Written by: 10K Ventures
This article attempts to comprehensively sort out the technical path, market structure, institutional evolution and profit logic of stablecoins, and build a panoramic framework for understanding the trend of stablecoins. This article is also the first in a series of studies. We will also launch research on topics such as RWA and coin stocks in the future.
Stablecoin Evolution Path
The birth of stablecoins is a natural result of the crypto asset system trying to solve the fundamental problem of "currency volatility". Whether it is Bitcoin, Ethereum, or other decentralized assets, their openness and scarcity constitute the foundation of the digital asset system, but their sharp price fluctuations and lack of a stable pricing anchor make it difficult for them to play a monetary role in daily transactions and payments. The proposal of stablecoins is precisely to build a bridge between "anti-censorship settlement methods" and "predictable currency values".
The prototype of stablecoin, Tether and the initial attempt of on-chain dollar
In 2014, the launch of Tether marked the first structural attempt at stablecoins. The principle is simple and straightforward: users remit US dollars to Tether's account, and the latter issues an equivalent amount of USDT stablecoins on the blockchain and promises to repay 1:1. This "fiat currency mortgage + off-chain custody + on-chain issuance" model essentially outsources the issuance of US dollar deposits to private institutions, forming a business model similar to that of a narrow bank.
The key to Tether's success lies in its first-mover advantage in the market, the network effect of on-chain liquidity, and filling the gap in the demand for US dollar settlement in crypto transactions. At the same time, USDT's off-chain custody asset structure has also caused controversy. Its assets are not entirely cash or treasury bonds, but include commercial paper, precious metals, and even Bitcoin. Although this mixed asset structure has improved profitability, it has also left a regulatory gray area at the trust level.
USDT launch period on various chains
The percentage of USDT used by users of various blockchains
With the increasing regulatory requirements and the market's pursuit of transparency, the USDC stablecoin launched by Circle has gained favor among mainstream institutions in 2018. Unlike Tether, Circle was jointly initiated by Circle and Coinbase and operates under the regulated financial system in the United States. Its reserve assets are entirely composed of cash and short-term U.S. Treasury bonds, and are regularly disclosed through third-party audit reports. USDC represents the path to stablecoin compliance and has become an industry reference sample for the U.S. government to promote the "payment stablecoin" compliance bill in the future.
Crypto-collateralized stablecoins: the emergence of DAI and the foundation of the DeFi ecosystem
If Tether and USDC are the “centralized tokenized versions” of the dollar on the chain, then the launch of DAI has opened up a stablecoin model under the decentralized finance (DeFi) paradigm. DAI, launched by MakerDAO in 2017, no longer relies on fiat currency deposits and bank accounts, but is collateralized by on-chain pledged Ethereum assets and automatically minted and destroyed by smart contracts.
The issuance of DAI relies on an over-collateralization mechanism. Users need to pledge ETH with a value higher than 150% to obtain DAI of equal value, and get back the collateral after repaying the loan. This mechanism worked well in the early stage, not only meeting the needs of on-chain users for decentralized dollars, but also becoming the basic currency for the "interest rate market" and "leverage structure" in the rise of DeFi applications.
However, this model with ETH as the core collateral asset faces the risks of volatility and liquidation efficiency. In the 2020 "3.12 Crash" incident, DAI faced problems such as blockage of the liquidation system and debt black hole, which triggered widespread reflection on the security of the model in the community. Since then, MakerDAO has added multiple collaterals such as USDC, WBTC, and even real-world assets (RWA), which has greatly weakened its degree of decentralization but enhanced its stability. DAI has gradually transformed from a fundamentalist "crypto-collateralized stablecoin" to a "multi-collateralized synthetic dollar system."
The rise and disillusionment of algorithmic stablecoins: a systemic warning from the UST incident
While fiat-collateralized stablecoins such as Tether and USDC provide compliance and stability, and crypto-collateralized stablecoins such as DAI explore decentralized paths, another type of algorithmic stablecoin model that claims to be "collateral-free" has also quickly attracted market attention. This type of model attempts to regulate supply and demand through protocols and maintain a coin price anchor, thereby achieving a stabilization mechanism driven by pure mathematical logic.
UST in the Terra system is the most representative case. UST does not rely on legal tender or crypto assets for collateral, but is anchored through a dual-currency adjustment mechanism with its sister currency LUNA - when UST is higher than $1, users can mint 1 UST with $1 LUNA; when UST is lower than $1, 1 UST can be exchanged for $1 worth of LUNA, thereby achieving arbitrage hedging. However, this model has no real asset support at the bottom layer, and its stability depends entirely on the market confidence of LUNA.
With the expansion of Terra's ecological incentive mechanism, the total issuance of UST exceeded US$10 billion at the end of 2021, becoming the third largest stablecoin after USDT and USDC. However, a large-scale redemption wave in May 2022 caused UST to decouple, and the mechanism of automatic issuance of LUNA by the protocol failed to suppress the collapse of confidence. LUNA subsequently entered a "death spiral" and UST completely returned to zero. This collapse directly caused the evaporation of tens of billions of dollars in assets, and also caused the algorithmic stablecoin model to collectively "exit" in the face of global supervision.
The rise of a new form: USDe’s financial engineering and on-chain spread mechanism
The failure of UST did not end the exploration of the stablecoin model, but instead inspired the emergence of a new generation of stablecoin mechanisms. At the end of 2023, the USDe stablecoin launched by Ethena proposed a different idea: using a "Delta-Neutral" structure to hedge against stablecoin price fluctuations while relying on on-chain interest rate spread income for support.
