The bill meant to settle US crypto market structure is stuck, and the reason is a growing fight over conflicts of interest.

The flashpoint is USD1, the dollar stablecoin from World Liberty Financial (WLFI), a venture tied to the Trump family, which reached the top ten by supply within months of launch.

Two developments have sharpened the dispute. In January, World Liberty applied to the OCC for a national trust charter to issue and custody USD1.

And in April, Tron founder Justin Sun sued the venture, alleging it froze roughly $540m of his tokens through a hidden blacklist to pressure him into minting $200m of USD1.

Why this matters

This is the single largest obstacle to a federal market-structure law, the framework the institutional market has been waiting on.

And the freeze allegation is a live, documented instance of the same centralised-control risk that sits inside every fiat-backed stablecoin, USDC included. The issuer that can freeze a wallet to enforce the law is the same issuer that can freeze one to settle a score.

For a treasurer, the lesson is not about one coin or one venture.

It is that the power to freeze is structural and embedded in the growth of a hugely powerful new part of the digital financial system.

It is worth pricing wherever it sits.

On 22 June the Bank of England published its final rules for systemic sterling stablecoins, and the shape of the regime tells you what it is for.

The Bank dropped the per-user holding caps it had floated, replacing them with a £40bn issuance ceiling on any single systemic coin during the transition. It raised the share of backing that can sit in short-term UK government debt to 70%, up from 60%, with the rest held at the Bank itself.

Feedback runs to 22 September, with the final code due by the end of the year and the regime live from 2027.

Why this matters

The Bank has chosen stability over growth, and it has done it in two ways that bear understanding from institutional finance.

The £40bn ceiling is a hard cap on scale that the US GENIUS regime does not impose, a deliberate brake to protect bank deposits and the credit they fund. And the slice that must sit unremunerated at the Bank is a permanent drag on issuer margin, where the US model lets reserves earn across cash, bills and repo.

There is a sovereign dimension too.

By requiring 70% of backing in short-term gilts, the rule turns every sterling systemic coin into a structural buyer of UK government debt, the same dynamic the BIS recently quantified for dollar stablecoins, where it found roughly $0.75 of Treasury bills bought for every dollar of USDC created over four months.

On 1 July the transitional period under the EU's MiCA regime ends. ESMA has confirmed there will be no extension and no grace period, and after that date any crypto firm operating without a MiCA licence is in breach of EU law. The conversion has been brutal: of more than 1,200 firms that held national registrations, only around 210 have been authorised.

For stablecoins the line is starker. USDC and its euro counterpart EURC are the only top-ten stablecoins fully MiCA-compliant.

USDT is not, and will not be.

Tether has declined to apply, with chief executive Paolo Ardoino arguing that the requirement to hold most reserves in European banks is incompatible with its model. He also claims that holding reserves with smaller European banks (many of the larger ones do not bank stablecoin issuers) introduces significant counterparty risk for Tether.

Major exchanges including Binance, Coinbase, Kraken, OKX and Crypto.com have already removed or restricted USDT for European users, and any licensed venue that keeps offering a non-authorised stablecoin now risks its own MiCA licence.

The largest stablecoin in the world is being shut out of the regulated European market. The second-largest, under half its size, inherits it.

Why this matters

This is the clearest proof yet of the point that runs through this issue: in a regulated market, legitimacy is not a virtue, it is the right to operate.

USDC does not win Europe because it is bigger: it is the smaller coin.

It wins because it complied, and USDT, dominant across the rest of the world, is locked out of the bloc's regulated venues because it would not.

Compliance is becoming a moat, granted one jurisdiction at a time. For an institution the lesson is plain: in the markets that matter to you, the compliant coin is the only coin you can actually use, whatever the global league table says.

Across the regulated world, in the developed economies where money moves under the eye of a supervisor, one stablecoin sits on the throne. Not Tether, which rules the wild lands to the south, the failing-currency economies where a stablecoin wallet is a lifeboat.

In the North, the coin that reigns is USDC.

It is a strange kind of king. It is not the largest, it does not own the rail it runs on (but is making moves to change that.) Much of the coin it issues earns its keep for someone else. And the crown it wears was placed there by the regulators, which is both the source of its power and the price of it.

