USDe’s success was largely driven by Ethena’s CeDeFi yield strategy offering. Meanwhile, Coinbase plans to delist Tether's USDT and five other stablecoins to comply with the EU's MiCA regulations, which raises some questions about USDT's compliance status. Additionally, Circle and Binance announced a partnership to promote USDC adoption, while Ripple's RLUSD stablecoin received NYDFS approval earlier this week. This positions RLUSD as a competitor to USDT and USDC.
Ethena’s USDe Surpasses Dai in Market Cap
Ethena's decentralized finance (DeFi) protocol recently hit a major milestone after its stablecoin, USDe, overtook Sky's Dai (DAI) in total market capitalization. This positions USDe as the third-largest stablecoin in the market, trailing only Tether's USDt (USDT) and USD Coin (USDC).
Top stablecoins by market cap (Source: CoinMarketCap)
According to data from DefiLlama, USDe has a market capitalization of just under $6 billion, which is still far behind USDt's $140 billion and USDC's $41 billion. Dai, the flagship stablecoin of Sky, saw its market cap shrink to around $4.5 billion, down from over $7 billion in 2022.
USDe’s growth is fueled by Ethena's innovative CeDeFi yield strategy, which merges DeFi smart contracts with centralized exchange derivatives trading. This approach attracted billions of dollars since USDe’s launch in February, offering double-digit annual percentage yields (APYs) to stablecoin holders. As of Dec. 12, staked USDe, or sUSDe, provides an APY of around 27%. Yields peaked at 55.9% earlier in the year.
(Source: DeFiLlama)
Ethena makes it possible for users to mint USDe by depositing tokens like Bitcoin, Ethereum, liquid staking tokens, and other stablecoins. The protocol mitigates portfolio volatility through offchain financial derivatives, deriving yield from staked assets, funding spreads, and futures markets.
While Ethena’s CeDeFi strategy drove rapid adoption, it still carries inherent risks, including potential failures of offchain exchanges and custodians. Despite these challenges, USDe experienced remarkable growth.
Leading crypto trading desk Wintermute started accepting USDe as trading collateral in October. In June, sUSDe integrated with DeFi lending giant Aave, and very quickly became the platform’s fastest-growing asset.
ENA price action over the past year (Source: CoinMarketCap)
Ethena’s success also extends beyond just its stablecoin. The protocol generated approximately $200 million in fees in 2024. Additionally, Ethena’s native token, ENA, surged by 5x since June. On the other hand, Sky's rebranding from Maker and its changes to Dai that was renamed USDS, attracted a lot of criticism over cybersecurity concerns and potential asset freezes.
Coinbase to Remove Tether and Five Other Stablecoins
Although USDT is still the leader in the stablecoin world, cryptocurrency exchanges across Europe are preparing to delist stablecoins that do not meet compliance standards under the European Union’s Markets in Crypto-Assets Regulation (MiCA). Coinbase Europe, Coinbase Germany, and Coinbase Custody International announced plans to delist Tether’s USDT and five other stablecoins, including PAX, PYUSD, GUSD, GYEN, and DAI, starting Dec. 13.
The delisting is part of Coinbase’s effort to comply with MiCA, which has been partially in effect since June 30 and will be fully enforced by Dec. 30. Despite these restrictions, Coinbase will continue supporting USD Coin (USDC) and the euro-pegged EURC stablecoin.
Coinbase is ranked as the third-largest global exchange by trading volumes, and has a very large share of USDT trading. In fact, the stablecoin accounts for more than 12% of all trades on its platform. While the decision to delist noncompliant stablecoins aligns with regulatory demands, Coinbase stated that it may reassess and re-enable services for stablecoins that achieve MiCA compliance in the future.
Top cryptos traded by Coinbase (Source: CoinGecko)
The legal status of USDT under MiCA is still uncertain. The European Securities and Markets Authority still has to clarify whether USDT is actually noncompliant, which leaves room for further discussions.
Tether’s CEO, Paolo Ardoino, criticized certain aspects of MiCA and revealed that Tether is developing a technology-based solution that is tailored for the European market. In November, Tether suspended its euro-backed stablecoin EURt due to limited market interest. EURt’s market cap represented only 0.02% of USDT’s value.
Despite facing regulatory challenges, Tether is still committed to the European market. The company is supporting new MiCA-compliant stablecoins, including EURq and USDq.
Circle and Binance Forge Strategic Partnership
Circle and Binance recently announced a strategic partnership that is aimed at advancing the financial services ecosystem and the global development of digital assets. The collaboration was unveiled during Abu Dhabi Finance Week, and will see Binance adopting Circle’s USDC into its corporate treasury and expanding its availability on the exchange. This includes introducing more USDC trading pairs, special promotions, and integration into various Binance products.
Circle will support Binance with technology and liquidity, while also assisting in building connections in global finance and commerce. Circle CEO Jeremy Allaire believes that stablecoin adoption is central to the future financial system Binance aims to create.
During the event, Circle also announced it incorporated an entity in the Abu Dhabi Global Market and revealed a partnership with LuLu Financial Holdings. This collaboration was formed to facilitate remittances and cross-border payments using USDC. LuLu Financial handles more than $10 billion in annual transactions across the Gulf Cooperation Council, the Indian subcontinent, and the Asia-Pacific region.
Looking ahead, Circle plans to relocate its headquarters to New York in early 2025 and proceed with an initial public offering (IPO) once the U.S. Securities and Exchange Commission (SEC) grants its approval. Circle filed for the IPO in January of 2024.
NYDFS Approves Ripple’s RLUSD
The stablecoin industry also attracted a lot of attention this past week after Ripple Labs CEO Brad Garlinghouse announced that the New York Department of Financial Services (NYDFS) approved the company’s RLUSD stablecoin after months of review. In a Dec. 10 social media post, Garlinghouse stated that Ripple will soon reveal exchange and partner listings for RLUSD after it received the regulatory green light.
Ripple first announced plans for the stablecoin earlier this year in April. The stablecoin will be a competitor to Tether’s USDT and Circle’s USDC. The company also plans for RLUSD to potentially reach a $2 trillion market capitalization by 2028.
Testing for RLUSD started in August on both the XRP Ledger and Ethereum mainnets. Ripple also started announcing partnerships in October with exchanges like Uphold, Bitstamp, Bitso, MoonPay, Independent Reserve, CoinMENA, and Bullish. The stablecoin will be pegged 1:1 with the U.S. dollar and backed by USD deposits, short-term U.S. Treasury bonds, and other cash equivalents. According to Ripple executives, RLUSD will complement XRP, and will focus on institutional players rather than retail users.
The approval was given despite Ripple’s legal battle with the U.S. SEC over the classification of XRP token offerings. Garlinghouse also recently appeared on a 60 Minutes segment to discuss the role of cryptocurrency in shaping the 2024 U.S. elections.