USDe is issued based on a collateral asset portfolio dominated by Ethereum, combined with a short perpetual contract strategy to hedge volatility risk. Users can deposit ETH, stETH or USDC, and the platform will convert it into delta-neutral structured assets and then issue USDe. This structure can theoretically achieve a stable net asset value through a combination of spot longs and contract shorts. In addition, sUSDe launched by Ethena allows users to pledge USDe to participate in profit sharing. Its annualized income comes from a combination of perp funding rate and stETH staking rate, which can reach 20-30%.
The key to the USDe model is its “interest-bearing stability mechanism” based on real arbitrage income on the chain. Unlike traditional stablecoins that rely on external assets or repayment confidence, this model uses the on-chain interest rate spread as a source of reserve support, and highly binds stablecoins to on-chain liquidity and market expectations. At the same time, Ethena provides USDe with additional insurance mechanisms and exchange windows, striving to enhance its systemic resilience and transparency.
The effectiveness of this model still needs to be verified periodically, especially during periods of low funding or fluctuations in on-chain liquidity. However, it is undeniable that USDe has brought a new direction to stablecoins: generating sustainable income with on-chain mechanisms, providing asset support with market neutral strategies, and embedding DeFi application scenarios with native protocols, representing an attempt to transition stablecoins from static "token mapping" to dynamic "income assets".
Current market stablecoin pattern: four major classification logics and institutional reconstruction
With the introduction of the United States Stablecoin National Innovation Act (GENIUS Act), the global stablecoin market is entering a new stage of institutional reconstruction. The Act clearly regulates core issues such as issuance thresholds, reserve structure, payment functions, and the path for technology companies to participate. Its impact is far-reaching and is no less than a "watershed event". Under this new institutional framework, the stablecoin market presents a clearer camp differentiation, which can be initially summarized into four major forces: compliance sovereignty, efficiency and pragmatism, political capital, and the institutional counterattack of traditional banks/tech giants.
Compliant Sovereignty: USDC Alliance
Representatives: Circle (USDC), Paxos (PYUSD), Gemini (GUSD)
As regulations become clearer, stablecoin issuers that first adapt to the regulatory framework gain a first-mover advantage. Take Circle as an example. Its USDC has a monthly market value of nearly $61 billion in June 2025, and its reserve structure is entirely composed of cash and short-term U.S. Treasury bonds, which meets the STABLE Act's requirement for reserve assets to be "≤93 days."
Represented by USDC, this type of stablecoin strictly complies with the provisions of the GENIUS Act. The reserve structure is mainly 100% cash and short-term government bonds, and audit reports are disclosed regularly. It has strong compliance and is welcomed by institutional clients, custody platforms and mainstream financial infrastructure.
USDC total market value, source: Deflama
These issuers generally have:
State chartered bank or trust charter
Monthly Reserve Audit Report
Clear 1:1 redeemable mechanism
However, in terms of revenue model, Circle faces the problem of being highly dependent on Coinbase’s distribution channels. It is disclosed that Circle’s annual revenue in 2024 will reach US$1.68 billion, but its profit will only be US$167 million, mainly because Coinbase took away most of the channel fees and marketing rewards. (Detailed explanation will be given in the “Profit Model of the Head Stablecoin Company” section)
In terms of income structure, stablecoin issuers can realize billions of annual interest income by managing reserve assets (such as U.S. Treasury bonds). For example, Circle's annualized revenue in 2024 reached $1.68 billion, of which more than 99% came from reserve investment income.
Circle has successfully listed in 2025. The strategic intention behind its IPO is clear. It is to break away from the sole dependence on Coinbase and strengthen its independent issuance and compliance service capabilities to obtain more support from financial institutions and bank-level users. But the problem cannot be ignored - strong supervision also brings "channel dependence". Most of the USDC (the reason for this part of the deletion is that it is not quite right. There are still a lot of USDC transactions on the chain. How can 90% of the transactions be driven by CB?) transactions are driven by Coinbase. Coinbase uses this bargaining power to suppress Circle's profits and retain partial custody rights of USDC. This "compliant stablecoin × distribution oligopoly" structure has also triggered new risks such as centralization and platform lock-in.
Efficiency and pragmatism: USDT Alliance
Representatives: Tether (USDT), Ethena (USDe), DAI (MakerDAO)
Tether has built a typical "loose off-chain regulation + efficient on-chain" operating system. The market value of USDT issued by Tether ranks first among global stablecoins all year round. As of June 2025, the circulating market value of USDT is close to 150 billion US dollars. Its advantages lie in extreme efficiency and market network effects. Its reserve strategy is relatively flexible, and part of the funds are allocated to non-treasury high-yield assets (such as Bitcoin, gold, and private bonds), forming a "high-interest arbitrage" type of stablecoin.
The advantages of Tether are:
The global distribution cost is extremely low, and chains such as TRON and Solana are highly dependent on its liquidity. The reserve asset structure is more profitable (such as some Bitcoin, precious metals, and non-treasury bonds), and strong demand barriers are established for markets with weak financial infrastructure such as Latin America and Southeast Asia.
Unlike Circle, Tether uses its leading position to collect channel fees. Major exchanges actively access USDT to meet user needs, which in turn helps Tether save a lot of issuance costs, which also makes its per capita profit level surpass that of traditional financial giants.
Faced with the "high-pressure regulation" of the GENIUS Act, Tether adopted a "dual-track strategy": maintaining the flexibility of USDT in overseas markets, while preparing to launch a fully compliant new stablecoin to enter the U.S. market. However, even with its cooperation with Cantor Fitzgerald and political endorsement, its "global stablecoin" model is still in a gray area in the United States.
