America’s Lost Edge in Web3
The United States remains the world’s economic powerhouse, home to unmatched innovation, talent, and technological leadership. Yet, in the emerging digital economy, it risks falling behind. Nowhere is this more apparent than in the race for stablecoin dominance — a contest that has quietly become a proxy for America’s position in Web3.
Despite its global financial clout, the U.S. has stumbled in its effort to cement USD Coin (USDC) as the digital dollar standard. Meanwhile, Tether (USDT), operated by Hong Kong–based iFinex Inc., has surged ahead, becoming the de facto reserve currency of the crypto market.
The Rise and Stall of USDC
USDC once seemed destined to lead the Web3 financial system. Launched in 2018 by Circle Internet Financial and overseen by the U.S. Treasury, the stablecoin quickly became synonymous with transparency and compliance. Circle’s reserves are held as cash and U.S. Treasuries managed by BlackRock, and its willingness to freeze blacklisted wallets reflects a strong regulatory posture.
For years, USDC’s growth was meteoric. Its circulating supply grew by an average of 860% annually, peaking at $55 billion in 2022. Circle began developing institutional infrastructure — on-ramping tools, custody solutions, and compliance frameworks — that would have positioned the U.S. as the undisputed leader in on-chain finance.
But 2023 tells a different story. USDC’s market cap has fallen to roughly $30 billion. Its brief depeg in March, following the collapse of Silicon Valley Bank, spooked investors. Although the incident reflected temporary panic rather than systemic failure, it underscored how fragile even compliant crypto instruments can appear.
Tether’s Dominance and U.S. Policy Failure
While USDC stumbled, Tether’s market capitalization climbed by about $15 billion. With more than $80 billion in circulation, Tether’s dominance is now undisputed. The shift has been labeled by Messari CEO Ryan Selkis as “a colossal public policy failure.”
From the U.S. perspective, the contrast between Circle and Tether is stark. Circle’s reserves are transparent and fully backed by U.S. assets; Tether’s remain opaque. Circle works with regulators; Tether operates independently. One aligns with American financial standards, the other with offshore markets.
The U.S. has inadvertently ceded influence to a foreign issuer, missing the chance to make USDC the cornerstone of a transparent, regulated global stablecoin system.
The Case for Supporting USDC
It’s not too late for policymakers to reverse the trend. USDC’s regulatory structure already gives it a strong foundation — but it needs active support from federal institutions to compete on a global scale.
One immediate step could be granting Circle access to the Federal Reserve’s reverse repo program, ensuring USDC’s liquidity through risk-free short-term loans. Additionally, the Securities and Exchange Commission could encourage tokenized securities denominated in USDC, driving adoption through compliance-ready financial instruments.
Beyond monetary policy, regulators should focus on building clear, modern frameworks for on-chain identity verification, anti-money laundering compliance, and transparent financial reporting. These steps would position the U.S. as a leader rather than a laggard in Web3 regulation.
The Digital Dollar and the Future of Web3
Stablecoins represent far more than trading tools — they are the foundation for the next generation of financial infrastructure. In a world moving rapidly toward digital assets and decentralized applications, the dominant stablecoin will wield enormous influence over trade, governance, and innovation.
If the United States continues to view Web3 as a regulatory nuisance rather than a strategic opportunity, it risks losing control over the financial backbone of the internet.
As Alex O’Donnell, CEO of Umami Labs, concludes: “The stakes are too high to ignore. It’s time for the U.S. to pick sides.”
