Miami Beach — The stablecoin universe, dominated by Tether and Circle, is stifling competition that could lead to better product-market fit for some key use cases, according to Ben O’Neill, Bridge’s head of money movement.
“I think it’s a net bad for the growth of stablecoins as a whole because you have two counterparties that have pros and cons to what they’ve built and the design choices they’ve made. But they don’t work for every use case,” O’Neill said on a panel on stablecoin growth at Consensus Miami.
Tether’s USDT, with its gigantic market cap of approximately $189.5 billion, and Circle’s USDC, which has grown to around $71 billion, each emerged in different generations in the crypto evolution.
Launched in 2014 as Realcoin, Tether won the Chinese export trade, O’Neill said, and built this shadow economy of dollars that people can use outside the US financial system. Launched in partnership with Coinbase in 2018, Circle attempted to do the exact opposite: a US-regulated stablecoin that later leaned heavily into decentralized finance (DeFi).
For O’Neill, the prospect of a large payments company such as Bridge owner Stripe illustrates the shortcomings of the two dollar-pegged token giants.
“As a payments company, I need certainty about how things are going to work,” he said. “So with Tether, they’re saying we’re burning for 10 bips, which is crazy expensive for a payments company, or you can trade on the open market, which means I have no security.”
“For Circle, their whole business is AUM and they keep raising these burn fees. Then again, if I’m someone like Visa and I want to do trillions of dollars in card settlement and stablecoins, I burn a lot of USDC and it’s going to be a net bad,” O’Neill said.
The solution, “which should come fairly quickly over the next few years,” is more stable coins that are built for specific use cases so they can be optimized for those use cases. The second part is the emergence of the clearinghouse, “a sexy topic for founders and VCs” to make it “as efficient as possible to exchange between stablecoins,” he added.
O’Neill concluded his argument by saying: “You need more competition or else [Tether and Circle] will just keep raising the fees. They will not share the profits. They will discourage you from burning it. They will make it harder and harder to make it feel like money with every trip.”
