JPMorgan says Circle faces 'intense' competition from Tether, Hyperliquid and fintech rivals

Circle, the issuer of the USDC stablecoin, faces “intense” competition as Tether, Hyperliquid, and several fintech companies prepare new stablecoin launches, according to JPMorgan analysts. Still, they cautioned that the stablecoin landscape may end up as more of a “zero-sum game” for U.S. issuers unless the crypto market expands significantly.

Tether plans to launch USAT, a stablecoin designed to be fully compliant with the recently enacted GENIUS Act in the U.S., unlike its existing flagship USDT, whose reserves are only about 80% compliant, JPMorgan analysts led by managing director Nikolaos Panigirtzoglou said in a report Wednesday. Tether intends to custody USAT reserves with Anchorage Digital, which holds a banking charter. The analysts said this could help Tether build institutional trust, reduce reliance on third-party banks, cut operational costs, and avoid risks such as those Circle experienced during the Silicon Valley Bank collapse in 2023. By directly managing USAT’s reserves, Tether also aims to retain more yield and improve profit margins, they added.

Meanwhile, Hyperliquid is preparing to launch a native stablecoin under the ticker USDH, moving away from reliance on Circle’s USDC. Hyperliquid’s futures exchange already accounts for around 7.5% of total USDC usage, the analysts noted, suggesting that USDC’s market share could shrink once USDH goes live.

Other entrants are lining up as well. Fintechs Robinhood and Revolut are said to be developing their own stablecoins. Circle, for its part, is building Arc, a dedicated stablecoin blockchain intended to keep USDC central to the crypto ecosystem by optimizing for speed, security, and interoperability.

"In all, as we get closer to the implementation of the new U.S. stablecoin legislation, new entrants are emerging in the U.S. stablecoin market preparing to capture market share, gain liquidity advantage, and challenge Circle’s dominance," the analysts wrote.

Notably, the analysts argued that stablecoin supply has closely tracked the overall crypto market cap, meaning that without significant expansion of the broader crypto universe, issuers will likely be trading market share rather than growing the pie. A "zero-sum game" is a situation where one participant's gain is balanced by another participant's loss, with no net benefit or loss for the group as a whole.

The stablecoin market has grown to about $278 billion, but as a share of total crypto market cap, it has remained flat, hovering below its 8% average since 2020, the analysts said.