The other type of representatives, USDe (Ethena) and DAI (MakerDAO), are moving towards an on-chain synthetic model. DAI has transformed into a quasi-compliant hybrid model through "RWA + DSR + veToken governance", while USDe adopts the "mortgage ETH + arbitrage hedging" model to build a "pseudo 1:1" redemption income stablecoin mechanism.
Their common characteristics are: on-chain native, interest rate sensitive, and highly composable, but there is also "policy uncertainty" - for example, the "Endogenously collateralized stablecoins" clause in the STABLE Act may restrict its role as a "payment stablecoin" across the board.
Tether reserve asset composition in Q1 2025, source: BDO audit report
Political Capital: USD1 and the Construction of Sovereign Trading System
Representative: USD1 (World Liberty Financial)
The representative is the USD1 stablecoin project promoted by World Liberty Financial, which has close ties with the Trump family. Its notable feature is that it relies on political resources and sovereign capital to leverage market application scenarios, such as cooperating with the UAE sovereign fund MGX's $2 billion investment and using the Binance exchange to build trading depth and liquidity.
In addition, such projects focus more on "scenario building" rather than "technical breakthroughs". The arrangement of using TRON chain as the issuance network and Justin Sun as the strategic advisor is a strategic combination of "technical foundation + political cover".
Although the USD1 path bypasses some traditional financial channels, its high dependence on political stability and Middle Eastern resource relations also sows uncertainty for its future growth.
USD1 trading volume changes, source: Artemis
Stablecoin market structure: size, participants and competition
As stablecoins evolve from crypto trading matchmaking tools to global digital payment infrastructure, their market structure is becoming more stratified and differentiated. From issuance models, asset reserves, circulation mechanisms to regional compliance, various types of stablecoins form a complex network interwoven with multiple rule systems, interest entities, and usage scenarios.
Market size and share distribution
Global Stablecoin Market Value Growth Trend (2019–2025): The total market value of stablecoins has climbed from less than US$10 billion at the end of 2019 to more than US$250 billion in the second quarter of 2025. This means that it has increased more than 5 times since the end of 2020, reflecting the explosive expansion of stablecoin demand and its rapid improvement in the crypto market.
Currently, the total market value of global stablecoins accounts for about 7-8% of the total value of the crypto market. Among the many stablecoins, USDT and USDC dominate, with a combined market share of more than 88% (USDT: 63.5%, USDC: 24.9%).
Among them, USDT is still the largest stablecoin, with a supply exceeding US$118 billion in 2024, accounting for nearly 75% of the stablecoin market value at the time; as of mid-2025, USDT circulation further increased to approximately US$150 billion, accounting for approximately 63% of the total global stablecoin supply.
USDC is the second largest stablecoin, with a market value of about 40-50 billion US dollars, accounting for about 20%. In addition, other stablecoins such as DAI, FDUSD, TUSD, USDe, PYUSD, etc. together constitute the remaining market share, each of which has formed a certain influence in specific user groups and scenarios.
Stablecoin market share structure (by market value)
As of the latest quarter, USDT accounts for about 69.0%, USDC accounts for about 20.7%, DAI accounts for about 3.1%, FDUSD accounts for about 1.7%, the emerging income-based stablecoin USDe accounts for about 1.5%, and other stablecoins account for about 4.0% in total. It can be seen that USDT and USDC are in an absolute dominant position in the stablecoin landscape. USDT occupies a leading position with its long-term and deep-rooted trading network effects, extensive user trust and abundant liquidity. Its user groups value its network breadth, market depth and relatively stable operating record. USDC, on the other hand, has won the favor of institutional and corporate users by relying on highly compliant and transparent reserve management - for example, its reserves are audited and disclosed by licensed accounting firms every week, mostly consisting of cash and short-term U.S. bonds. This transparent and compliant advantage has enabled USDC to gain higher trust and adoption in formal financial channels such as banks and payment companies.
It is worth noting that in a high-interest environment, issuers of legal-collateralized stablecoins have also gained considerable benefits. For example, Tether disclosed that it holds about $97 billion in U.S. Treasury bonds and repurchase agreements in its reserves (data from the second quarter of 2024), with interest income of nearly $400 million per month. This shows that as the scale grows, the stablecoin business itself is becoming an important profit center, and it also further strengthens the advantages of the leading stablecoins in terms of funds and reputation.
Looking ahead, as global regulation becomes clearer and user demand continues to grow, the overall stablecoin market still has room for expansion. The news that the U.S. Senate passed the Stablecoin Act in June 2025 once pushed the total market value of global stablecoins to a record high of $251.7 billion, indicating that favorable policies may further enhance market confidence in stablecoins. Although the market structure of mainstream stablecoins is relatively stable, the rise of new types of stablecoins (such as endogenous interest-bearing USDe, etc.) is also constantly expanding the boundaries of the stablecoin market, injecting new competitive momentum into this field.
Regional Distribution
The global use of stablecoins is showing significant regional differences. On the one hand, stablecoins have achieved the "spillover" of the US dollar value, serving as an anti-inflation and US dollar substitute tool in emerging markets; on the other hand, different regulatory environments in different regions have also affected the types of stablecoins preferred by the local area and the level of on-chain activity.
