Digital Dollar Competition: The Four Kingdoms of the Stablecoin Market

In 2025, the United States passed the GENIUS Act, completely changing the game for stablecoins and triggering an unprecedented "digital dollar war." If we compare the stablecoin market to the ancient Warring States period, there are currently four powerful "lords" vying for dominance. Each alliance has its unique characteristics and strategies, akin to four distinct martial arts sects. Let's explore these forces one by one.

GENIUS Act: A New "Constitution" That Changes the Game

The full name of the GENIUS Act is "Guiding and Establishing the National Innovation Act for U.S. Stablecoins," which can be seen as the "Constitution" of the stablecoin industry, establishing clear rules for this once relatively chaotic field.

The main provisions of the bill include:

1. Reserves must be fully supported on a 1:1 basis and can only use the safest assets such as cash in USD and short-term U.S. Treasury bonds.

2. Set a "watershed" at $10 billion: stablecoins with a market value exceeding this amount must adhere to strict federal government regulation; those below this figure may opt for more lenient state-level regulation.

3. Prohibit direct interest payments to avoid stablecoins becoming speculative tools, while soothing the traditional banking industry.

4. Set strict approval for major tech companies issuing stablecoins to prevent market monopolies.

Compliance Honor Roll Alliance: The Dilemmas and Opportunities of USDC

The alliance centered around USDC issued by Circle is like the "model student" in class: excellent in performance, well-liked by teachers, but sometimes appears a bit "bookish".

Circle strictly adheres to all regulations, with reserves nearly entirely in U.S. Treasury bonds and cash, exhibiting high transparency by releasing detailed audit reports monthly. This practice has won favor with regulators and increased trust among institutional investors.

However, there are "family conflicts" within the alliance. The relationship between Circle (the issuer) and a certain trading platform (the main distributor) is similar to that of a "manufacturer" and a "distributor". The problem is that this "distributor" is too strong and occupies most of the profits. Circle has an annual revenue of $1.68 billion, but an operating profit of only $167 million, with most of the earnings being obtained by the trading platform in various forms.

The reason why a certain trading platform is so powerful is that its importance to USDC is self-evident. Firstly, the platform has launched a large number of trading pairs that include USDC, creating real use cases and market demand for USDC. More importantly, although the GENIUS Act prohibits Circle from directly paying interest to USDC holders, the certain trading platform can use its own funds to distribute "rewards" to users who use USDC on the platform, indirectly providing benefits. This capability is crucial for attracting users and is the source of its negotiating power.

What makes Circle even more headache-inducing is that a certain trading platform has set numerous restrictive clauses in the contract. For example, Circle must obtain permission from this trading platform to cooperate with other channels. There are even clauses stating that if Circle is unable to distribute dividends to this trading platform in the future (for instance, due to regulatory prohibitions), this trading platform can take over the issuance rights of USDC. These "unreasonable clauses" require Circle to consider the attitude of this trading platform in multiple decision-making processes.

For a certain trading platform, the profits brought by USDC are not only substantial but also very stable, unlike trading fees which are affected by market conditions. Because of this, the platform has always intended to acquire Circle to gain complete control over this "cash cow". However, after Circle successfully went public in 2025, the stock price surged, making the acquisition plan more expensive, and the platform could only temporarily shelve this idea.

The reason why Circle chose to go public is to obtain more funding and independence, reduce excessive reliance on a specific trading platform, and establish its own sales channels. This game between "manufacturers" and "distributors" will determine the future direction of the USDC alliance.

Offshore Empire: The Global Strategy of USDT

The alliance centered around a certain company's USDT, if the USDC alliance is the "model student", then the USDT alliance is like the "leader of the underworld" — experienced, resourceful, and with "little brothers" all over the world.

USDT is currently the largest stablecoin by market capitalization, nearing $150 billion, with astonishing profitability, earning billions annually. Their "money-making secret" mainly consists of two points:

1. High-yield investment strategies: In addition to investing in safe US Treasury bonds, they also invest in some higher-risk but higher-yield assets, such as corporate bonds, secured loans, precious metals, and even Bitcoin. It is estimated that about 18% of the reserves are invested in these high-risk, high-yield assets.

2. Extremely low channel costs: With its first-mover advantage and market position, USDT does not need to pay high listing fees or commissions to major exchanges. Instead, major exchanges actively compete to list trading pairs that include USDT due to the huge user demand.

In the face of challenges from the new legislation, a certain company has adopted a dual-track strategy: maintaining the existing USDT to continue servicing the global market (especially emerging markets), while developing a completely compliant new stablecoin for the US market.

A certain blockchain network is another important member of the USDT alliance. Over 50% of USDT circulates on this network due to its low transfer fees and fast speed, making it particularly suitable for cross-border remittances and transactions. This relationship is mutually beneficial: USDT gains an efficient infrastructure, while the network benefits from huge transaction volumes and revenue.

It is worth noting that a certain company has a strong political background. They are collaborating with a Wall Street giant, and the CEO of this company is the current government's Secretary of Commerce. This Secretary has publicly endorsed the company, claiming that "the company always delivers on its promises." This political relationship provides the company with a strong "safety net."

More cleverly, the GENIUS Act allows for reciprocal relationships to be established with foreign jurisdictions that are "substantially similar" to the regulatory framework. A company has already obtained a license in El Salvador, and with its strong political capital, it is entirely possible to lobby the U.S. government to recognize El Salvador's regulatory system as "substantially similar," thereby opening a backdoor for USDT to re-enter the U.S. market.

