The long-standing dominance of Tether’s USDT and Circle’s USDC in the stablecoin market is showing cracks, with new entrants and regulatory shifts eroding their once near-total control.

For years, the two tokens have acted as the backbone of digital asset liquidity. But according to fresh data from DefiLlama and CoinGecko, their combined market share has fallen from a peak of 91.6% in March 2024 to

Earlier coverage: USDT and USDC Lead $46B Stablecoin Inflows in Q3 as Demand Surges

just 83.6% as of this week — despite both increasing their overall supply.

Nic Carter, industry analyst and partner at Castle Island Ventures, highlighted the shift in a post titled “The stablecoin duopoly is ending”. He argued that newer issuers and bank-backed projects are poised to chip away at the dominance of USDT and USDC, particularly through yield-bearing products that attract users with income-generating incentives.

From 91% dominance to 84% in a year

At the height of stablecoin adoption in early 2024, USDT’s market cap was nearly $100 billion, while USDC stood at $29 billion. Together, they commanded more than nine-tenths of the $140 billion stablecoin market.

Since then, the market has diversified. While both Tether and Circle have grown in absolute terms, their dominance has steadily weakened — losing 5.4 percentage points in just one year.

Carter attributes the decline to three main factors: increasing competition from yield-based stablecoins, regulatory changes in the United States following the GENIUS Act, and “new assertiveness” from intermediaries and banks entering the sector.

Market capitalization of USDT and USDC versus total stablecoin market cap. Sources: DefiLlama, CoinGecko

Ethena’s USDe leads the new wave

One of the fastest-growing challengers is Ethena’s USDe, a yield-bearing stablecoin that passes along returns from crypto basis trading. USDe’s supply has surged to $14.7 billion, making it one of the year’s biggest stablecoin success stories.

Other notable entrants include PayPal’s PYUSD, World Liberty’s USD1, Ondo’s USDY, Paxos’ USDG, and Agora’s AUSD. Many of these are designed to provide passive income to holders — a model increasingly attractive to both retail and institutional investors.

“Newer startups will be able to undercut the major issuers on yield and create a race to the bottom (or realistically, the top),” Carter said, noting that even Circle is working with Coinbase to roll out yield offerings for USDC.

Banks prepare to step in

Another looming threat to the duopoly comes from the banking sector. Large financial institutions are exploring ways to issue their own stablecoins, often in consortiums that pool resources and distribution channels.

Carter pointed to joint efforts between JPMorgan and Citigroup as an early sign of how banks could enter the space. “No bank individually has the ability to create the necessary distribution for a stablecoin which could compete with Tether,” he said. “But bank consortia make by far the most sense.”

Five top yield-bearing stablecoins by market cap. Source: CoinGecko

European lenders are also making moves. ING, UniCredit, and a group of seven other banks recently announced a euro-denominated stablecoin project set to launch in the second half of 2026 under the EU’s MiCA regulatory framework.

A more competitive future

For now, Tether and Circle still dominate stablecoin inflows, but the market signals a slow erosion of their grip. Yield-bearing rivals and bank-issued tokens could soon create a more competitive landscape, ending the era of a two-player stablecoin monopoly.