The United States and developed markets: In the United States, due to stricter regulatory requirements, institutions and enterprises prefer compliant and transparent stablecoins. For example, USDC issued by Circle and PYUSD launched by payment giant PayPal have been adopted by many financial institutions and technology companies. On payment networks such as Visa and Mastercard, USDC is being used for cross-border clearing and merchant settlement to achieve instant payment of digital dollars. For example, in June 2025, Shopify announced that it would cooperate with Coinbase and Stripe to integrate USDC stablecoin payments, enabling the global e-commerce network with a scale of more than US$140 billion to accept digital dollar payments. In these scenarios, as a compliant and penetrable payment closed loop, the transparency and regulatory filing of stablecoins are particularly important. Therefore, the US market is dominated by stablecoins such as USDC and PYUSD, which are anchored and issued through the Ethereum mainnet and trusted bank channels. The demand for speculation and trading is relatively limited. In addition, Europe, Singapore, Japan and other places have also formulated stablecoin regulatory frameworks (such as EU MiCA, Singapore MAS regulations, etc.) and cultivated compliant local stablecoins (such as Euro EURS, Singapore Dollar XSGD, etc.). The common point of these developed regions is that they place more emphasis on the license qualifications and reserve review of issuers. The use of stablecoins is more reflected in B2B cross-border payments, trade settlements and wealth management, rather than personal hedging.
Emerging markets and developing countries: Latin America, Africa, the Middle East, South Asia and other regions have a particularly strong demand for stablecoins, which are seen as a tool for replacing the US dollar and financial inclusion. In countries with high inflation and currency depreciation, residents and companies buy a large number of stablecoins to hedge against currency depreciation, make cross-border remittances or daily settlements. According to Chainalysis data, Latin America is the leading region in the real application of stablecoins in the world: 71% of the surveyed institutions use cross-border payments as the main purpose of stablecoins, far higher than the global average of 49%. Many Latin American companies have achieved an efficient cross-border remittance experience that is difficult for traditional banking systems to achieve by combining stablecoins with local payment networks. For example, Brazil received a total of approximately US$90.3 billion in crypto inflows from July 2023 to June 2024, ranking first in Latin America. Among the crypto flows from local exchanges to overseas, stablecoins accounted for as much as 70%. As the exchange rate of the local currency, the real, weakened, the transaction volume of stablecoins on Brazilian exchanges soared by 207.7% year-on-year, far exceeding the growth of Bitcoin or Ethereum in the same period. This reflects that local companies and individuals have turned to stablecoins as a cross-border carrier of funds in order to gain exposure to the US dollar and avoid exchange rate risks.
In Africa, stablecoins also play a role as a daily financial alternative. Nigeria's crypto receipts in 2023-2024 reached $59 billion, of which about 85% of the funds transferred were less than $1 million - indicating that it was mainly composed of small and medium-sized retail transactions, with extremely high grassroots adoption. Many Nigerians bypass banking regulations and use stablecoins such as USDT to replace naira to store value and trade through peer-to-peer markets. The cost advantage of stablecoins over traditional remittance channels is particularly significant: cross-border remittances through stablecoins can cost as little as 0.1% of the transfer amount, while traditional remittance fees are often as high as 7-8% or more. This gap means that using stablecoins can save 98% of remittance costs, and the funds are almost real-time (completed within a few minutes), while traditional wire transfers may take 2-5 days. Take Ethiopia as an example. After the country experienced a 30% devaluation of its local currency, the birr, in 2024, people flocked to stablecoins for risk aversion, driving a 180% year-on-year surge in local retail stablecoin transfers. According to statistics, stablecoins currently account for about 43% of the total crypto trading volume in sub-Saharan Africa. It can be said that in African countries with weak financial infrastructure, stablecoins provide an unprecedented low-cost and fast means of value transmission, and are regarded as a "revolutionary" tool to improve remittance and payment systems.
Asia and Other Regions: The use of stablecoins in the Asia-Pacific region is more diversified, with both institutional applications in developed economies and retail demand in developing markets. For example, India ranks first in the Global Crypto Adoption Index, and about 68.8% of its crypto trading volume comes from large transfers of more than $1 million in a single transaction - indicating that it is mainly driven by institutions and large accounts, and stablecoins are widely used in scenarios such as trade settlement and fund scheduling. In Southeast Asia, the XSGD Singapore dollar stablecoin launched by Singapore has processed more than 10 billion Singapore dollars in on-chain transactions since its issuance in 2020. In the second quarter of 2024, the scale of stablecoin payments in Singapore reached about $1 billion per quarter, showing that local fintech companies and cross-border e-commerce companies are more interested in compliant stablecoin payments (about 25% of which are small retail scenarios and 75% are corporate payments). Indonesia has become an emerging leader in Asia: Indonesia received a total of about $157.1 billion in crypto asset value inflows between 2023 and 2024, ranking third in the world, with an annual growth rate of nearly 200%. Most of Indonesia’s trading volume is concentrated on decentralized exchanges and token transactions, but stablecoins still play an important role, helping local users save about $300 million a year in cross-border payments and dollar hedging.
In general, the penetration rate of stablecoins in developing countries is much higher than that in developed countries. This is due to the strong demand for US dollars under the exchange rate fluctuations and inflationary pressures in emerging markets, and also because stablecoins lower the financial threshold and fill the gaps in the traditional banking system. Research by the World Economic Forum points out that the adoption of stablecoins will grow rapidly when the local currency depreciates - this law has been confirmed in many places in Latin America, Africa, and Southeast Asia. On the contrary, in the United States, the European Union and other places, stablecoins are more used as tools for technology companies and financial institutions to improve payment efficiency, rather than as a rigid demand for residents. Therefore, we see that "US dollar stablecoins" are spreading around the world, but the way they are adopted varies from place to place: on one end, Stripe, Visa, etc. embed stablecoins into the payment link, and on the other end, street vendors in Nigeria quote goods with USDT. This uneven regional distribution indicates that the promotion of supervision and market education in various countries in the future will profoundly affect the regional evolution of the stablecoin landscape.
