Fidelity launching its own stablecoin, Tether loves gold

Wall Street financial firms continue to embrace stablecoins, while Tether is embracing its inner Goldmember and sanctions-evaders are embracing A7A5.

White House crypto advisor Patrick Witt claims this year’s World Economic Forum (WEF) in Davos was “a turning point” in terms of the traditional finance sector’s embrace of blockchain technology. In particular, Witt called stablecoins “the gateway drug” for tradfi institutions, in part because the technology “could be threatening or challenging to their business model.”

Enter asset manager Fidelity Investments, which on Wednesday announced plans to launch its own dollar-backed stablecoin on the Ethereum network. The Fidelity Digital Dollar (FIDD) will make its debut on major exchanges in the coming weeks and will be accessible by both retail and institutional clients.

Last March, Fidelity said it was “actively testing” its own stablecoin but had no immediate plans to launch the product. The subsequent passage by Congress of the stablecoin-focused GENIUS Act appears to have tipped Fidelity’s hand.

Fidelity Digital Assets president Mike O’Reilly said FIDD reflected the company’s “long-standing belief in the transformative power of the digital assets ecosystem and [Fidelity has] spent years researching and advocating for the benefits of stablecoins.”

O’Reilly told Bloomberg that stablecoins “have the potential to serve as foundational payment and settlement instruments. Real-time settlement, 24/7, low-cost treasury management, are all meaningful benefits that stablecoins can bring to both our retail and our institutional clients.”

Fidelity is hardly alone among major tradfi players in dipping its toes into the stablecoin waters. JPMorgan (NASDAQ: JPM) launched its JPMD ‘deposit token’ last year, and U.S. Bancorp (NASDAQ: USB) began testing its stablecoin on the Stellar payments network in November. A consortium of U.S. banks is also exploring a joint stablecoin project.

But the success of Fidelity’s FIDD is anything but assured. Ripple Labs’ dollar-backed stablecoin (RLUSD) has struggled to boost both its market cap and adoption. PayPal’s (NASDAQ: PYPL) PYUSD saw its cap rise nearly 50% last year to $3.6 billion, but that’s a fraction of Tether’s market-leading USDT ($186.1 billion) and runner-up Circle’s (NASDAQ: CRCL) USDC ($71.3 billion). Meanwhile, new competitors—like Tether’s USAT, which launched Tuesday—continue to throw their hats into this ring.

Bucking the lack of traction by RLUSD/PYUSD, the USD1 stablecoin issued by the Trump family’s decentralized finance (DeFi) project World Liberty Financial has managed to grow its market cap to $5 billion since its launch only nine months ago. But not all stablecoins have a backer in the White House.

Tether can’t stop buying gold

While USAT’s market cap remains at $20 million the day after its launch, Tether’s gold-backed token (XAUT aka Tether Gold) has seen its market cap rise more than 20% in just the past month. This reflects the sharp rise in the price of the rare metal itself over the same period, spurred by the decline in the U.S. dollar’s value due to the country’s massive debt and the Trump administration’s often inscrutable policy positions.

This week, Tether issued XAUT’s Q4 attestation that ‘confirmed’ the existence of 520,089.35 troy ounces of gold, one ounce for each XAUT token currently circulating in the wild. Of these, 409,217 have been sold, with the remaining 110,871 XAUT still available for sale. Tether claims XAUT represents ~60% of the total gold-backed stablecoin market. (XAUT’s attestations are conducted by BDO Italia, the same firm that attests to the existence of reserves allegedly backing Tether’s USDT stablecoin.)

Tether’s most recent USDT attestation said the company booked a profit of $10.1 billion over the first nine months of 2025, much of which has gone towards its gold purchases. Tether now holds around 140 tons of gold, more than half of it acquired over the past year.

This stack is worth ~$24 billion, and Bloomberg characterized it as “the largest known hoard outside of those held by central banks, [exchange-traded funds] and commercial banks whose vaults underpin the main trading hubs.”

Bloomberg quoted Tether CEO Paolo Ardoino saying the company has been buying one or two tons of gold per week and would continue to do so for “definitely the next few months,” after which the company would reassess its strategy “based on the market.” Ardoino said Tether is “operating at a scale that now places the Tether Gold Investment Fund alongside sovereign gold holders, and that carries real responsibility.”

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A7A5 usurping USDT’s crime coin crown?

USDT’s longstanding reputation as the preferred financial rail of criminals and sanctions-evaders could be under threat by Russian upstart A7A5, according to new research.

Last week, Elliptic researchers reported that the ruble-backed A7A5 has surpassed $100 billion in aggregate transaction value since its launch in January 2025. Transaction volume enjoyed a boost last September after Russia’s state-owned PSB Bank endorsed the token by allowing A7A5 purchases via its bank cards.

A7A5 runs on its own decentralized exchange (DEX) as well as two Kyrgyzstan-based exchanges, Meer and Grinex. The latter exchange rose from the ashes of Garantex, which was taken offline last spring following a coordinated law enforcement effort by multiple Western nations targeting money launderers and ransomware operators.

Uniswap, the largest DEX, added A7A5 to its unsupported token list in November. The ongoing negative spotlight on A7A5 helped reduce its daily transaction volume from $1.5 billion in July to its current level of around $500 million.

But Elliptic reported that A7A5 has seen strong uptake of its Digital Promissory Notes, aka A7A5-backed ‘physical security instruments’ that can be exchanged for cash in certain countries via the Telegram platform. (Telegram was recently flagged as a facilitator of compliance-phobic ‘crypto-to-cash’ retail outlets and courier services.)

