The beef between Circle and Tether

Circle and Tether have been battling for stablecoin market supremacy for several years but recently things have escalated with a series of increasingly public spats between the two firms.

Earlier this year, USDC suffered a de-peg, and Circle, which had stored billions with Silicon Valley Bank (SVB), duly failed. Tether’s chief technology officer Paolo Ardoino described the company’s reserve management around the SVB failure as a “basic mistake in risk management.”

Tether has been criticized for its own reserve management in the past and has reached several settlements with the New York Attorney General and Commodity Futures Trading Commission (CFTC). These relate to undisclosed related party loans that followed the loss of access to hundreds of millions of dollars stored at an unlicensed money transmitter accused of money laundering for the Colombian cartels.

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Dante Disparte, chief strategy officer at Circle, stated that concerns over its SVB deposits are “risk reduction to absurdity.”

Reportedly, Coinbase was prepared to step in to help USDC during its de-peg, offering a $3 billion line of credit to help backstop the stablecoin. However, this line of credit ended up being unnecessary after the government chose to backstop SVB depositors.

More recently, Disparte spoke at the Federal Reserve Bank of Philadelphia Annual Fintech Conference, where he opined that “one half” of the stablecoin market is “counterfeiting the US dollar” and blamed it on “US inaction on policy and regulation.” The only coin with more than half the stablecoin market is Tether, meaning this would seem to be an accusation that Tether’s reserves differ so drastically from Circle’s that its activities are uniquely counterfeiting.

Chart from The Block.

This is a more explicit call-out than previous comments Disparte has made about whether or not people should “be able to counterfeit US dollars using cryptographic methods.”

Circle and Tether have been vying for influence in the stablecoin market for the last several years, and similarly, both have deployed resources to influence the policy and regulation discussion in the US.

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Over the last several months, USDC has seen its market cap decrease as Tether’s has continued to grow despite the bear market and rising rate environment.

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