Usage scenarios and ecological embedding
The application of stablecoins has long gone beyond the scope of transaction matching and has been deeply integrated into various financial scenarios such as payment, lending, financial management, and remittances, becoming an indispensable infrastructure component in the blockchain ecosystem. More and more multinational payment companies are incorporating stablecoins into their channels. Visa has allowed USDC to settle some cross-border credit card transactions through the Circle platform; remittance companies such as MoneyGram also provide stablecoin cash exchange services, allowing users in developing countries to send and receive USDC and instantly exchange them for local fiat currencies. In the field of e-commerce, after platforms such as Shopify integrate stablecoin payments, small and medium-sized merchants can easily receive digital dollars from overseas without having to worry about the high fees and settlement delays in traditional acquiring.
Global Payments and Remittances
The outstanding advantages of stablecoins in remittance scenarios are mainly reflected in lower costs and faster speeds:
Cost of handling fee:
Traditional cross-border remittances are made through bank wire transfers or remittance companies (such as Western Union), with an average fee of about 5% to 8%, and some small-amount channels even have a double-digit fee. For example, the average remittance fee in Latin America in 2023 was 5.8%, and in Africa it was even higher than 8%.
In contrast, stablecoin remittances only require paying a gas fee, which is a fixed rate of a few cents in many cases. Taking Africa as an example, the average fee for remittance of $200 using stablecoins is about 60% lower than traditional methods.
Speed of arrival:
Traditional SWIFT cross-border transfers often take 2-5 working days, and are cleared by multiple correspondent banks and can only be processed on working days, with longer delays on weekends and holidays. Stablecoins are transmitted point-to-point through blockchain and are usually confirmed within a few minutes. On a high-performance chain, a stablecoin transfer takes only a few seconds to be credited.
In addition, the stablecoin network operates 24/7, uninterruptedly, without time differences or business hours. This is particularly critical for small and micro-sized households that rely on instant cash flow. Faster settlement also reduces the risk of exchange rate fluctuations. In traditional remittances, large fluctuations in exchange rates during the few days that funds are in transit may erode the value of remittances, while stablecoins lock in value through instant exchange.
In summary, stablecoins are becoming a transformative force for cross-border remittances in emerging markets. In the past year, the number of active stablecoin wallets worldwide has increased by 53% year-on-year to more than 30 million; the monthly on-chain transfer volume of stablecoins has also jumped from US$1.9 trillion at the beginning of 2024 to US$4.1 trillion at the beginning of 2025, and a total of about US$35 trillion in value transfers have been processed throughout the year, which is comparable to or even exceeds the transaction volume of traditional international payment networks.
Many successful cases of stablecoin remittances in Latin America, Africa, Southeast Asia and other places have shown that its low cost and high efficiency are meeting the urgent needs of ordinary users and small and micro enterprises. Of course, the large-scale application of stablecoins still depends on the support and cooperation of regulators in various countries, especially the improvement of anti-money laundering and user protection systems.
Source: aremisanalytics, the settlement amount of stablecoins exceeds Visa and becomes the world's second largest settlement architecture
On-chain lending and synthetic finance
In the DeFi world, stablecoins are the most important base currency and are widely used in activities such as mortgage lending, leveraged trading, and yield farming. Users can deposit stablecoins into the Lending protocol to obtain interest income or use them as collateral to borrow other assets. Many leveraged traders amplify their positions by borrowing stablecoins, because the price of stablecoins is stable and does not increase additional volatility risk like borrowing BTC and ETH. Stablecoins are also often used as arbitrage and market-making funds: arbitrageurs borrow stablecoins to sell or buy assets on different exchanges to earn price differences; market makers hold both tokens and stablecoins, and provide liquidity in the AMM pool to charge fees. It can be said that without stablecoins, there would be no prosperous DeFi ecosystem today.
OTC Trading and Over-the-Counter Markets
Clearing medium function in emerging markets
Due to foreign exchange controls and restrictions on deposits and withdrawals of fiat currencies in emerging markets, OTC networks have adopted a large number of stablecoins for clearing. USDT plays the role of a "shadow dollar" in Nigeria, Argentina, Venezuela and other countries, and is used for commodity pricing, exchange and savings. Local residents use USDT to complete payments through channels such as Telegram, forming a parallel financial system.
After Nigeria implemented foreign exchange controls, it was difficult to find US dollars on the black market, so citizens turned to Telegram groups to use USDT to pay for imports and exports. In high-inflation countries such as Argentina and Venezuela, residents immediately exchanged their paid pesos for USDT to maintain value, and spent or exchanged them back for paper money through peer-to-peer channels. It can be said that stablecoins are acting as a parallel financial system in these regions: USDT/USDC is a substitute for the US dollar, exchanges and wallets are bank accounts, and blockchain is a clearing network. Although this part of the transaction is largely outside of traditional supervision, it meets real market demand and objectively promotes the growth of the global circulation of stablecoins.
Commercial Payment and Supply Chain Finance
Multinational companies have begun to use stablecoins for B2B settlements, shortening settlement cycles and reducing exchange costs. Cross-border e-commerce uses USDC to pay overseas suppliers directly, and mining companies use USDT to pay for equipment within minutes. In the field of supply chain finance, stablecoins provide technical tools for securitization of accounts receivable and accelerate cash repatriation. Some government agencies have accepted stablecoins for tax payments.
Competition landscape and ecological layout
The competition of stablecoins has shifted from currency value stability to ecological competition. USDT dominates the crypto trading and OTC fields, while USDC leads in compliant payments and corporate services. Issuers are actively expanding application scenarios: Circle provides USDC enterprise integration API, Tether invests in cross-border payment channels, and decentralized communities explore the combination of DAI and the credit system.
