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Robinhood Markets Inc. HOOD and Revolut Ltd. are reportedly exploring the possibility of entering the $170 billion stablecoin market, which could challenge the dominance of incumbent Tether USDT/USD.

What Happened: Bloomberg cites sources familiar with the matter that both Robinhood and Revolut are looking into launching their own stablecoins, although they may ultimately decide against it.

The stablecoin market is currently dominated by Tether’s USDT, which has a circulation of almost $120 billion, ahead of Circle’s USDC/USD, which has a valuation of $36 billion. To diversify, Tether is branching out to other markets, having recently launched a Dirham-pegged stablecoin and expanded into Bitcoin mining.

This interest comes as the European Union edges closer to fully implementing its Markets in Crypto-Assets (MiCA) regulations by the end of 2024.

These rules could force crypto exchanges operating in the EU to delist stablecoins from issuers like Tether that lack appropriate permits.

Tether CEO Paolo Ardoino told Bloomberg in an emailed statement that his company is working on a “technology-based solution” to serve the EU market.

Tether reported profits of $5.2 billion in the first half of 2024, primarily from reserves backing its stablecoin.

Thomas Eichenberger, chief product officer at Swiss crypto bank Sygnum, noted, “Many businesses have looked at the likes of Circle and Tether and the figures they’ve posted. It sounded like a beautiful business model, and there are many out there that might want to replicate that.”

Stablecoins are gaining traction as a payment method. Bernstein analysts see them as “systemically important,” citing that “20% of 18-24-year-olds (in emerging markets) hold 25-50% of their portfolio in stablecoins.”

The entry of Robinhood and Revolut into the stablecoin market could introduce new competition to incumbents like Tether and Circle. Meanwhile, PayPal Inc PYPL has expanded its cryptocurrency offerings, allowing U.S. merchants to buy, sell, and hold crypto in their online wallets, signaling broader adoption of digital currencies.

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