Political Elite Group: The Rise of USD1

The third "sect" is the newest and most controversial one—an alliance centered around the USD1 stablecoin. While the first two alliances were built on technological strength and market accumulation, this alliance is a typical "politics + capital" strong partnership, reminiscent of ancient "royal marriages."

The lineup of this alliance is truly star-studded:

1. Political Star: A certain financial project, including USD1, has a close relationship with a certain political family. The official website of the project is titled "Inspired by a certain political family, Powered by USD1," showcasing its strong political influence.

2. Distribution Giant: A certain global largest cryptocurrency exchange has provided a robust distribution network for USD1.

3. Sovereign Capital: In March 2025, a state-owned investment institution announced an investment of $2 billion in a certain exchange, using USD1 to settle this investment. This move can be described as a "stroke of genius"—the exchange cleverly utilized these USD1 to create USD1 trading pairs on the platform, establishing a complete channel for distributing USD1 to ordinary users.

4. Infrastructure: A well-known figure plays a key role in this alliance, acting as both an investor and an advisor, with USD1 choosing to issue on his blockchain network.

This "top-down" market expansion strategy is vastly different from the traditional development path of cryptocurrencies. The USD1 alliance directly creates huge application scenarios and market demand through political influence and large-scale transactions at the sovereign level, which can be described as a "dimensionality reduction strike" against traditional competitive models.

However, the political resource advantage of USD1 is also a "double-edged sword". Currently, during the rule of a certain political family, the entire family crypto industry, including USD1, is indeed thriving. However, the political winds are unpredictable, and once there is a change in power, USD1 is likely to face the risk of political reckoning. Therefore, the political resources of USD1 are both its greatest competitive advantage today and may also become its biggest uncertainty factor in the future.

The Counterattack of Traditional Banks

The biggest threat to crypto stablecoins may not come from each other, but from the traditional financial system they are trying to disrupt. While the native players of the crypto world are in fierce competition, the "behemoths" of the traditional world have quietly entered the arena.

A large bank's digital dollar is quite interesting: it looks like a stablecoin, operates like a stablecoin, but is not legally a stablecoin; rather, it is a tokenized form of bank deposit. This distinction is important and brings several 'killer' features:

1. It can legally pay interest since it is essentially a deposit. And this is something that the GENIUS Act expressly prohibits stablecoins from doing.
2. It is directly endorsed by banks, with extremely high credit.
3. It operates within a mature banking regulatory framework, without the need to adapt to entirely new and untested stablecoin regulations.

However, it also has a huge limitation: it is a "private club". Only large institutions that have passed the bank's strict approval can join this network, and ordinary people cannot use it. Its battlefield is institutional settlement, rather than everyday payments.

In addition to this bank, other large banks are also exploring the issuance of their own deposit tokens and even considering forming a banking alliance to create a shared, interoperable, bank-led digital currency. This is actually a collaborative defensive action taken by the banking industry to prevent the "disintermediation" by crypto-native stablecoins. Their strategy is clever: leveraging new technologies (blockchain) while retaining their core advantages, such as credibility, regulatory clarity, and seamless integration with the existing financial system.

This trend suggests that the future of the digital dollar may see divergence. The market will not move towards a single type of digital dollar, but rather split into two major categories serving different markets: stablecoins dominating the crypto-native and retail markets, and deposit tokens leading the institutional and B2B markets.

Challengers Outside the City Gate: Diversification Strategies of Technology Companies

While major alliances compete for territory, some technology and fintech companies are also seeking their own opportunities, but their strategies vary.

1. A certain payment company: chose a very smart path, not directly participating in the competition of stablecoin issuance, but providing infrastructure services for everyone. By acquiring certain companies, this company gained the ability of "stablecoin as a service", allowing any developer to easily issue their own stablecoin.

2. A certain payment giant: Although its stablecoin market value is only $900 million, they offer an annualized yield of up to 3.7% to attract users. This seems to violate the GENIUS Act's prohibition on paying interest on stablecoins, but the company cleverly packages it as "loyalty rewards," with the funds sourced from the company's own treasury rather than the interest on the stablecoin reserves.

3. Some retail giants: For these companies, the motivation to issue stablecoins is very clear: to reduce credit card fees amounting to billions of dollars each year and to establish their own payment ecosystem. However, the main obstacle they face is the strict restrictions of the GENIUS Act on non-financial companies issuing stablecoins.

4. A certain social media giant: After the previous failure of its stablecoin project, the company has become very cautious and clearly stated that the new strategy focuses on "real payment scenarios" rather than "restructuring the monetary system", such as focusing on providing cross-border payment services for creators.

Future Outlook: The Conclusion of the Battle of the Four Strong

This war may not have a single winner. A more likely scenario is market differentiation:

1. Institutional market: Deposit tokens from bank alliances may dominate, as they can pay interest, have clear regulations, and better meet institutional needs.

2. U.S. Retail Market: The USDC Alliance may continue to lead due to its compliance and deep integration with the largest exchanges in the U.S.

3. Global Emerging Markets: The USDT alliance, with its first-mover advantage and strong foundation in emerging markets, may continue to reign.

4. Politically driven special scenarios: The USD1 alliance may play a unique role in certain specific political and sovereign transactions.

The battle of stablecoins reflects not only the competition of technology and business models but also the contest of different financial philosophies and governance models. Traditional finance emphasizes safety and regulation, while crypto-native projects...