Tether CEO Paolo Ardoino discusses stablecoin strategy | PaymentsSource

Tether controls more than half of the world’s stablecoin market, but it’s facing more competition on at least two fronts, as banks consider a greater role in the market and a major rival prices a blockbuster IPO.

“Now that the GENIUS Act will likely pass, we’re expecting every single financial institution and payment platform to launch a stablecoin,” Tether CEO Paolo Ardoino told American Banker. While banks have opposed a pending stablecoin bill, called the GENIUS Act, a group of large banks is considering developing a stablecoin, partly in anticipation of a more regulated cryptocurrency market that could support broader uses for stablecoins.

A bank-led stablecoin would provide an alternative in a market where nonbank fintech issuers have dominated. Coupled with rival Circle’s IPO, Tether is operating in a stablecoin industry that’s getting more crowded. 

What Tether has to say

The El Salvador-based Tether issues USDT, the world’s largest stablecoin with a market capitalization of about $156 billion. Circle’s USDC, the second largest stablecoin, has a market cap of about $60 billion. The total market capitalization for all stablecoins is about $253 billion. 

Stablecoins, which are supposed to be backed by reserves of traditional currencies, are expected to grow as regulations in the U.S. and Europe advance, potentially giving investors, consumers and businesses more confidence in the assets backing the stablecoins, along with other security and consumer protections.

Michael Nagle/Bloomberg

Tether will rely on its strength in emerging markets and an expansion in the U.S. to compete in the new stablecoin market, according to Ardoino, a 41-year-old Italian computer scientist who became Tether’s CEO in 2023, following six years as Tether’s chief technical officer.

“In a certain way Tether is lucky,” Ardoino said. “Everyone that is launching a stablecoin will go after a single user base … the institutional or wealthy user base, at least relative to the rest of the world.” 

There are about 2.5 billion people who do not use traditional banks, according to McKinsey. That provides a large field for Tether to play in, Ardoino said.

“The banks and others will go after the ‘Western World’ but that leaves a huge market for us to go after,” Ardoino said. “Emerging markets are considered a niche but it’s not really a niche.”

The fintechs and banks that pursue stablecoins will need to convince users that payments is a necessary use. While most stablecoin use today is passive, for purposes such as liquidity management, trading and dollar-denominated storage, stablecoins are gaining ground in emerging markets, James Wester, director of crypto for Javelin Strategy & Research, told American Banker. 

“In places with weak currencies or unreliable banking, stablecoins are already beginning to function as digital dollars,” Wester said, adding that if this adoption can be paired with substantial infrastructure, the most widely used digital dollar systems could end up being built outside the banking system.

Beyond emerging markets, Tether is also focusing on speeding processing for trade finance, a common use case for stablecoin issuers. The stablecoin acts as a bridge between traditional currencies, removing time and third parties such as correspondent banks from international payments. Most real-time payment networks are focused on domestic markets and do not work well together, making cross-border payments for trade finance a future option for real-time payment networks. 

Tether plans to issue a new stablecoin designed for institutional clients that want to improve settlement between banks. A primary use will be processing cross-border payments. Through near instant settlement, Tether hopes to help users manage finances by timing payments to better match available funds. The firm has positioned that as a way to respond to economic volatility amid changing tariffs. 

“When you have a ship on the dock that has to wait for a wire transaction to clear before it can move, that’s an opportunity for us,” Ardoino said. 

Besides issuing the largest stablecoin, Tether has also drawn controversy.

U.S. commodities regulators fined Tether about $18 million in 2021 over the issuer’s claims that its stablecoin was entirely backed by U.S. dollars and euros. Tether’s reserves at the time included unsecured receivables, making Tether more prone to “run risk.” 

Tether has since added more U.S. Treasury bonds to its reserves. In Tether’s most recent quarterly attestation, or reserve report, the company said it has $120 billion in U.S. Treasuries in its reserves, and has 100% backing for its stablecoin.

Additionally, the United Nations in 2024 claimed Tether was a “key tool” for money launderers and other criminals. The stablecoin issuer countered that Tether uses a public blockchain, which enables all transactions to be traced, and as such makes Tether an “impractical” choice for illicit activities. Tether told American Banker it works with 255 law enforcement agencies in more than 50 countries as part of its security and risk management strategy. 

A rush to stablecoin payments

While stablecoins have traditionally been used as an investment tool, payment companies such as Visa, Mastercard, Stripe and others are investing in products that enable stablecoins to be used for payments, usually by quickly converting traditional currencies to stablecoins at both ends of a transaction. 

Circle and PayPal have prepared for a stablecoin payments market, with Circle adding payment-related products and other financial services over the past several years. PayPal has used support for crypto trading as a way to build PayPal accounts that can be used to make payments; and has added partners to scale support for PayPal’s PYUSD stablecoin. Circle and PayPal did not return requests for comment for this story. 

A bank-led stablecoin is in early stages, but would reportedly involve Bank of America, JPMorganChase and other large banks that manage Early Warning — the technology company that operates the transfer app Zelle and digital wallet Paze. Early Warning, which did not return a request for comment, performs a role similar to Visa and Mastercard in the 1970s — providing a bank-owned firm to supply a network for payments at scale.

“The general sentiment among major banks is cautiously positive,” Enrico Camerinelli, a strategic advisor for Datos Insights, told American Banker. “They are interested in becoming stablecoin issuers and see strategic advantages, but are currently held back by regulatory uncertainty. The pendulum is still swinging on the fintech side.”

Unlike Ardoino’s positioning of Tether as an alternative to bank stablecoins, Circle has taken a more conciliatory tone. In an interview with American Banker, Circle President Heath Tarbert did not categorize banks as competitors, signaling opportunities for partnerships.

“While I typically am hesitant to look to Early Warning and big banks to provide industry-wide solutions, stablecoin is the exception,” Tony DeSanctis, senior director at Cornerstone Advisors, told American Banker. “The need for scale and infrastructure required to compete against an already robust stablecoin ecosystem will likely require a consortium of banks to create a common standard and gain the scale to compete.”

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