Author: Nancy, PANews

Today's stablecoins are no longer just a medium of exchange in the crypto world. Standing at a scale of over $300 billion, this new financial edifice is only just beginning to be built, with both native crypto institutions steadily expanding and traditional financial forces tentatively entering the market.

Judging from the latest moves of Tether and Circle, the two major native stablecoin giants, the rules of the game in the market are changing, and competition is no longer just a simple contest of market capitalization. On the one hand, the rapid evolution of the policy environment has brought compliance benefits, while also forcing continuous adjustments to business models and expansion paths; on the other hand, the influx of more professional newcomers and massive amounts of capital has raised the market ceiling, but trust has also become a test that all players must face.

Circle's rebound faces policy resistance after its largest single-day drop.

Circle, the first stablecoin to go public, benefits from compliance but is also hampered by policy.

On Tuesday, Circle's stock price plummeted by approximately 20%, marking its largest single-day drop in history. The market widely believes that the immediate trigger for this volatility was the uncertainty surrounding the latest draft of the US Clarity Act.

According to Coindesk, a source familiar with the draft revealed that the new terms will prohibit earning rewards solely for holding stablecoins, while restricting any practices that equate the program with bank deposits, and setting further restrictions on other potentially permitted activities, while the specific recognition mechanism for activity-based stablecoin rewards remains unclear.

This compromise stemmed from lobbying between the crypto industry and the banking sector. The banking industry insisted that stablecoin rewards should not resemble interest-bearing bank deposits, arguing that such competing products could harm the banking industry and stifle lending. The final compromise allowed reward programs based on users' stablecoin activity, but not rewards based on balances. Related reading: A stablecoin "civil war" erupts in the US: banks block returns, crypto industry retaliates.

Market analysts believe this is undoubtedly a negative for Circle, as its revenue growth is highly dependent on the increase in the average circulating supply of USDC, and the prohibition of interest-bearing mechanisms may suppress demand for stablecoins.

Prior to this, Circle's stock price had been rising steadily due to its crypto compliance efforts, with its market capitalization once exceeding $70 billion. However, with the uncertainty surrounding policy direction, concerns about its reliance on USDC business intensified again, leading to significant fluctuations in its stock price.

The turning point came with Circle's 2025 financial report. This report not only delivered better-than-expected results but also painted a new growth story for the market, directly driving a strong rebound in the stock price and reaching a new high in six months.

Circle is striving to shed its stablecoin label and transform into a global digital dollar infrastructure platform, focusing on three main areas: Arc blockchain, programmable money and tokenized products, and institutional solutions, in order to enhance its network effect and ecosystem barriers.

Circle's performance in new payment scenarios provided real support for the short-term rebound in its stock price. In the field of AI payments, Circle's approximately 400,000 AI Agents completed 140 million payments in the past nine months, of which 98.6% were settled using USDC, with an average payment of $0.31 per transaction. In the prediction market, the transaction volume is projected to exceed $60 billion by 2025, and USDC is the main settlement tool for leading platforms such as Polymarket and Kalshi.

The market is gradually recognizing Circle's new story, but its growth model is still hampered by the speed of business transformation and constant policy changes.

Tether unveils its hand by launching its first-ever comprehensive audit.

As compliance windows gradually open, the stablecoin market is becoming increasingly active. However, the inflow of funds into this pool is not just a competition of technological speed, but also a contest of trust.

Compared to crypto-native institutions, traditional financial players have a natural advantage in compliance, allowing them to quickly enter markets previously dominated by crypto. With increasing regulatory pressure and competitors closing in, compliance has become an unavoidable dimension of competition for market participants.

Recent actions by Tether, the world's largest stablecoin issuer, have signaled an inevitable trend towards greater transparency and compliance within the industry.

In addition to launching its compliant stablecoin USAT in the US, Tether recently announced that it has officially engaged one of the Big Four accounting firms to initiate its first-ever complete and independent financial statement audit. This audit is considered the largest ever in the financial markets, covering a complex asset structure including digital assets, traditional reserves, and tokenized liabilities.

For a long time, Tether has been mired in questions about the transparency of its reserves. Although it responds to market concerns by issuing quarterly verification reports, such reports only reflect a snapshot of the balance sheet at a specific point in time and are insufficient to completely dispel external concerns.

To enhance trust, Tether has continuously strengthened its reserve assets, provided transparency updates, and maintained close cooperation with global law enforcement agencies over the years, while establishing a robust compliance and risk management system. Last year, Tether appointed Simon McWilliams as Chief Financial Officer to lead a full independent audit and spearhead engagement with the Big Four accounting firms. It is under Simon McWilliams' leadership that Tether possesses the internal leadership and financial structure necessary to complete a full independent audit.

A full audit by the Big Four accounting firms is one of the most rigorous and recognized forms of financial assessment globally. Tether stated that this audit aims to go beyond the industry's generally accepted standards of proof and move towards a complete audit to demonstrate that USDT is fully backed, has sufficient liquidity, and its risk management is at a world-class level.

Currently, USDT has a market capitalization exceeding $184 billion and over 550 million users worldwide, but its core users are still mainly concentrated in emerging markets. If the audit is successfully completed, the boost to market confidence it will provide is considerable.

It's worth noting that the Big Four accounting firms—PwC, Deloitte, KPMG, and EY—all stated in 2022 that they were unwilling to audit proof-of-reserves (PoR) companies privately. Their change of attitude now is due to factors including reduced reputational risk for Tether, an improved regulatory environment, and the increasing maturity of the crypto industry.

However, the disclosure of Tether's comprehensive financial audit may be due to its fundraising needs. According to Bloomberg, sources revealed that Tether has suspended its $20 billion fundraising plan, awaiting the results of its first comprehensive financial audit, and may restart fundraising after the audit results are released. During the fundraising process, potential investors and bankers have repeatedly urged Tether to increase its financial transparency, but some potential investors are still prepared to support the company before the audit results are published.

Regardless of the motives, if Tether can successfully pass the audit, it will not only build a deeper moat of trust for USDT, but also mean that the stablecoin industry is accelerating into an era of transparency.

KPMG's audit department reportedly laid off hundreds of employees.

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