JPMorgan exposes Circle facing a three-way attack, putting USDC's market dominance at risk.

JPMorgan's latest analysis report indicates that USDC stablecoin issuer Circle is facing “intense” competition from Tether's planned USAT, Hyperliquid's USDH, and multiple fintech giants. Analysts warn that unless the overall crypto assets market expands significantly, the competition among US stablecoin issuers may devolve into a “zero-sum game,” primarily just exchanging market shares.

Tether, Hyperliquid, and fintech giants jointly attack Circle's dominance in the stablecoin market

(Source: CoinMarketCap)

Analysts including Nikolaos Panigirtzoglou, Managing Director at JPMorgan, detailed the competitive pressures facing Circle in a report released on September 18. With the implementation of the new US stablecoin legislation, the GENIUS Act, approaching, several competitors are actively positioning themselves to challenge the market dominance of USDC.

Tether's USAT: Fully Compliant US Stablecoin

The USAT stablecoin that Tether plans to launch aims to fully comply with the regulatory requirements of the U.S. Genius Act, in stark contrast to its existing flagship product USDT, whose reserves only meet about 80% compliance. Analysts point out that Tether will entrust the reserves of USAT to Anchorage Digital, which holds a banking license, a move that may:

· Help Tether build institutional trust

· Reduce reliance on third-party banks

· Reduce operating costs

· Avoid the risks that Circle experienced during the 2023 Silicon Valley Bank collapse.

By directly managing the reserves of USAT, Tether also aims to retain more revenue and increase profitability.

Hyperliquid's USDH: Breaking Free from USDC Dependency

At the same time, Hyperliquid is preparing to launch a native stablecoin called USDH, freeing itself from reliance on Circle's USDC. Analysts point out that Hyperliquid's futures exchange has accounted for about 7.5% of the total USDC usage, which means that once USDH goes live, USDC's market share may shrink immediately.

Financial Technology Giants Join the Battle

In addition to native competitors in encryption, traditional fintech companies are also actively laying out their strategies in the stablecoin market:

· Robinhood and Revolut are reportedly developing their own stablecoin.

These fintech giants have a large user base and financial strength.

· Circle's response strategy and the outlook of the stablecoin market

In the face of intense competition, Circle is not sitting idly by. The company is building Arc, a dedicated stablecoin blockchain aimed at maintaining the central position of USDC in the Crypto Assets ecosystem by optimizing speed, security, and interoperability.

JPMorgan analysts stated: “In summary, as we approach the implementation of new stablecoin legislation in the United States, the U.S. stablecoin market is witnessing new entrants ready to seize market share, gain liquidity advantages, and challenge Circle's dominance.”

It is worth noting that analysts believe the supply of stablecoins is closely related to the overall market value of Crypto Assets. The stablecoin market has currently grown to about 278 billion USD, but its share of the total market value of Crypto Assets has remained stable since 2020, hovering below an average level of 8%. This means that if there is no significant expansion in the Crypto Assets field, the competition among stablecoin issuers may become a “zero-sum game”—the gains of one party will be offset by the losses of another.