Tether’s ‘hedge-and-expand’ US strategy puts Circle on defense in market shake-up, tests oversight versus privacy
Tether is officially set to plant its flag in the U.S. market by offering a compliant dollar-pegged token customized for the American market. The launch is set to shake up the stablecoin market, pressure rival issuer Circle, and potentially test the balance between privacy and oversight.“USAT is a hedge-and-expand move. It gives Tether a U.S.-regulated rail for banks, fintechs, and corporates while preserving USDT’s offshore reach," Colin Butler, EVP and Global Head of Markets at Mega Matrix told The Block.Tether CEO Paolo Ardoino oversaw the long-expected launch of USAT during an event in New York City on Friday. The new token, marketed as a U.S. compliant stablecoin, has been designed so Tether, the issuer of the world's largest U.S. dollar-pegged cryptocurrency, USDT, can legally access the American market. Anchorage Digital Bank is set to issue USAT while Cantor Fitzgerald will hold the assets needed to back the new stablecoin. USAT could possibly become available by the end of the year.The step signals Tether’s desire to align with U.S. regulators after years of scrutiny. The company has appointed former White House official Bo Hines as CEO of its U.S. division, a decision that could also be viewed as Tether further aligning itself with the crypto-friendly Trump Administration. Additionally, Cantor Fitzgerald was, until recently, led by Trump's Commerce Secretary Howard Lutnick.Butler emphasized that Tether issuing its new token “via Anchorage Digital” and trusting Cantor Fitzgerald to oversee USAT reserves “signals a compliance-first posture” under the recently passed GENIUS Act, which established federal guidelines for stablecoins. Labeling USAT a ‘non-yielding token’ helps ensure the cryptocurrency conforms with U.S. law, he also said.“Tether has the size and scale to shape how regulation and infrastructure evolve in the U.S.,” Stable CEO Matthew Tabbiner told The Block. “This launch is symbolic of the systemic shift toward stablecoins becoming everyday money.”Tether laid the groundworkTether’s U.S. launch has been months in the making. Ardoino first mentioned a potential launch during a visit to the U.S. earlier this year, shortly after President Trump took office and signaled his administration’s plans to embrace crypto. On that trip —his first to the country as Tether’s chief executive— Ardoino embarked on a press tour aimed at reassuring institutions and lawmakers of Tether's intention to operate in an above-board manner. The unveiling of USAT, in a way, marks a major step in Ardoino's efforts to establish a footprint in the lucrative U.S. market.“This is a huge moment for Tether who has overcome years of misinformation campaigns to get here,” Merris Badcock, VP at crypto trade association The Digital Chamber told The Block. “Tether is making a strategic move that strengthens its credibility and momentum in America.”Tether has spent years trying to distance itself from what many have considered a checkered past, one shaped by those who criticized both bad actors using USDT and the company's approach towards reserve transparency. The company faced scrutiny from regulators and law enforcement, including Department of Justice probes into whether its tokens were used to facilitate illicit transactions. Meanwhile, USDT grew into the world’s most widely traded stablecoin.USDT's total supply is $170 billion, far greater than its closest competitor USDC, which is issued by Circle and has a supply of $73 billion, according to The Block Data Dashboard.Circle challenged by Tether's launch of USATTether entering the U.S. market is poised to reshape the competitive landscape given its name recognition, scale and the financial firepower it wields thanks to years of profitability. The company will have billions of dollars at its disposal to help power the launch of USAT and woo institutional partners. After all, stablecoins are not a cryptocurrency that can accrue value like Bitcoin; instead their value is predicated on how widely adopted they are.“For other issuers, [Tether launching USAT] sends a real signal that they had better have some captive distribution soon or their days are numbered,” Stablecoin Standard co-founder Ramy Soliman told The Block. "As you can see with the ‘hype’ around Hyperliquid, the economics of buying distribution don’t favor issuers without alternative sources of client acquisition."Tether's USDT and Circle's USDC are the two most widely distributed stablecoins. But USDC's position may be at risk of weakening, not only because of Tether launching USAT.Hyperliquid recently announced an auction for stablecoin tickers for its Layer 1 blockchain HyperEVM. Many have suggested that Hyperliquid introducing a stablecoin could cause USDC activity to shrink on Hyperliquid's popular futures exchange. Nearly 7.5% of the total USDC supply "is used as collateral on the Hyperliquid perpetual futures platform," according to analysts at Bernstein.Circle has long sought to position USDC as the regulated alternative to USDT. Tether launching USAT is a direct challenge to USDC, which possesses a close relationship with Coinbase, generally considered the top crypto exchange in the U.S.Mizuho Securities Senior Analyst Dan Dolev sees the launch of USAT as a headwind for Circle. “This is a testament to the fact that USDC is more commoditized than people initially thought,” Dolev told The Block. “That is exactly why we are cautious on Circle.” Recently, Mizuho analysts said Circle could encounter slower-than-expected USDC growth. Before the launch of USAT, Bernstein analysts offered a counter view, saying they expect Circle will sustain growth regardless of impending competition.Circle didn't immediately respond to a request for comment."The market is settling into three poles. USDT is the global retail anchor. USDC and USAT are the U.S.-compliant rails. USDe, Sky, and USDH are the yield frontier,” Mega Matrix's Butler said. “From here, the share battle shifts to integrations, on- and off-ramps, treasurer workflows, and liquidity depth.”Privacy versus oversightWhile seen as a positive development by many, Tether's willingness to play by U.S. rules in order to tap the American market raises questions about crypto’s original appeal. In crypto's early days the allure for many was the seemingly limitless possibilities created by allowing people to transact with one another minus the middle men, the gatekeepers.Bitcoin, Ethereum, and even early stablecoins allowed for pseudonymous, borderless transactions. Tether, as the market-leading stablecoin, for years provided users a permissionless means of escaping inflationary pressures and transfering money around the world. In recent years, in an effort to avoid regulatory scrutiny, Tether has adopted a markedly different attitude towards who uses USDT. To comply with U.S. regulations Tether's USAT will operate on regulated rails, meaning access will not be fully permissionless and transactions will be transparent and traceable. "Tether’s decision to launch a U.S.-regulated stablecoin adds to the wave of recent launches that underscore the growing convergence between traditional finance and digital assets,” Taxbit CEO Lindsey Argalas told The Block. For some, the question is whether this convergence will come at a cost.Holonym's human.tech is a project focused on harnessing technology to enhance “personal freedom, privacy, and financial autonomy.” Daniel Brunsdon, the organization's growth and product lead, welcomed Tether’s U.S. launch but warned it could mark an inflection point for personal privacy in crypto.“It’s a test of whether oversight and innovation can actually work together, and if it succeeds stablecoins could finally become trusted global infrastructure. But privacy-preserving tech still has to be at the core, otherwise we’re just rebuilding the same old surveillance system with new tools,” Brunsdon told The Block. “If regulators lean too far into control, the whole point of stablecoins gets lost, but if they get it right we’ll finally have digital dollars that are trusted globally and still move with the speed and openness the tech was built for. That balance is what decides if stablecoins become the backbone of a new financial system or just another tool of the old one.”Disclaimer: The Block is an independent media outlet that delivers news, research, and data. As of November 2023, Foresight Ventures is a majority investor of The Block. Foresight Ventures invests in other companies in the crypto space. Crypto exchange Bitget is an anchor LP for Foresight Ventures. The Block continues to operate independently to deliver objective, impactful, and timely information about the crypto industry. 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