Regulation of Stablecoins and Ecosystem Dynamics (Issue 1 · Week 29, 2026)

01Event Overview

On July 9, 2026, Circle faced criminal charges for refusing to freeze $380,000 in fraudulent assets, triggering a crisis regarding the compliance of stablecoins. On the same day, Revolut announced that it would cease providing USDT services to users in the European Economic Area and Switzerland by August 31, 2026, reflecting the tightening regulatory stance of the EU. Meanwhile, giants such as JPMorgan Chase are collaborating to establish a tokenized deposit network in an effort to cope with the $33 trillion annual transaction volume associated with stablecoins.

02Course of the incident

• [2026-07-09] Wisconsin and New York state file criminal charges against Circle for refusing to freeze fraudulent assets, triggering a compliance crisis for stablecoins.
• [2026-07-10] The competition over stablecoin compliance intensifies, with USDT and USDC establishing separate roles in payments and DeFi.
• [2026-07-11] After half a year of preparation, a compliance-focused blockchain is unexpectedly disrupted by an incident involving a cat, resulting in a loss of $200 million in market value.
• [2026-07-12] Circle receives final approval from the OCC to establish a national trust bank; its stock rises by over 10% before trading begins, with competition shifting toward control over infrastructure.
• [2026-07-14] JPMorgan downgrades Coinbase’s rating, citing its 90% revenue-sharing agreement with Hyperliquid and declining USDC circulation, which puts the issuer in a prisoner’s dilemma.
• [2026-07-15] Circle’s 2025 financial report shows that $1.4 billion in costs associated with Coinbase transactions consumed more than half of its revenue, reshaping the profit model for stablecoins through competitive dynamics.

03Impact Analysis

04Impact Analysis

05Market Price Dimension

The stablecoin market exhibits a clear dual-track differentiation between “payment” and “settlement” functions, with USDT and USDC assuming distinct roles. Driven by its core purpose of enabling permissionless dollar transfers, USDT once surpassed Ethereum in market value, yet there is no positive correlation between the value of public blockchains and the scale of stablecoins. Although USDC maintains a leading supply position, it faces significant profit pressures. Coinbase’s 2025 financial reports showed that distribution costs of $1.4 billion consumed over half of its revenue. Additionally, the 90% revenue-sharing agreement between Coinbase and Hyperliquid further exacerbated the dilemma for issuers, who had to sacrifice profits to gain market share, resulting in a decline in USDC’s circulation. Currently, the price of USDT is $0.9992, while that of USDC is $0.9998, with minimal price fluctuations indicating a neutral market sentiment.

06Regulatory Response Dimension

Regulatory focus has shifted from issuance licensing to control over infrastructure and compliance enforcement. On July 12, 2026, Circle received final approval from the OCC to establish a national trust bank, marking a shift in competition toward custody and settlement infrastructure under federal regulation. However, compliance risks remain severe. On July 9, 2026, Wisconsin and New York filed criminal charges against Circle for refusing to freeze $380,000 in fraudulent assets, highlighting the intense conflict between technical architecture and legal obligations. On the international front, stricter EU regulations have led Revolut to announce that it would stop providing USDT services to users in the European Economic Area and Switzerland by August 31, 2026, due to Tether’s lack of MiCA authorization. This move involves $184 billion worth of stablecoins exiting the European market. Meanwhile, the U.S. joined forces with Tether to freeze wallets linked to Iran, involving nearly $500 million in assets. The stablecoin blacklist mechanism has thus become a new tool for sanctions.

07Ecological Impact Dimension

Traditional financial giants are counteracting the impact of stablecoins through underlying operating systems and tokenized networks. BlackRock utilizes BUIDL for government bond tokenization and its Aladdin risk management system to shift from using ETFs as a lure to taking control over on-chain collateral and pricing power. Faced with the $33 trillion annual transaction volume generated by stablecoins, giants such as JPMorgan Chase have partnered with TCH to build a tokenized deposit network, aiming to replicate the Zelle model and defend their positions in the payment sector. PayPal has collaborated with Polygon to upgrade the PYUSD infrastructure, targeting the $2.6 trillion cross-border market and using its compliance advantages to compete with USDC. Although OUSD has the support of 150 institutions, it struggles to challenge the monopoly held by USDT and USDC. Exchanges prioritize liquidity over meager interest rates, making it difficult to overcome the barriers posed by network effects. The U.S. government transferred $288 million in confiscated crypto assets to Coinbase Prime. Although the amount is small, it violates the original intent of strategic reserves and has caused market volatility.

