According to a report by The Block, JPMorgan expressed concerns about the growing dominance of Tether, the issuer of the stablecoin USDT, despite the encouraging growth in stablecoin market value. The report stated that Tether faces significant risks due to a lack of regulatory compliance and transparency. JPMorgan believes that the continuous growth of Tether over the past year is detrimental to the stablecoin sector and the wider cryptocurrency ecosystem.
According to data from CoinGecko, the total market value of stablecoins is currently $137 billion, with USDT accounting for 70% and the second-ranking USDC accounting for nearly 20%. Since the US banking crisis in March 2023, USDC’s market value has been declining while USDT’s has been steadily rising.
Analysts state that stablecoin issuers face regulatory risks globally. In the US, the “Stablecoin Clarity Act” is awaiting congressional approval. Meanwhile, in Europe, the Market in Crypto-assets regulation (MiCA) is expected to be partially implemented in June this year. Therefore, analysts believe that stablecoin issuers who strictly comply with existing regulations will benefit from upcoming regulatory reviews and potentially gain market share.
Paolo Ardoino, the CEO of Tether, responded to this by saying that he is glad to see JPMorgan recognizing the importance of Tether and the stablecoin technology created by their company. However, he finds JPMorgan’s comments on centralization somewhat hypocritical, considering that it is the largest bank in the world.
Ardoino added that the success of USDT is attributed to its financial reliability, strong reserves, and its commitment to emerging markets and developing countries. In these countries, the entire community sees USDT as a lifeline to protect their families from high inflation and devaluation of their domestic currency.
Tether recently released its Q4 reserve report, which showed excess reserves of $5.4 billion. Its Q4 net profit of $2.85 billion even surpassed Goldman Sachs’ $2.01 billion.
JPMorgan analysts also mentioned that Circle, the issuer of stablecoin USDC, recently secretly applied for an initial public offering (IPO) in the US. This indicates Circle’s intention to expand internationally and actively prepare for forthcoming stablecoin regulations.
Analysts state that stablecoins act as a bridge between the traditional financial and cryptocurrency worlds, functioning as “cash” within the cryptocurrency realm. The expansion of stablecoins means more funds flowing from traditional finance into cryptocurrency, more cash circulating in the cryptocurrency space, and an increase in collateral, thus making the cryptocurrency financial system more stable.