In summary, stablecoins are moving from the cryptosphere to mainstream finance, becoming a bridge connecting different economic systems. Future competition will focus on who can provide more efficient stablecoin services under the premise of safety and compliance. The market structure is developing in the direction of multi-level division of labor and coordination, and stablecoins are expected to become an important financial infrastructure in the digital economy era.
Profit model of leading stablecoin companies
Circle
Circle Internet Financial relies on USDC reserve interest to form its core revenue source: More than 90% of Circle's revenue comes from USDC reserve interest, and this interest mainly comes from investing in U.S. Treasury bonds and reverse repurchase agreements, and a small part comes from bank deposit interest;
The cooperation with Coinbase enables most of the interest income to be distributed to coin holders in the form of "user rewards", and this arrangement is treated as a marketing expense;
By reclassifying part of its “distribution expenses” as marketing expenses, Circle significantly increased its book gross margin;
In addition, Circle's other revenues such as corporate payment network and developer API currently account for a very small proportion (less than 5%), but have growth potential in the future.
Interest income composition and trend changes
Reserve interest is Circle's absolute main source of income. Circle's revenue model is extremely simple: the US dollar reserves obtained from the issuance of USDC are invested in safe, short-term interest-bearing assets to earn interest income. According to Circle's disclosure, more than 99% of its revenue in 2024 came from the interest generated by USDC reserves. This proportion was 98.6% in 2023 and 95.3% in 2022, showing a trend of becoming more concentrated as interest rates rise.
Specifically, Circle only has $735 million in reserve interest income in 2022, which soars to $1.43 billion in 2023 and further grows to $1.66 billion in 2024. This is mainly due to the surge in short-term interest rates in the Fed's interest rate hike environment. Even if the circulation scale of USDC declines in 2023, it still drives a sharp increase in interest income.
Reserve Asset Composition
U.S. Treasury bonds are mainly used for reverse repurchase, supplemented by bank deposits. According to Circle's S-1 document, the company follows strict reserve management standards, with 80-90% of USDC reserves allocated to short-term U.S. Treasury bonds and cash equivalents such as overnight reverse repurchases, and the remaining 10-20% retained as bank demand deposits for liquidity.
Since January 2023, Circle has concentrated its reserves in the Circle Reserve Fund managed by BlackRock (a government money market fund open only to Circle), which invests in U.S. Treasuries maturing in less than three months, overnight U.S. Treasury repurchase agreements, and a small amount of cash. For example, in 2024, Circle held an average of approximately $37.5 billion in the fund, of which approximately $6.4 billion was held in deposit accounts at global systemically important banks (GSIBs). The bank deposit portion also generates interest (the average interest rate in 2024 was approximately 3.96%), but due to its small proportion, its contribution is far less than the interest on Treasury bonds and repurchase agreements. In other words, Circle's interest income mainly comes from U.S. Treasury interest and reverse repurchase income, while bank deposit interest accounts for only a small proportion.
Trend change: rising interest rates drive a surge in interest income
The Fed's rapid rate hikes have caused the yield on Circle's reserve investments to climb from less than 0.5% at the beginning of 2022 to around 5% in 2023. Circle's average Reserve yield was only 2-3% in 2022, but it has exceeded 5% in 2023. Although the circulation of USDC declined after the Silicon Valley Bank incident in mid-2023, the rising interest rate still doubled Circle's interest income. Interest rates remained high throughout 2024 (the U.S. 3-month Treasury bond rate was about 5.1%), and Circle's reserve interest continued to grow. It can be said that during the analysis period, Circle's revenue benefited greatly from the macro interest rate environment: rising interest rates are "good" for Circle's profitability, and once it enters a rate cut cycle, its revenue will face downward pressure. According to the prospectus sensitivity analysis, if the interest rate is reduced by 200 basis points, Circle's annual profit may be reduced by a huge amount of US$414 million (equivalent to nearly 1.6 times the net profit in 2024).
Cooperation mechanism with Coinbase and USDC interest sharing
Coinbase is not only an important distribution channel for USDC, but also a key partner of Circle. In 2018, the two parties jointly established the Centre consortium, and initially agreed to share interest income according to the proportion of USDC issued or held by each party. Under this model, "whoever issues (or holds) more USDC will get more interest", which effectively encourages Coinbase to actively promote the adoption of USDC. In August 2023, the Centre consortium was dissolved, and Circle took full control of USDC governance, while giving Coinbase a minority stake and signing a new three-year collaboration agreement.
The new agreement adjusts the revenue distribution mechanism: Circle first extracts a small portion of the issuer retention fee to cover compliance and operating costs, and then the remaining interest income is split into two layers to Coinbase:
Party-product slice: Coinbase will receive a corresponding proportion of interest income based on the proportion of USDC held on the Coinbase platform in the total circulation on that day; the USDC on Circle’s own platform will also receive the same proportion of income based on its proportion.
Ecosystem slice: After the above distribution, if there is any remaining profit, Circle and Coinbase will each get 50%, but Coinbase must fulfill its obligations to promote USDC (ensuring that users can easily purchase USDC, integrating it into key products, and participating in policy support, etc.).
This new profit-sharing arrangement means that Coinbase can get a considerable interest share for USDC on and off its platform. The higher the proportion of USDC held on the Coinbase platform, the more Coinbase's share will be; conversely, if more USDC circulates on Circle or third-party platforms, Coinbase's share will decrease. In recent years, the proportion of USDC on the Coinbase platform has increased significantly, from about 5% at the end of 2022 to about 20% at the end of 2024, and to 25% as of March 2025. Coinbase has become one of the most important issuance and custody channels for USDC, which has brought scale growth to Circle and also means that the bulk of the revenue needs to be shared with Coinbase.