08Key points to watch going forward

Key Monitoring Points

1. Changes in Circle’s Profit Structure and Channel Dividends
   Circle’s 2025 financial report showed that $1.4 billion in costs associated with Coinbase accounted for over half of its revenue. It is necessary to continuously monitor whether the proportion of channel dividends in Circle’s revenue exceeds the 50% warning threshold, as well as whether the 90% dividend agreements between Coinbase and platforms like Hyperliquid further squeeze the profit margins of token issuers. If these dividend ratios continue to rise, it will confirm that stablecoin issuers are trapped in a “sacrifice profits for market share” dilemma.

2. Progress of Traditional Financial Infrastructure in Replacing Stablecoins
   Giants such as JPMorgan Chase have partnered with TCH to build a tokenized deposit network aimed at replicating the Zelle model to counter the $33 trillion annual transaction volume driven by stablecoins. Close attention should be paid to the average daily transaction volume and the number of institutional participants once this network goes live. If its transaction volume grows significantly by 2026, it could directly undermine USDC’s monopoly in compliant settlements and reshape the payment industry landscape.

3. Risks Related to Regulatory Compliance and Legal Battles
   Although Circle received approval from the OCC to establish a national trust bank on July 12, 2026, it faced criminal charges from Wisconsin and New York states on the same day for failing to freeze $380,000 in fraudulent assets. There is a need to be vigilant about potential conflicts between local judicial jurisdictions and federal approvals. If criminal charges spread to more jurisdictions, it could weaken Circle’s regulatory advantages. Additionally, attention should be paid to Revolut’s decision to stop offering USDT services to users in the European Economic Area and Switzerland by August 31, 2026, to assess the actual impact of MiCA regulations on USDT’s market share.

4. Penetration Rate of BlackRock’s On-Chain Infrastructure
   By leveraging the BUIDL bond tokenization platform and its Aladdin risk management system, BlackRock is shifting from ETFs to gaining control over on-chain collateral and pricing power. It is important to monitor the growth rate of assets managed under the BUIDL protocol and the proportion of traditional financial institutions adopting Aladdin for on-chain settlements. If BlackRock succeeds in developing an underlying operating system for the crypto world, it will change the role of stablecoins from mere payment tools to integral components of traditional financial collateral management processes.

09Related Reads

1. “Frozen at $380,000: Criminal Charges Laid, Stablecoin Compliance Crisis Erupts”
2. “Why Were $184 Billion in Stablecoins Forced to Exit Europe?”
3. “Trillion-Dollar Stablecoins Under Pressure; U.S. Banking Sector Unites to Create Zelle-like Solutions”
4. “Diverging Daily Active Users and Giants’ Shifts: USDT for Payments, USDC for Settlements, and Strategy’s Break from Convention”
5. “Circle Gets Federal Trust License: Stablecoin Competition Shifts from Issuance to Infrastructure Control”
6. “90% Profit-Sharing Agreement Triggers Prisoner’s Dilemma: Coinbase’s Profits Eaten by Hyperliquid”
7. “USDC Leads in Supply but See Profits Eroded: Circle’s $1.4 Billion Cost”
8. “USDT’s Market Value Surpasses Ethereum: Users Prefer On-Chain Dollars, Misunderstanding of Public Chain Value”
9. “Nearly $500 Million Frozen: Tether Becomes New Tool in U.S. Sanctions Against Iran”
10. “BlackRock’s Secret Takeover: From ETF Bait to On-Chain Operating System”
11. “$2.6 Trillion Payment Market: PayPal Seeks Breakthrough with PYUSD”
12. “150 Companies in Alliance Still Can’t Break the Duopoly: Why Did Binance Abandon Interest Rate Differences?”
13. “$288 Million Transferred to Coinbase: Trump’s Strategic Reserve Order Under Scrutiny”