Tether’s USDT, the world’s largest dollar-pegged stablecoin, has recorded its steepest weekly market cap decline in two years, dropping over 1% to $137.24 billion, according to TradingView data. This marks its sharpest drop since the FTX collapse in November 2022. Meanwhile, Circle’s USD Coin (USDC) is experiencing a resurgence, with its circulating supply increasing by 80% from cyclical lows, now approaching $44 billion, according to data from CoinGecko.‍

Regulatory Pressures on USDT

USDT’s decline coincides with new compliance challenges in the European Union (EU) following the full implementation of the Markets in Crypto-Assets (MiCA) regulations on Dec. 30. Several EU-based exchanges, along with Coinbase, delisted USDT due to its non-compliance with MiCA’s licensing requirements for stablecoins. MiCA mandates issuers of asset-referenced tokens (ARTs) and e-money tokens (EMTs) to secure licenses to operate within the bloc.

While EU-based traders can still hold USDT in non-custodial wallets, trading on MiCA-compliant centralized exchanges is no longer an option. Despite these challenges, analysts argue that the impact on USDT may be limited, given its dominant trading volume in Asia and the United States.

Karen Tang, head of APAC partnerships at Orderly Network, downplayed the EU’s role in the global stablecoin market, stating on X, “Access to @Tether_to set to be restricted in the EU due to MiCA regulation isn’t going to harm USDT dominance. Most crypto trading volume occurs in Asia and the U.S.”

Similarly, crypto analyst Bitblaze noted that Asia accounts for 80% of USDT’s trading volume, further reducing the significance of EU delistings on the stablecoin’s global position.‍

USDC Gains Traction

In contrast to USDT, Circle’s USDC has seen significant growth, with its market capitalization nearly doubling from less than $24 billion in 2023 to $44 billion as of January 2025, according to CoinGecko. The surge is attributed to increasing on-chain activity and broader adoption across blockchain networks, including Solana and emerging layer-1s like Hyperliquid.

Dan Smith, data analytics manager at Blockworks Research, highlighted a diversification in USDC’s distribution. While Ethereum remains the dominant network for USDC, holding 65% of its supply, Solana, Base, Arbitrum, and other networks are gaining traction. This shift is partially driven by retail traders speculating on Solana-based tokens and AI-related assets.

USDC’s adoption is also bolstered by regulatory clarity, positioning it as a potential alternative for European traders facing restrictions on USDT. Cryptocurrency researcher Steno Research projects USDC’s market cap could surpass $100 billion in 2025 if Tether remains unregulated within the EU.