Tether had proven that stablecoins were useful, but its controversies created an opening for competitors. In October 2018, Circle and Coinbase launched USDC (USD Coin), the first major stablecoin from well-regulated U.S. companies. USDC promised what Tether wouldn’t: fully audited reserves, transparent reporting, and regulatory compliance. Each USDC was backed by $1 in cash and short-term U.S. Treasury bonds, held in regulated U.S. banks.
USDC’s launch marked the beginning of the “regulated stablecoin” era. Unlike Tether, which operated in regulatory gray areas, USDC embraced compliance. Circle pursued banking licenses and built relationships with regulators. The token was listed on major exchanges quickly. Institutional traders who had avoided Tether due to its reputation found USDC a more palatable option. By 2021, USDC had grown to tens of billions of dollars in circulation.
Other stablecoins followed. Binance launched BUSD, a stablecoin issued in partnership with Paxos. Gemini launched GUSD. TrueUSD, Pax Dollar, and others competed for market share. By the peak of the 2021 bull market, total stablecoin supply exceeded $150 billion — a massive new category of crypto assets that didn’t exist five years earlier.
Stablecoins became the lifeblood of the crypto economy. They served as the primary trading pair on most exchanges. They were the foundation of DeFi lending protocols. They were used by traders to temporarily “park” value without converting back to fiat. They enabled cross-border payments that could settle in minutes instead of days. They were even used by people in countries with unstable local currencies as an informal dollarization mechanism.
The regulatory future of stablecoins remains contested. Some regulators worry that stablecoins threaten monetary sovereignty by creating private digital dollars outside the banking system. Others see them as a key innovation that the dollar needs to remain competitive in the digital economy. In 2023, the collapse of Silicon Valley Bank briefly broke USDC’s peg, revealing that even “regulated” stablecoins depend on the traditional banking system. But stablecoins have become too important to disappear. They’re now a fundamental building block of crypto and increasingly of traditional finance as well.
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