IPO as more than just a corporate milestone; he perceives it as a potential shift in how traditional financial institutions regard stablecoins.
“It’s akin to providing investors a chance to invest in a central bank. Such visibility and trust are precisely what traditional institutions require to comfortably hold USDC or develop new financial products centered around it.”
Kelghe D’Cruz, CEO of Pairs, believes Circle’s strategy is intentional and focused.
“Circle’s move towards becoming public is a direct challenge to Tether. Public markets demand transparency. If Circle successfully navigates this, USDC will be positioned as the stablecoin that institutions can trust. It may not immediately surpass Tether, but it will significantly narrow the gap.”
Tim Delhaes, CEO of Grindery, emphasizes that legitimacy is only one factor at play.
“This moment is crucial, yet the market also revolves around network effects, accessibility, and integration. USDT maintains a strong grip on offshore and emerging markets where liquidity often trumps regulatory issues.”
The rivalry for supremacy: USDC versus USDT
As Circle moves forward with its IPO and USDC’s market capitalization grows, the pressing question remains whether it can genuinely challenge Tether’s supremacy.
Robbie, CEO of Cycle Network, asserts that the rivalry between USDC and USDT essentially revolves around regulatory compliance versus market reach.
“The competition between USDC and USDT revolves around regulatory compliance versus market inertia. USDT continues to be the most liquid stablecoin, especially on exchanges like Binance and OKX. It remains the default unit of account in much of Asia and maintains dominance not purely due to narratives but also infrastructure.”
He concedes that USDC is undoubtedly the more trusted asset in DeFi, with clear reserves and a solid foothold in lending protocols like Aave (AAVE) and Compound (COMP).
However, he notes that Tether’s simplicity and speed continue to make it the default selection for high-frequency, cross-border use cases where compliance is not a primary concern.
Blake Jeong, Co-CEO of IOST, points to the changing dynamics around utility and capital efficiency.
“In this new phase, dominance will not solely depend on scale but also on utility and sustainable yield. The upcoming wave of stablecoins may be backed by real-world assets and offer pedestrian yield. This shifts the dialogue from reserve safety to active performance.”
He adds that yield-generating designs could entice institutional and DeFi users, especially if they are aligned with strong collateralization and adaptable deployment across various protocols.
Zino, CEO of GamerBoom, highlights the importance of geography and market segmentation. He notes that while USDC’s regulatory compliance bolsters its standing in Europe and the U.S., Tether’s presence in emerging markets is challenging to contest.
“Tether commands a 70 percent market share and remains deeply embedded in decentralized platforms and remittance corridors like TRON. While Circle’s IPO enhances its appeal in regulated environments, Tether’s liquidity in high-volume, underregulated markets remains a formidable barrier.”
Dmitrij Radin, CEO of Zekret, perceives the rivalry as indicative of two divergent value paradigms within the crypto universe.
“Circle must be transparent and adhere to U.S. regulations. Conversely, Tether remains offshore and semi-anonymous, delivering flexibility that users in many emerging markets appreciate. This competition is no longer about who is right but about which model proves superior under varying constraints.”
Opinions differ regarding which entity has the advantage in the long run, but most concur that the stablecoin market is likely to stay fragmented.
Circle’s reliance on Coinbase
As Circle embarks on its journey to public trading, several risks come into play. One of the main concerns is Circle’s significant reliance on Coinbase, which serves both as a partner and a primary distribution channel.
Robbie pointed out that the $908 million spent on Coinbase for USDC distribution surpasses Circle’s net income of $156 million, highlighting the extent of this dependency.
“The payments to Coinbase are substantial. Circle’s stablecoin operation began as a joint venture with Coinbase, and although acquiring Coinbase’s stake was strategic, it has created a scenario where a large part of Circle’s growth is tied to a single platform. Should Coinbase encounter regulatory complications or shift its focus, Circle could feel significant repercussions. This dependency introduces a risk factor that could negatively impact the company’s margins and growth prospects in the long term.”