Despite A7A5’s 2025 gains, USDT’s usefulness in facilitating illicit transactions was on full display in a new report from TRM Labs detailing Tether’s enduring popularity with Islamic terror groups like ISIS.

TRM says “fundraising campaigns for ISIS members … have become a persistent driver of cryptocurrency adoption among ISIS supporters globally.” Often presented as humanitarian assistance, “there is clear evidence that the funds raised often benefit ISIS as an organization, not just individual detainees or their families.”

And while ISIS isn’t choosy about what types of tokens they receive via these donations, “Tether (USDT) remains the preference for most involved.”

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Circle not going quietly

The overall stablecoin market cap has witnessed a decline of late, with Circle’s USDC seemingly bearing the brunt of this retreat. On January 26, Santiment analysts noted the stablecoin cap had fallen by $2.25 billion in just 10 days due to global uncertainty and the subsequent flight from digital assets like BTC into more reliable ‘safe havens’ like gold.

USDC’s cap has continued to fall since that report, as of mid-Wednesday, sitting nearly $5 billion below its level on January 18. Meanwhile, USDT’s cap has fallen by only around $700 million during that same timeframe. RLUSD and PYUSD have enjoyed modest gains during this period, while USD1 is up nearly $1.6 billion.

Tuesday’s launch of Tether’s U.S.-compliant USAT was viewed by some as a threat to USDC’s U.S. market dominance, but Circle investors continue to brush off these concerns. Circle’s share price closed on Wednesday up 4.1% to $72.84.

Circle’s Wednesday surge was assisted by a favorable nod from Mizuho Securities analysts, who upgraded Circle’s stock from ‘underperform’ to ‘neutral’ and raised Circle’s price target from $70 to $77. The analysts cited USDC’s increased use on the Polymarket prediction market, which they claim assisted the token’s 2025 market cap gains (+73% from 2024) and could add billions more to that total.

Mizuho noted Polymarket’s “large share of non-crypto-native users,” particularly since the prediction market was welcomed back to the U.S. by the Commodity Futures Trading Commission (CFTC) last September. These non-native users will help drive “incremental demand for USDC from outside the usual DeFi audience.”

USDC is by far the most popular stablecoin on DeFi platforms, thanks in part to its more regulatory-friendly reputation in the U.S. and Europe. Just this week, Token Terminal reported USDC hitting new all-time highs in transfer volume on Ethereum (the dominant DeFi network) in the final quarter of 2025, rising 400% year-on-year to $4.5 trillion.

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South Korea stablecoin plans moving forward (kinda)

Across the Pacific, South Korea appears to be making progress on its long-delayed digital asset legislation. South Korea’s Financial Services Commission (FSC) was supposed to submit a draft of its Basic Digital Asset Act in December, but missed that deadline due to ongoing squabbles with the country’s central bankers over who gets to issue won-denominated stablecoins.

In short, the Bank of Korea (BoK) wants the nation’s regulated financial institutions to hold a controlling stake in any stablecoin issuer, while the FSC wants the country’s tech giants to play a greater role. The impasse has frustrated the country’s digital asset operators, who want the legislation to advance so they can firm up their plans.

On January 28, Chosun Biz reported that the ruling Democratic Party of Korea’s (DPK) Digital Asset Task Force (TF) was now aiming to get a finished draft to the legislature for consideration before the Lunar New Year celebrations on February 17.

The TF held a meeting on Wednesday at which the BoK’s recommendation for a ‘unanimous consent system’ for stablecoin issuance was rejected in favor of a plan to coordinate authorization among related agencies. This group will include both the BoK and FSC, the Ministry of Economy and Finance, and the Financial Supervisory Service (FSS).

The TF claims the BoK’s unanimous system would have slowed issuance, although the speed with which all these government bodies might achieve something resembling consensus seems questionable. DPK legislator Lee Kang-il said the BoK’s ‘50%+1 share’ proposal “remains contentious because there is still no willingness to concede among government ministries.”

Speaking at this week’s Asia Financial Forum in Hong Kong, BoK Governor Rhee Chang-yong said South Korean-registered financial institutions must take the lead role in won-backed stablecoin issuance in order to limit cross-border money laundering and capital control violations. Rhee believes banks are better equipped to handle this task than tech platforms.

The TF did agree on the requirement for stablecoin issuers to demonstrate capital requirements of “at least five billion won” ($3.5 million). The TF also authorized the formation of a new inter-ministerial consultative body on virtual assets called the Virtual Assets Council. The council will be chaired by FSC Chairman Lee Eog-weon, while the BoK’s deputy governor will have a seat.

South Korea is also mulling a proposed ownership cap for digital asset exchanges between 15% and 20%. FSC Chair Lee said this cap, which is expected to be incorporated into the Act, is necessary because “excessive concentration of ownership could increase the risk of conflicts of interest and undermine market integrity.”

South Korean exchanges are currently required to seek renewal of their right to operate every three years. But Lee said the Act’s “proposed shift to an authorization system would effectively grant exchanges permanent operating status,” necessitating stricter rules to “match their larger role and greater responsibilities.”

Some major local exchanges, including Upbit and Coinone, currently have owners whose stakes exceed the proposed caps. This could be good news for U.S. exchange Coinbase (NASDAQ: COIN), which is reportedly looking to take a stake in Coinone, the country’s third-largest exchange.

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