USDC interest share is used to issue "rewards" to users. Coinbase will use the USDC interest share obtained from Circle mainly to pay USDC balance rewards (similar to the return of interest income) to users who hold USDC on its platform. This is essentially Coinbase subsidizing users' currency holding income with its own income to increase the attractiveness of USDC to users. For example, Coinbase increased the annualized reward for ordinary users holding USDC to nearly 5% in the second half of 2023, which greatly stimulated the retention and growth of USDC on its platform. In accounting treatment, Coinbase regards such USDC user rewards as marketing expenses and classifies them as sales and marketing expenses. In 2024, Coinbase's USDC user reward expenditures reached US$224 million, a surge of 542% from US$34.94 million in 2023. Coinbase explained that the increase in the USDC reward rate is aimed at enhancing customer acquisition, retention and platform engagement, and is a marketing investment. Therefore, although this part of the interest comes from USDC reserves, it is ultimately regarded as Coinbase's marketing cost in the form of "user rewards."
Coinbase will benefit greatly from the scale of the share in 2024. As USDC interest income soars, Coinbase's share amount will rise. According to the prospectus, Circle will recognize a total of $1.017 billion in "distribution, transaction and other costs" in 2024, of which about $908 million will be paid to Coinbase.
In other words, about 54% of Circle's total revenue that year was transferred to Coinbase as a share of the cooperation. This figure is approximately US$248 million and US$691 million in 2022 and 2023, respectively, corresponding to 40% and 50% of the revenue of the year. It can be seen that Coinbase is grabbing an increasing share of the revenue in the USDC ecosystem with its strong user base and distribution capabilities. Some analysts pointed out that after deducting the rewards issued to users, Coinbase's net income from the USDC business even exceeded Circle itself. This highlights Coinbase's strong position in the USDC ecosystem: it is both a "rainmaker" for Circle's revenue growth and a "toll booth" for grabbing revenue.
Distribution cost classification reduces reported gross margin
Circle classifies the channel share expenses related to the issuance and circulation of USDC as "distribution and transaction costs", which are directly included in operating costs and deducted from revenue. The $908 million share paid to Coinbase in 2024 and the $74.1 million strategic fee paid to Binance were handled in this way, resulting in the company's reported gross profit margin of only 39%.
These distribution expenses are essentially user acquisition costs and have the nature of marketing expenses. If reclassified as marketing expenses rather than sales costs, Circle's gross profit margin will be close to 100%, because there is almost no direct cost to obtain interest income itself. However, regardless of the accounting classification, Circle still needs to distribute more than 60% of its revenue to partners, and the proportion of distribution costs has increased from 40% in 2022 to more than 60% in 2024.
Edge revenue: Enterprise payment network and API services
Other income currently accounts for a limited proportion. In addition to reserve interest, Circle also has a small amount of income from transactions and infrastructure services, namely "other income". This includes fee income from providing payment settlement, digital wallets, blockchain access and other services to corporate customers through APIs, as well as technical service fees charged when assisting new blockchains to integrate USDC. However, for now, this part of the income is very small.
The prospectus disclosed that Circle's other product revenues accounted for only 1% of total revenues in 2024 and 2023, and only 5% in 2022. In terms of amount, other revenues in 2024 were approximately US$36.17 million, which is a drop in the bucket compared to the total revenue of US$1.676 billion. Circle has not yet effectively gotten rid of its sole reliance on interest income.
Development potential outlook
The market has high hopes for Circle's ability to expand income beyond interest. Investors expect Circle to make substantial progress in areas such as cross-chain bridge CCTP, merchant payments, and enterprise APIs, thereby "improving the quality of revenue." According to Tanay Jaipuria's analysis of S-1, the public offering market has implied in its pricing that Circle will achieve double-digit USDC circulation growth in the future and gain significant traction in fee-based products. Management also stated that it will continue to invest in the development of new products and gradually diversify its revenue. However, as of early 2025, these marginal revenues are still in the incubation period and have limited contribution to overall performance. Circle's short-term performance fluctuations still mainly depend on USDC interest income. Only by deepening its presence in the stablecoin ecosystem and providing differentiated value-added services can it gradually increase the proportion of non-interest income and enhance business resilience.
Incremental curve of USDC users, source: Token tetminal
Tether
U.S. Treasury bond interest income
Currently, Tether's main revenue comes from the interest generated by the large amount of U.S. Treasury bonds it holds in reserve. As the Federal Reserve's interest rate hikes push up U.S. Treasury yields, Tether's short-term U.S. Treasury portfolio has become its core source of "low-risk, high-yield" income in recent years.
Tether currently directly holds $98.524 billion in U.S. Treasury bonds, $6.286 billion in money market fund shares, and $4.885 billion through funds; it holds $15.094 billion in overnight reverse repurchase agreements, and $15.087 billion in U.S. Treasury bonds as collateral.
Tether’s exposure to U.S. Treasury bonds through different means reached: Direct holdings of U.S. Treasury bonds reached $98.524 billion
Indirect holdings (through money market funds): $4.885 billion
Controlled as collateral: $15.087 billion
A total of approximately $118.496 billion is tied to U.S. Treasuries, or about 79.4% of total reserves of $149.275 billion.