Like Jon Snow, USDC was proclaimed king by the lords of the North, not crowned on the Iron Throne. Its claim is not even its own. It runs in the blood of an older house, the dollar itself.

This is the story of how USDC came to reign in the regulated North, who really holds the power behind the throne, and why the crown costs more than it looks.

THE CORONATION AND COST OF THE CROWN

Every king needs a claim, and USDC's is legitimacy.

Circle was the first major issuer to clear MiCA, taking an electronic money licence in France before the rules took effect. It publishes monthly Deloitte attestations on its reserves. It is pursuing a New York trust charter. And when the GENIUS Act set the federal standard for what a stablecoin reserve may hold, USDC was already inside the line, because it had been built to that standard before the standard existed.

Look at what backs it.

Roughly 80% sits in short-dated US Treasuries held in the BlackRock-managed Circle Reserve Fund, the rest in cash at large banks.

·       No gold.

·       No Bitcoin.

·       No secured loans.

Set that against Tether, which carries around $50bn of precisely those assets. One reserve is dressed for a coronation. The other is not.

The title is real. It is also smaller than it sounds.

USDC is the second coin by supply, $74bn against Tether's $187bn, which is why this is King in the North and not King of the Seven Kingdoms. The North is the regulated, developed, institutional world, and USDC holds it by law, not by headcount.

And here is the cost of the crown.

The same legitimacy that lets USDC reign is centralised control. Circle can freeze a wallet, and it has, for sanctions enforcement and stolen funds. For a regulator that is a feature. For a treasurer holding USDC as an operating balance it is a live counterparty risk, because the power that makes the coin trusted is the same power that can reach into your vault and stop it.

Why this matters: the source of USDC's edge and the source of its freeze risk are one and the same. The first is why you hold it. The second is why you size your exposure with your eyes open.

THE REIGN

A king is measured by his realm, not his treasury. And by that measure USDC has just done something that should reframe how you read it.

Not in supply, where it remains the smaller coin, but in use.

Across 2025, USDC settled $18.3 trillion against USDT's $13.3 trillion. On Mizuho's adjusted-volume measure, which strips out wash trading and internal cycling to show genuine economic activity, USDC took roughly 64% of the combined flow, its first lead since 2019.

This February alone it moved $1.26 trillion to Tether's $514 billion, despite being less than half the size.

Read those two facts together and the picture is clear.

That is the textbook split between the functions of money, drawn in real data.

Tether is the savings dollar, the store of value and the unit of account for the household in Buenos Aires or Lagos pricing its life in dollars it cannot get from a bank. USDC is the spending dollar, the medium of exchange for the regulated economy, the rail under payments, settlement and treasury operations.

The same North and South divide, seen through a different lens.

A caveat, so the claim stays honest. This is not global dominance. Tether still owns offshore venues and emerging-market remittance, where most of its volume lives. USDC's win is specific and it is decisive: the regulated corridor, where institutions move real money under real supervision.

That is the realm the King in the North actually rules.

Why this matters: supply tells you which coin is bigger. Velocity tells you which coin is becoming infrastructure. For a treasurer choosing a settlement asset, the second question is the one that matters, and the answer is already shifting USDC's way.

THE POWER BEHIND THE THRONE

Here is the thing about USDC that the league tables do not show. Circle issues the coin. It does not keep all of what the coin earns.

We can say that with precision because of what happened a year ago.

When Circle went public in June 2025, listing on the NYSE as CRCL, it became the first pure-play stablecoin issuer in the public markets, and the economics that had always been private were dragged into the daylight of quarterly filings.

The watershed was not the share price. It was the disclosure.

What the filings show is this. USDC earns the simple way: the reserves backing it sit in Treasuries and earn interest, and at current rates that is a substantial business.

But a large share of that interest never reaches Circle.

 It is paid away to Coinbase, under the arrangement that has bound the two together since they launched USDC as partners in 2018. Coinbase distributes the coin, and for that it takes a cut of the yield on every USDC held on its platform.

The mechanics matter, because they tell you where the power sits.

