As the topic of stablecoin legislation gains traction in the United States under the Trump administration, the bosses of Circle and Tether both set out their views on regulation in what some in the crypto community are calling a "stablecoin war."

A crypto regulatory framework, including stablecoins, was one of the key pledges President Trump made to the industry during the election campaign. Republican Sen. Bill Hagerty introduced a stablecoin bill in the Senate earlier this month, including requirements for backing stablecoin payments with Treasury bills, U.S. dollars and Federal Reserve notes, alongside monthly audited reports. That came before a press conference where lawmakers announced they would form a working group to write rules for crypto and stablecoins. 

Top Democrat of the House Financial Services Committee, Maxine Waters, later released a discussion draft to regulate stablecoins that included language around federal regulators for the issuers. Republican Chair of the committee French Hill also introduced draft legislation in the House to regulate stablecoins as U.S. lawmakers forge ahead on rules for the assets.

However, negotiations around passing a stablecoin bill have been complicated over the last few years on Capitol Hill, and on Feb. 11 a House hearing revealed divides over potential stablecoin regulation amid tension over the shuttering of the Consumer Financial Protection Bureau and Trump's memecoin launch.

In an interview with Bloomberg News on Tuesday, Jeremy Allaire, CEO of New York-based Circle, made the case that issuers of U.S. dollar-based stablecoins — a market now valued at over $230 billion — should be registered in the United States.

"It shouldn’t be a free pass, right? Where you can just ignore the U.S. law and go do whatever the hell you want wherever and sell into the United States," Allaire told Bloomberg News, without referring to any firm in particular. "The stablecoin bill is the first priority of the administration."

Circle's USDC is the second-largest stablecoin globally with a current supply of $56.6 billion. El Salvador and formerly Hong Kong-based Tether operates the largest stablecoin on the market, USDT, which has a supply of $142.8 billion, according to The Block's data dashboard.

"This is about consumer protection and financial integrity," Allaire added. "Whether you're an offshore company or based in Hong Kong, if you want to offer your dollar stablecoin in the U.S., you should need to register in the U.S. just like we have to go register everywhere else."

Earlier on Tuesday, Tether CEO Paolo Ardoino suggested its competitors were attempting to push stablecoin legislation to their advantage.

"USDT is the most successful tool for U.S. dollar hegemony and distribution across emerging markets," Ardoino posted on X. "Every single day our teams and portfolio companies are with their boots on the ground in countless areas within developing countries, helping communities and growing utilization, trust and education into USDT and by reflection into the US economy."

Ardoino claimed USDT is used by more than 400 million people worldwide, growing at a pace of 35 million wallets per quarter, focused on developing countries while strengthening the U.S. dollar. Tether holds over $115 billion in U.S. Treasuries — making it the 18th largest holder, comparable with sovereign nations like South Korea, Mexico and Germany, according to Treasury Department statistics.

"While our competitor's business model should be to build a better product and even bigger distribution network, their real intent is 'Kill Tether,'" Ardoino said, without naming a specific firm. "Every single business or political meeting that they have culminates with this intent."

Tether's reserves are partially managed by Cantor Fitzgerald, whose ex-CEO, Howard Lutnick, was recently confirmed by the Senate as President Trump's new Secretary of Commerce. In January, President Trump reinforced the U.S. government’s support for stablecoin issuers by signing an executive order to safeguard the U.S. dollar, which includes efforts to foster the growth and development of "legitimate," dollar-backed stablecoins globally.

Ardoino's comments came in response to a post by Framework Ventures co-founder Vance Spencer. "The soon-to-be revealed stablecoin markup apparently has requirements to shut off access to the treasury market to centralized international stablecoin issuers — which is straight up bats**t crazy," Spencer wrote. 

"This is a blatant attempt at regulatory capture by U.S. players done at the expense of U.S. national interest — please tell me how limiting access to hundreds of billions of dollars of demand for treasuries helps us preserve dollar hegemony across the globe, or fix our debt problem," Spencer continued. "The largest stablecoins today are built overseas, and the largest source of demand is overseas — this is not changing no matter what. The net effect of a continued hostile regulatory stance towards stablecoins will only be to regulate ourselves out of the picture like Europe with AI."

"Nothing angers me more than crypto firms lobbying to kill their competitors," Castle Island Ventures General Partner Nic Carter added. "Regulatory capture is poison. Reminds me of what SBF used to do."

However, Electric Capital co-founder Avichal Garg disagreed. "I have spoken with the people drafting — the goal is not to shut out foreign buyers of treasuries," he said. "The goal is to prevent foreign issuers that have low standards for backing collateral from claiming to be safe/secure and rugging people, which is very fair. If you aren't willing to be subject to regulation in the U.S. and subject to U.S. issuer standards, why should U.S. consumers trust you?"

"This is weird," Carter responded, suggesting such a policy would signal to the market that the Treasury market is officially two-tier, with foreign holders potentially being "rugged" at any moment. "Why is it suddenly being proposed that an offshore entity no longer be able to buy USTs to back dollar claims? Unless… there's a certain onshore stable issuer with a vested interest in killing their competition?" he said.

The Block reached out to Circle and Tether for further comment.

Disclaimer: The Block is an independent media outlet that delivers news, research, and data. As of November 2023, Foresight Ventures is a majority investor of The Block. Foresight Ventures invests in other companies in the crypto space. Crypto exchange Bitget is an anchor LP for Foresight Ventures. The Block continues to operate independently to deliver objective, impactful, and timely information about the crypto industry. Here are our current financial disclosures.

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