It’s been a while since we’ve seen some serious FUD on USDT. Recently, Ripple CEO Brad Garlinghouse said that the U.S. government was going after Tether, which issues the USDT stablecoin.

He did not provide any specific thoughts on possible risks to the USDT stablecoin. At the same time, Brad Garlinghouse noted that USDT was important for the entire crypto ecosystem and the story was worth monitoring.

In response, Tether noted that Ripple would soon launch its own stablecoin. According to Tether, Brad Garlinghouse was simply trying to put some pressure on the competitor's product. However, it is quite possible that Ripple CEO had some specific threats in mind when talking about USDT-related risks.

According to recent reports, the U.S. was working on rules that would limit issuers without a banking license to a maximum stablecoin market cap of $10 billion. Such rules would prohibit U.S. entities from holding and transacting with offshore-issued stablecoins that do not have a U.S. banking license, such as USDT. In theory, the potential rules will provide banks with an opportunity to create their own stablecoins and compete with USDT.

It’s no secret that U.S. regulators do not like the offshore Tether, although the company has boosted its compliance with U.S. rules, including sanctions.

With a market cap exceeding $110 billion, USDT is the dominant force in the stablecoin market. The second biggest stablecoin, USDC, has a market cap of roughly $33 billion. Put simply, the market is choosing USDT over USDC.

At this point, USDC is the go-to stablecoin for anyone who wants a U.S.-based stablecoin. Ironically, USDC suffered from its U.S. exposure back in March 2023, when the U.S. regional banks crisis dealt a serious blow to its capitalization.

The data shows that there is no demand for another U.S.-focused stablecoin. PayPal, which aimed to leverage its huge user base, tried to promote its own stablecoin, PYUSD. The result is extremely disappointing since PYUSD failed to climb above the $400 million market cap level. It remains to be seen whether Ripple’s stablecoin will gain market success.

It should be noted that USDT is used all over the world. For many users, its offshore nature is a feature, not a bug. It is not clear whether such users would like to deal with a potential stablecoin issued by a big U.S. bank.

In addition, crypto markets are growing fast, which means that the potential total market cap for all existing stablecoins is growing as well. Thus, USDT may lose market share to a U.S. bank-issued stablecoin but still increase its market cap due to rising demand for stablecoins in the world.

Bottom line: USDT is well positioned to profit from crypto market growth. Real market data shows that demand for U.S.-based stablecoins is weaker than for offshore-based stablecoins. The proposed U.S. rules could put some pressure on USDT market share but will not serve as the black swan event for crypto markets or USDT itself.