Robinhood and Revolut Eye Entry into $170M Stablecoin Market

As reported by Bloomberg, this article indicates that crypto trading platform Robinhood and financial tech firm Revolut are considering the introduction of their own stablecoins. This possible initiative comes as regulatory pressures increase in Europe, potentially challenging Tether’s position as the dominant stablecoin provider in the market.

Tether And Circle Gear Up For Regulatory Changes

Numerous startups have attempted to rival Tether’s USDT, which has a substantial hold on the stablecoin market, boasting a circulation of nearly $120 billion—over two-thirds of the overall market.

In comparison, USDC, issued by Circle Internet, is Tether’s nearest competitor with a circulation of around $36 billion. Despite multiple efforts to increase market presence, most challengers have found it difficult to gain significant traction.

Nonetheless, the report highlights a shift in the landscape, as the European Union is set to implement its sweeping regulations—known as the Markets in Crypto-Assets (MiCA) framework by year-end, which may serve as a catalyst for both Robinhood and Revolut’s entry into the stablecoin arena.

These new regulations could force crypto exchanges within the EU to remove stablecoins from issuers like Tether that do not possess the necessary licenses, ultimately generating uncertainty for Tether’s operations.

Circle has already obtained the requisite EU license, giving it an advantageous stance as regulations become stricter. The company has even confidentially initiated a US initial public offering (IPO), demonstrating its confidence in the evolving regulatory environment.

However, Tether’s CEO, Paolo Ardoino, has raised concerns about the challenges that EU regulations could bring, particularly concerning scenarios involving mass redemptions. Tether is actively seeking a “technology-based solution” to adapt to the European market, although it currently lacks an e-money license in the region.

Robinhood And Revolut Target Stablecoin Possibilities

While Robinhood has indicated that it has “no imminent plans” to launch a stablecoin, Revolut has revealed its intentions to broaden its crypto product range. The potential for lucrative opportunities is considerable; Tether reported earnings of $5.2 billion from its reserves during the first half of 2024, underscoring the profitability of this business model.

Nevertheless, as competition within the stablecoin sector intensifies, experts caution against potential market “hyper-fragmentation.” Nuri Chang, head of product at BitGo, remarked that various financial applications may develop their own stablecoins, facilitating seamless transactions that users might overlook.

The MiCA regulations, which are already partially enacted, mandate stablecoin issuers to obtain an e-money license and ensure that a significant proportion of their assets are kept in independent banking institutions. The second phase of these regulations, which will encompass all crypto platforms, is expected to provide a more definitive compliance framework.

Exchanges like OKX, Uphold, and Bitstamp have begun delisting Tether’s stablecoins in anticipation of these regulations, creating competitive disadvantages for those that continue to support Tether. It remains uncertain whether Robinhood and Revolut will capitalize on this opportunity to enter this sector of the market.