On USDC held on Coinbase's own platform, Coinbase keeps 100% of the reserve income. On USDC held anywhere else, the income is split with Circle, fifty-fifty. So the more of the coin that pools on Coinbase, the less of its own reserve income Circle keeps, and a great deal of the coin pools on Coinbase.

In 2024 the arrangement sent Coinbase around $908m, the bulk of Circle's distribution costs and more than half of its reserve income

You can see the lever in the numbers. As more balances moved onto Circle's own rails, its revenue-less-distribution margin reached a record 41.4% in the first quarter. That figure is, in effect, a measure of how much of its own kingdom the king has won back from his most powerful bannerman.

Because that is what Coinbase is. The Centre consortium that once jointly governed USDC was wound down in 2023, leaving Circle the sole issuer, the named king. But the economics never left. Coinbase is the great house whose army carries the coin to the realm, and whose loyalty is bought, every quarter, in a share of the crown's revenue. The king reigns. The bannerman is paid.

Why this matters: if you read Circle as a counterparty, or CRCL as an equity, the Coinbase distribution cost is the single biggest structural drag on its margin, and the on-platform versus off-platform mix is the lever that moves the model most.

THE BLOODLINE

A king should command his own treasury. This one does not.

Around 94% of Circle's revenue is interest earned on the reserves behind USDC, which means the king's income does not rise and fall with his own decisions. It rises and falls with the weather, and the weather is set in Washington, by a central bank he has no say over.

The reason he cannot shelter from it is the rule that crowned him. The GENIUS standard caps what the reserve may hold at Treasuries of 93 days or less, plus cash and overnight repo. That pins the whole book to the very front of the curve, a weighted-average maturity of under 60 days.

So when the Fed cuts, the income reprices down within weeks, and there is nothing locked in to soften it. Circle cannot reach further out the curve for term premium to defend its margin, because the rule that gives it legitimacy forbids the duration that would.

The crown and the exposure are the same object. Its profit is a leveraged bet on a rate it does not set.

But that same rule reveals the bloodline. The 93-day cap does not only bind Circle. It channels every dollar of compliant stablecoin growth into the front of the Treasury market. The BIS has put a number on it: for every $1 of USDC created, roughly $0.30 of Treasury bills are bought on impact, and about $0.75 cumulatively over four months.

The coin is not merely backed by the dollar's short-term debt. Its growth is a structural, near price-insensitive bid for that debt.

This is what the opening meant: USDC's claim was never its own. It runs in the blood of an older house, and here is the proof in the plumbing: the coin is the dollar's short-term debt wearing a token, and as the coin grows it funds the very issuer whose name it borrows.

The dollar lends USDC its legitimacy.

USDC lends the dollar a new and captive buyer of its bills.

Sovereign capture, stated not as theory but as a cash flow.

One change to watch: the OCC has asked whether to widen the eligible reserve out to two-year Treasuries, with final rules due on 18 July. If it lands, the duration leash loosens, and the king gets a little more shelter from the weather.

Until then, he stands in it.

Why this matters: USDC's earnings are a direct, undiversified bet on short rates, so a cutting cycle hits the issuer before it hits anyone else. And at the level of the system, the growth of the regulated stablecoin is now wired into demand for US government debt.

The king's fortunes and the Treasury's funding have become the same trade.

So this is the King in the North.

Crowned by the regulators, carried by a bannerman who keeps much of the coin, his treasury rising and falling with a rate he does not set, his claim borrowed from an older house.

He reigns.

But whether he rules is the question we began with, and the honest answer is that he does not, not yet, and perhaps not in the way a king is supposed to.

But that may be the wrong question.

A year on from the June 2025 Circle IPO that dragged this stablecoin industry into the scrutiny of public markets, the contest is no longer about which dollar is largest, or even which moves the most.

It is about who controls the rails the regulated world is quietly moving onto. That war has already arrived. USDC is fighting it from the strongest hand in the regulated world, and from a throne it does not fully own.

The North has its king. The war for the realm is just beginning.

-Thanks for reading.

Mark McKendry, Stablecoin State

P.S. If you would like to contact our team just reply to this email - we read every response.

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