The rapid ascent of stablecoins in the cryptocurrency sector is fueling ongoing debate over market concentration. Speaking at the Consensus event in Miami, Ben O’Neill, who leads payment operations at Bridge, warned that the dominance of two industry giants—Tether and Circle—is creating several challenges. According to O’Neill, their market power is stifling innovation and preventing the emergence of tailored solutions for diverse use cases.
Leading roles of Tether and Circle
Tether’s USDT currently stands as the world’s largest stablecoin, boasting a market capitalization of approximately $189.5 billion. Circle’s USDC, which was launched in 2018 in partnership with Coinbase and is widely used in decentralized finance (DeFi), follows with a $71 billion market cap. O’Neill noted that Tether, originally launched as Realcoin in 2014, underpinning an offshore dollar economy with significant influence over China’s export trading, operates independently of the US financial system. By contrast, Circle has built its USDC offering with a strong focus on US regulatory compliance and the DeFi sector.
O’Neill emphasized that, from the perspective of major payment firms like Stripe, both of these dominant stablecoin providers leave key needs unaddressed, limiting broader adoption and efficient operation.
Obstacles for payment companies
From a payment provider’s viewpoint, O’Neill highlighted the importance of predictability—a feature he believes both current systems lack. He explained that Tether imposes steep fees for each token burned, leading to high transaction costs and unpredictable results when trading on the open market. Meanwhile, Circle’s core business relies on assets under management, causing its burn fees to gradually increase over time.
In O’Neill’s words: “As a payment company, I want to know how things will work. Tether charges a 0.1% fee when burning tokens; that’s a very high cost. The open market offers me no guarantees. On Circle’s side, particularly for high-volume transactions, bulk burn fees become a significant burden.”
He also pointed out that, for global payment giants like Visa and Stripe handling trillions in transactions, these burn fees pose a serious barrier to stablecoin adoption.
Consequences of declining competition
The article underscores the need for a wider and more diverse pool of stablecoin providers to spur mainstream adoption and usability. According to O’Neill, new stablecoin projects tailored to specific use cases should enter the market swiftly in the coming years. He also stressed the importance of developing a modern clearinghouse system to allow efficient transitions between different stablecoins.
O’Neill concluded that a lack of robust competition could lead to higher fees and reduced rewards for users, gradually distancing stablecoins from their intended function as digital money.
“We need much stronger competition. Otherwise, two dominant players will keep raising fees and withholding rewards. Token burning will get even harder for users, and the functionality of money will erode with every step,” O’Neill warned.
