The stablecoin war has a new front — and Circle's own partners are the attackers

The stablecoin market has crossed $320 billion — and for most of that growth, two players, Tether and Circle, controlled more than 80% of it together, largely without looking over their shoulders. In the summer of 2026, that changed all at once: Tether ran into new US regulatory pressure, while Circle found itself facing a competitor built by its own business partners.

The Balance of Power in Mid-2026

As of May 2026, Tether's USDT holds roughly 59% of the market with about $189.5 billion in circulation, while Circle's USDC holds around 24%, or about $78.8 billion. The two leaders' trajectories are moving in opposite directions, though: in the first quarter of 2026, USDT's supply contracted by roughly $3 billion — its first quarterly decline since 2022 — while USDC added about $2 billion, driven largely by institutional demand for regulated assets.

Tether's Problem: A Certification From the US Treasury

The GENIUS Act, which regulates payment stablecoin issuance in the US, sets a clear threshold: any issuer with a market cap above $10 billion must transition to federal oversight under the Office of the Comptroller of the Currency (OCC) within 360 days, or obtain a separate exemption. Both Tether and Circle cleared that threshold long ago, so for both companies this isn't a hypothetical future problem — it's current regulatory reality.

For Tether, the situation is doubly complicated: the company is registered in the British Virgin Islands and operates as a foreign issuer, and the law only lets such issuers operate in the US if the Treasury officially certifies their home jurisdiction's standards as "comparable" to US ones — and that certification isn't automatic. Separately, in April 2026, FinCEN and the Office of Foreign Assets Control (OFAC) issued a joint rule treating stablecoin issuers as financial institutions for anti-money-laundering purposes: every transaction above a set threshold now requires customer identification, suspicious activity reports, and a formal compliance program.

Circle's Problem: Its Own Partners Built the Competitor

While Tether deals with regulators, Circle has run into a completely different headache. On June 30, 2026, a consortium of more than 140 companies — including BlackRock, Coinbase, Mastercard, Stripe, and later Visa — announced its own stablecoin, Open USD, expected to launch in the second half of 2026. Circle's stock plunged 17% on the day of the first announcement of support from Stripe, Coinbase, and BlackRock, and after Visa joined the consortium, shares dropped roughly another 5%.

The reason for that market reaction isn't just the arrival of another competitor — it's a direct attack on Circle's business model. Open USD is structured so that income from the reserves backing the stablecoin goes not to the issuer, but to the partner companies distributing it — precisely the banks, payment networks, and exchanges whose distribution powers the entire economics of USDC today. According to analysts at CoinShares, this is the most serious threat Circle has faced in USDC's entire history.

Analysts largely agree on one point, though: Open USD threatens Circle specifically, not Tether. USDT has a completely different competitive moat — dominance in emerging markets and offshore dollar liquidity, where a consortium of American fintech and payments giants has no comparable presence and is unlikely to gain one anytime soon.

How Circle Is Defending Itself

Circle isn't sitting still: back on April 8, 2026 — before Open USD was even announced — the company launched CPN Managed Payments, letting banks and fintechs use USDC for payments without directly managing digital assets themselves, a product designed specifically for the post-GENIUS Act regulatory landscape. That same institutional demand for regulated products is what drove USDC's supply growth in the first quarter of 2026, even as USDT's supply contracted.

What Happens Next

The $320-billion-plus stablecoin market has stopped being a duopoly where two players simply split the market between them. Tether now has to prove to US regulators that its offshore jurisdiction is "comparable," while Circle has to defend the very economics of its business against a consortium that includes its own largest distribution partners. For the market as a whole, that means the next phase will be decided less by circulating supply and more by who adapts their business model fastest to a regulated, post-GENIUS-Act world of payment stablecoins.

This material is for informational purposes only and is not investment advice.