The dominance of Tether is dangerous for the crypto universe - According to JPMorgan

While the total market capitalization of stablecoins has recently experienced significant and encouraging growth, the increasing market share of Tether (USDT) is raising concerns at JPMorgan. In a recent report, the bank’s analysts believe that “the growing concentration on Tether over the past year is negative for the stablecoin universe and the broader crypto ecosystem.”

The crypto risks surrounding Tether

According to JPMorgan, the crypto Tether is particularly vulnerable to the increasing regulatory risks weighing on stablecoins. In the United States, Congress is reviewing the Clarity for Payment Stablecoins Act bill. In Europe, a partial implementation of the MiCA regulation on crypto-assets is expected in June 2024.

In this context, Tether suffers from a lack of regulatory compliance and transparency regarding its reserves, the analysts say. This is in contrast with rivals like USDC, which actively communicate with regulators. According to JPMorgan, the most transparent stablecoin issuers will be best positioned to navigate this regulatory turning point.

USDT remains the dominant stable crypto, with a capitalization exceeding $70 billion. But its precarious position concerns JPMorgan about the impact on the entire crypto ecosystem if regulatory measures were to specifically target Tether. Investor confidence would be shaken.

USDC prepares for the future regulatory framework

On the contrary, the second stablecoin, USDC, seems to adopt a proactive strategy in the face of the imminent regulation on stable cryptos. Recently, Circle, the issuer of USDC, confidentially filed for an initial public offering in the United States.

According to JPMorgan, this move reflects Circle’s desire to comply with regulatory requirements, expand its international presence, and strengthen transparency about its reserves and operations.

With a capitalization exceeding $50 billion, USDC is a solid alternative to Tether. An IPO and compliance with upcoming regulations could enable Circle to nibble market share if Tether were to be the target of strict regulatory measures.

In summary, JPMorgan warns against the growing domination of Tether in the stable crypto market, in an uncertain regulatory context. Its precarious position is a risk for the entire crypto ecosystem. Meanwhile, its rival USDC appears to be adopting a proactive regulatory compliance strategy.