Stablecoins at a Crossroads: Regulatory Uncertainty in Germany While International Markets Advance

Political Disagreement Slows German Stablecoin Market

Stablecoins such as EURA and Frankencoin are increasingly conquering the European market. Banks, exchanges, and tech startups like Klarna are developing their own tokenized forms of money, thereby driving innovation in the financial sector. Yet while the industry accelerates, politics lags behind ^[1].

A survey by BTC-ECHO among Bundestag parties reveals a heterogeneous picture: the positions of CDU/CSU, SPD, The Left, AfD, and the Greens on stablecoins vary considerably. Some parties see digital currencies as an opportunity for innovation, while others warn of the associated risks ^[1]. This disagreement limits investors' options, while the industry is already moving forward ^[1].

S&P Downgrades Tether to Lowest Rating

On the international stage, a downgrade of Tether, the largest stablecoin provider, is causing a stir. S&P Global has downgraded USDt within its five-tier risk framework from "4 (constrained)" to "5 (weak)" ^[2]. The rating agency cites growing exposure to riskier assets and persistent transparency gaps ^[2].

According to S&P, Tether's reserves now include larger allocations in Bitcoin, gold, corporate bonds, secured loans, and other investments with "limited disclosures" as well as credit and market risks ^[2]. The agency also criticized limited transparency regarding custodians and counterparties, though it acknowledged that USDt "has maintained a remarkable degree of price stability" during volatile periods ^[2].

Tether CEO Firmly Rejects Criticism

Tether CEO Paolo Ardoino responded sharply to the downgrade. The company "firmly rejects the characterization presented in the report" and argued that S&P relied on "an outdated framework" that does not reflect the scale or economic role of digital money ^[2].

Ardoino went further, describing the downgrade as an example of traditional finance resisting newer models. Established financial actors would be "concerned when a company tries to defy the gravity of a broken financial system," the CEO stated ^[2]. Tether is "the first over-capitalized company in the financial industry without toxic reserves" ^[2].

The El Salvador-based company states it has issued approximately 184 billion US dollars in USDt and maintains full backing through US Treasury securities and other reserve assets ^[2].

Ripple Celebrates Regulatory Successes in Abu Dhabi

While Tether faces criticism, Ripple can chalk up regulatory wins. The company's RLUSD stablecoin received approval for institutional use in Abu Dhabi ^[3]. The approval is the latest step in Ripple's efforts to expand its presence in the United Arab Emirates ^[3].

RLUSD was launched in late 2024 and has since become one of the largest stablecoins with a market capitalization exceeding one billion US dollars ^[3]. According to CoinMarketCap, RLUSD is the eighth-largest stablecoin by market capitalization ^[3].

The United Arab Emirates is regarded as a hub for decentralized finance (DeFi) and Web3 due to its crypto-friendly policies ^[3]. This week, the country passed comprehensive new central bank legislation that places DeFi and a large portion of the Web3 industry under formal regulatory oversight ^[3].

Stablecoin Market Grows to Over 300 Billion US Dollars

The stablecoin market experienced a record year. Market capitalization exceeded 300 billion US dollars for the first time, according to data from DefiLlama ^[3]. Tether's USDT maintains its dominance, accounting for over 60 percent of the market, followed by Circle's USD Coin (USDC) with a capitalization exceeding 75.48 billion US dollars ^[3].