Zino concurs, asserting that Circle’s business model, heavily influenced by payments made to Coinbase, may turn into a financial hindrance.
“Circle’s dependence on Coinbase is more than just a partnership — it’s vital for their revenue framework. With so much of their distribution tied to one exchange, any alteration in Coinbase’s focus or market standing could dramatically affect Circle’s operations and profitability. This inherent risk is particularly daunting in such a volatile market.”
Circle’s balance sheet vulnerabilities
Beyond concentration risks, Circle is also exposed to changing interest rates. The S-1 filing indicated that a 200-basis-point reduction in interest rates could lead to a $414 million loss, largely because of Circle’s dependence on interest income from reserves.
This is an area where Radin sees a crucial difference between Circle and Tether.
“Circle’s financial approach is extremely sensitive to shifts in interest rates. With most of its revenue derived from interest on reserve holdings like U.S. Treasuries, any notable interest rate drop could considerably diminish their earnings. This stands in contrast to Tether, whose revenue sources remain largely hidden, likely providing them with a model less directly affected by immediate fluctuations in interest rates.”
Daria Morgen, Head of Research at Changelly, echoed Radin’s opinions, emphasizing the vulnerability Circle faces from its reliance on low-yield, safe assets.
“While Circle’s transparency is indeed a strength in the realm of regulatory compliance, it exposes them to adverse market conditions. Should rates fall, their revenue structure could face significant setbacks. In contrast, Tether’s lack of full disclosure may afford it more flexibility in facing such shifts.”
Circle’s interest rate susceptibility not only poses challenges for its operational framework but also underscores a broader strategic gap. Jeong emphasized that diversifying its revenue sources beyond interest from reserves should be paramount for Circle moving forward.
“To effectively compete with Tether, Circle must broaden its operations beyond the constraints of interest-bearing reserves. Opportunities are growing in areas such as fiat ramps, liquidity settlement, and decentralized finance. A business model overly reliant on the interest rate environment presents significant risks to Circle, particularly if rates decline or fluctuate.”
Steven Pu, Co-Founder of Taraxa, underscores the critical need for Circle to diversify to alleviate these risks.
“Circle’s focus on reserve earnings aligns with regulatory standards, yet it leaves them exposed. With a heavy reliance on reserves and dependence on Coinbase, Circle’s business framework is distinctly vulnerable to market shifts. To remain relevant in the long term, they must enlarge their revenue streams and lessen their exposure to these singular vulnerabilities.”
Radin observed that this reliance on external financial influences is more pronounced in Circle’s model compared to Tether’s, whose lack of transparency leaves its financial stability open to interpretation.
“Circle’s transparency regarding its reserves is a strength; however, it simultaneously makes them more susceptible. The fact that 99% of their earnings stem from interest on U.S. Treasury reserves places them at the mercy of rate variations. Tether’s model, though opaque, likely provides them with protections from some of this risk due to its absence of disclosure about revenue sources.”
Sirkia perceives Circle’s necessity for diversification as a financial imperative and a strategic one.
“Circle’s focus on compliance is advantageous, yet it won’t suffice if their revenue framework is excessively reliant on a solitary source. The stablecoin landscape is evolving, leading to new possibilities in areas such as liquidity settlement and decentralized finance. If Circle fails to adapt, it may find itself trailing behind more agile competitors in responding to market dynamics.”
The journey ahead
For Circle to enhance its competitiveness, diversifying its income streams and minimizing reliance on a single partner is essential. Although regulatory clarity and institutional support are significant benefits, they cannot be the sole factors if market conditions change drastically.
In order for Circle to effectively challenge Tether’s supremacy, rethinking its strategy is crucial, with a focus on expansion into decentralized finance and liquidity settlement.
Lacking this diversification, Circle risks being surpassed by competitors more equipped to navigate uncertainty and seize emerging trends.