1. Introduction: Liquidity as the lifeblood
The first stablecoin experiment on Bitcoin's Omni Layer proved a critical lesson: network credibility and asset stability alone are not enough. For a stablecoin to achieve mass adoption, it must also flow efficiently across exchanges and payment networks.
The current ecosystem is highly diverse in its mechanisms, a complexity primarily developed on smart contract platforms like Ethereum:
- Fiat-collateralized: Tokens like Tether (USDT), USD Coin (USDC), Gemini Dollar (GUSD), PayPal USD (PYUSD), and EURC (Euro-pegged by Circle) are backed by reserves of fiat currency or equivalent assets. This is the dominant market model.
- Crypto-collateralized: Assets like Dai (DAI) are generated by decentralized protocols like MakerDAO, backed by crypto-assets.
- Commodity-backed: Pax Gold (PAXG) represents physical gold stored in LBMA vaults.
- Algorithmic/synthetic: Tokens like Ethena USDe (USDe) and Frax (FRAX) rely on complex financial mechanisms or fractional collateral systems to maintain their stability.
Simon Consulting insight: Stablecoins are unique because they combine the properties of fiat, tech infrastructure, and financial instruments. As such, their value lies not only in their pegged price but in the speed, accessibility, and liquidity they provide to end-users and institutional participants.
After the official launch of USDT (July 2014 → November 2014 rebrand) and its first deployments on exchanges like Bitfinex and Poloniex, demand for rapid, low-cost transfers became clear. Traditional banking rails—multi-day wire transfers with variable fees—were incompatible with the emerging crypto economy.
2. The arbitrage engine and network effects
USDT's immediate utility came from enabling arbitrage across exchanges. Traders could move dollars as USDT almost instantly between Bitfinex, Poloniex, and later Binance and Kraken, avoiding slow wire transfers and taking advantage of price differences.
- Early adoption: Bitfinex, closely aligned with Tether, served as the primary liquidity hub.
- Poloniex & global reach: Listing on Poloniex allowed USDT to circulate among global traders, fueling early trading volume
Today, the market has expanded dramatically. The total stablecoin market capitalization sits at approximately $282 Billion, with the top two assets—Tether (USDT) and USDC—commanding over 90% of that value.
- Tether (USDT) dominates with a market cap around $177 Billion, holding approximately 70% of the stablecoin market share.
- USDC follows with a market cap around $75 Billion.
This massive liquidity pool, which now exceeds the annual transfer volume of major card networks, is constantly seeking the most efficient rails.
Simon Consulting insight: Exchange adoption is more than a listing—it’s a network effect. The more venues support a stablecoin, the more liquid it becomes, and liquidity itself drives further adoption. For institutions, understanding this feedback loop is key to evaluating the risk and opportunity of new stablecoins like EURQ or upcoming MiCAR-compliant Euro coins.
3. The migration: Ethereum and Tron
Bitcoin’s Omni Layer had limitations: high transaction costs and slow confirmation times. By 2017–2018, USDT volumes exceeded the capacity of Omni. Market demand drove the migration to faster, cheaper, and more flexible decentralized rails.
1. Ethereum (ERC-20): This platform allowed native smart contract compatibility. It supported DeFi applications (lending, borrowing, automated market makers) and became the foundation for institutional and algorithmic use cases. Its high security and wide ecosystem, hosting diverse assets like DAI, PAXG, and USDe, is its strength. However, its major weakness is low throughput (≈15 TPS) and high gas fees.
2. Tron (TRC-20): This network offered lower transaction fees and faster throughput (up to 2,000 TPS). This combination proved ideal for retail transactions and remittances. Today, USDT on Tron carries the largest transactional volume globally, proving that efficiency on the decentralized rail is paramount for mass adoption. Other networks like BNB Smart Chain (BSC) also offer high speed and low cost (up to 2,000 TPS) but with a more centralized architecture.
Simon Consulting insight: The commercial preference for Tron over Ethereum for high-volume USDT transfers proves that cost and speed dictate real-world usage. For regulators, this multi-chain deployment introduces operational and compliance complexity. Institutions must track reserve backing, monitor chain-specific risks, and reconcile transactions across multiple decentralized ledgers. This is a lesson for banks or EMIs launching MiCAR-compliant stablecoins and fintechs exploring Lightning Network adoption.
4. The rise of competitors and euro-denominated stablecoins
As USDT solidified its position, USD Coin (USDC) emerged, emphasizing regulatory transparency and reserve attestations—qualities appealing to institutional investors. Stablecoins are now competing on trust and transparency, not just price stability. Upcoming European initiatives include:
- EURQ by Quantoz Payments BV: A Dutch, DNB-supervised Euro stablecoin launched by Netherlands’ first regulated stablecoin issuer. EURQ represents the first Euro-native stablecoin fully compliant with local regulation and ready for cross-border adoption.
- Nine-bank MiCAR Euro stablecoin consortium: Announced in September 2025, ING, Banca Sella, KBC, Danske Bank, DekaBank, UniCredit, SEB, CaixaBank, and Raiffeisen Bank International are jointly launching a MiCAR-compliant euro-denominated stablecoin, with near-instant settlement and programmable payment capabilities expected in 2026.
These initiatives mark the transition from USD dominance to European strategic autonomy in digital payments, demonstrating that stablecoins are no longer just a crypto phenomenon—they are becoming national and continental payment infrastructure.
5. Key takeaways
Liquidity drives adoption: Stablecoins succeed when exchanges, wallets, and PSPs can use them efficiently.
- Rail choice matters: Omni → Ethereum → Tron demonstrates the trade-offs between security, speed, and cost.
- Transparency and regulation: Institutional adoption depends on trust, clear legal structures, and oversight.
- Euro stablecoins are coming: EURQ and the nine-bank consortium coin illustrate how regulated Euro digital assets will compete globally.
Simon Consulting insight: Any stablecoin strategy must anticipate multi-chain operations, compliance reporting, and reserve management. The early USDT case provides a blueprint for new entrants navigating the evolving regulatory and technological landscape.
In the next article, we will examine the regulatory response: MiCAR, GENIUS Act, and how governments are codifying trust in stablecoins, which will shape the next phase of digital finance.
