Is Tether Losing Its Dominance in Stablecoins?

Last week, when I outlined the 3 interest-income revenue models for stablecoins, I had no idea just how much bigger the opportunity would become a few days later - courtesy of the US Office of the Comptroller of the Currency (OCC).  On Friday, in a dramatic reversal, the OCC scrapped Biden-era restrictions that had kept US banks from engaging in stablecoin transactions and crypto custody.

Overnight, the stablecoin market’s potential didn’t just grow—it likely 10x’d. 

With top US banks now free to integrate stablecoins into their digital asset strategies, the landscape has fundamentally changed.

Right on cue, SBI VC, a subsidiary of Japanese financial giant SBI Holdings (a SoftBank spinout), announced it had secured a license to offer and handle transactions in USDC for a select group of clients.

At first, I wondered why a Japanese trading platform would make such a big splash about offering a USD stablecoin product. Then it clicked: they want their slice of the risk-free revenue stream that Tether has been raking in—more than $10 billion a year on interest income alone.

In this Weekly Research, I’ll break down SBI VC<>Circle’s USDC play and explain why Japan, from both a regulatory and market potential standpoint, is shaping up to be an ideal go-to-market strategy for stablecoin businesses.

Let’s dive in.

Identifying Low Hanging Markets

Below is the table showing the top 5 stablecoins by their market cap. What do you see?

Here are the top 3 things I see: 

1. 3 out of the top 5 stablecoins are completely unregulated anywhere in the world: USDS, USDE, sUSDS. They were made by crypto natives for diehard crypto degens. They do NOT and can NOT compete in any regulated markets.

2. Tether, the largest by far, has zero interest in regulatory compliance. Why would it? The four founders are already pocketing $13 billion a year in interest income. Why would they want the additional regulatory headaches?

3. Only USDC is US-based and regulated by NYDFS. But don’t mistake that oversight for bank-like security—USDC isn’t a bank, and that’s precisely where the opportunity lies. US banks have a gaping market opening to step in and capture the regulated stablecoin sector.

What This Means for Stablecoin Opportunities?

1. Tether’s non-compliance is your opening. If you believe the future of stablecoins lies in regulatory approval, the market for compliant alternatives is waiting to explode.

2. USD stablecoins reign supreme—globally. Even in non-USD jurisdictions, USD is the stablecoin of choice. Look no further than EUR stablecoins, which have struggled to break a €200M market cap, while USD stablecoins have soared past $220B. That’s a staggering 1,100:1 dominance ratio.

3. Trading drives the stablecoin market. While payments have their place, the reality is clear—when it comes to on-chain and off-chain exchange volume, USD stablecoins own the space. There is no second-best. 

Sure, the onchain stablecoin volume shot up to $5T in 2024 according to Visa. A large portion of this volume comes from trading/lending/collateral as opposed to payments. For example, Decentralized Exchange (DEX) as a category alone claimed close to $2T in trading volume in 2024 per DeFiLlama.

By comparison, the volume on spot trading on exchanges in 2024 was $10T+ and derivatives trading volume is even larger with $20T+ in 2024.

The 3 key takeaways you need to remember are: Regulatory Compliance, USD Dominance and Trading Use Case.

So where are the top markets that require 1) stablecoin issuers to be regulatorily compliant, 2) have a lot of trading volumes but 3) are yet to have a USD stablecoin offering for traders?

I wrote about the top 20 digital asset markets in the world before. Off the list, there is only one market that meets all three conditions: Japan.

Please note while many markets meet one or even two of these criteria, they fail to offer all three. For example, while the EU (Netherlands, Spain, Poland, Germany, France) does have a stablecoin regulatory framework and has a lot of trading volume, it already has USDC as the dominant USD stablecoin option. 

Go Where Your Competitors Can’t + GTM Execution

When you connect the dots between low-hanging opportunities and market signals, Circle’s interest in Japan becomes obvious—it would be the only game in town.

As I’ve said before, in the stablecoin business, distribution is everything. Sure, Circle could try to build its own distribution network from scratch, but anyone who’s worked in GTM roles for regulated digital assets knows the truth: that takes forever.

A faster and more effective strategy? Partnering with local players who already have the infrastructure and regulatory approvals in place.

Japan doesn’t have a Coinbase, but it does have SBI VC, a subsidiary of SBI Holdings (a SoftBank spinout) and one of the country’s strongest crypto brands. SBI VC’s recent license to offer and handle USDC transactions makes it an ideal distribution partner.

And this isn’t a sudden move—the groundwork was laid back in 2023 when SBI signed a business alliance with Circle. If history is any guide, this likely includes a revenue-sharing model similar to what Circle has with Coinbase, where Coinbase pulled in $1 billion from its distribution and equity agreements with Circle in 2024.

On the exchange side, SBI VC’s acquisition of DMM’s crypto trading business in 2024 was a power move. DMM.COM draws 100 million monthly website visits—equivalent to acquiring the crypto customer base of Robinhood or Webull in the US, or Revolut in the UK/EU.

For perspective: bitFlyer, Japan’s leading crypto exchange, sees just 3.7 million visits per month and averages $300M in daily trading volume, with 98% of it in JPY (according to Cointelegraph).

By comparison, bitFlyer, the leading crypto exchange in Japan receives around 3.7M visits a month with a $300M average daily trading volume where 98% is against JPY according to Cointelegraph.

For a Circle, SBI VC isn’t just any partner—it’s the fastest, most scalable path to winning Japan’s stablecoin market while its biggest competitors are absent.

Future Outlook

Japan stands out as one of the only G7 markets with a pro-innovation regulation regime for stablecoins - a rare advantage in an industry where clear, supportive regulations are hard to find.

Meanwhile, Tether—the world’s largest stablecoin issuer—continues to avoid markets that enforce stablecoin regulations. That reluctance creates a prime opportunity for regulated competitors to step in. 

As more top 20 markets finalize their stablecoin regulations, the door will open even wider for compliant issuers. Regulation friendly jurisdictions such as Hong Kong or the UK may offer the next big prize. And make no mistake—big US banks won’t sit on the sidelines for long. They’ll bring their own stablecoin products and services to the table.

The stablecoin wars are heating up fast—and regulated players are about to take center stage.