In the first quarter of 2024, Tether announced a record net profit of $4.52 billion, of which about $1 billion came from interest income from U.S. Treasury bonds. This figure has increased significantly from the previous quarter, reflecting the effect of rising U.S. Treasury bond interest rates and the expansion of Tether's reserves. In a high-interest environment, Tether's interest income in a single quarter has exceeded $1 billion.
Exchange and transaction fee income
Tether also earns a certain amount of commission income through the issuance and redemption of stablecoins. According to its regulations, the minimum amount for subscribing or redeeming USDT directly on the Tether platform is US$100,000, the redemption fee is 0.1% (at least $1,000), and the subscription fee is also 0.1%. These fees not only meet the large-scale exchange needs of institutions, but also provide Tether with a stable cash flow. During periods of turbulent market fluctuations, large redemptions are converted into company revenue: for example, during the turmoil in the crypto market in 2022, Tether paid out more than US$20 billion in redemptions in just a few weeks while maintaining stable redemption (the redemption volume in the second quarter alone brought the company tens of millions of dollars in fees).
In addition, the frequent use of USDT transfers and transactions by users in a multi-chain environment also reflects its value as an infrastructure for the crypto market. According to statistics, as of April 2025, Tether's annual cumulative revenue has reached approximately US$1.46 billion, significantly higher than other blockchain platforms (Ethereum's revenue was approximately US$157 million during the same period, and USDC issuer Circle's profit was approximately US$620 million). Overall, compared with the huge interest income, redemption/transaction fees are a secondary but stable revenue supplement, reflecting the widespread use of USDT in transaction settlement.
Evolution of asset allocation and profit model
Tether’s profit model is closely related to the composition of its reserve assets, which have undergone significant adjustments at different stages:
Early stage (2019–2021)
In the global low-interest rate environment, Tether has allocated a large amount of credit assets and high-yield investments in its reserves to increase its returns. The proportion of US dollar cash and treasury bonds is very low, and the proportion of risky assets is high. Take the reserve details first disclosed in March 2021 as an example (audited by Moore Global, a Caribbean auditing company with only 5 employees at this time): only 2.94% of the reserves are US treasuries, 49% are commercial paper with relatively poor liquidity, and the rest are mortgage loans (12.55%), corporate bonds and precious metals (9.96%), and other investments (1.64%, including a small amount of digital currency).
At that time, the U.S. Treasury bond interest rate was close to zero. The company earned additional income by holding short-term credit assets such as commercial paper and corporate loans, but it also assumed higher credit and liquidity risks. Tether's revenue structure at this stage can be described as a "high-risk, low-interest" model: interest income was limited, and it mainly relied on venture capital returns and stablecoin business fees for profit. At the same time, it also faced market doubts (such as the lack of independent audits in the early days and the opaque quality of commercial paper).
Tether's reserve structure at this stage:
Commercial paper accounts for 65.39% of cash and cash equivalents
US Treasury bonds account for 2.94%
Secured loans account for 12.55% of total reserves
Corporate bonds and precious metals accounted for 9.96%
Other investments (including digital currencies) accounted for 1.64%
Transformation and transition phase (2022)
Faced with regulatory pressure and industry concerns about the security of reserves (events such as the TerraUSD collapse have triggered scrutiny of the quality of stablecoin reserves), Tether significantly adjusted its asset allocation in 2022. The company gradually reduced its commercial paper holdings and announced in October 2022 that commercial paper had been cleared, and instead focused on cash equivalents such as U.S. Treasury bonds and bank deposits.
BDO's attestation report shows that at the end of September 2022, Tether held approximately $39.7 billion in U.S. Treasury bonds, accounting for more than 58% of total reserves; at the same time, 82% of its assets were "highly liquid" assets such as cash, cash equivalents and short-term deposits. This adjustment greatly reduced the credit and liquidity risks of the reserves.
In the fourth quarter of that year, despite the sharp decline in the crypto market, Tether still achieved a net profit of more than US$700 million. The source of profit began to shift to interest income. With U.S. bonds accounting for more than half and interest rates rising, the company's earnings for the quarter increased significantly. The profit model for this period can be summarized as "reducing risk exposure and surviving the winter steadily." On the one hand, increasing the proportion of U.S. bonds ensures redemption liquidity and asset security, and successfully withstood the test of large redemptions of approximately US$20 billion in the second half of 2022. On the other hand, the interest income brought by the Fed's interest rate hike gradually replaced the previous high-risk investment income and became a new engine for profit growth.
Current Phase (2023 to Present)
Since 2023, Tether's asset structure has further tilted toward conservative and high liquidity, and has benefited from high interest rates, significantly improving profitability. By the end of 2023, the proportion of Tether's reserves in US and Chinese bonds and cash equivalents had exceeded 82%; in the first quarter of 2024, it reached more than 90%, a record high. In other words, the vast majority of reserve assets are low-risk assets such as US short-term Treasury bonds, money market funds and bank deposits, and the proportion of high-volatility investments (such as Bitcoin and gold) has dropped to about 10%.
Such an asset structure has brought rich and stable returns in the upward interest rate cycle. Tether has made considerable profits in each quarter of 2023, with a full-year net profit of approximately US$6.2 billion. In early 2024, there was even a surge in quarterly profits, with a net profit of US$4.52 billion in the first quarter of 2024. This was due to both the huge amount of U.S. Treasury interest income in that quarter and the additional income provided by the rising prices of assets such as Bitcoin.
The proportion of U.S. Treasuries in reserves has jumped from less than 3% in 2021 to about 82% in 2024, and profits have also increased year by year. Tether's revenue model has changed from "high risk and low return" to "low risk and high return". This change not only increased the total profit, but also greatly improved the sustainability and stability of profits.
Figure: Tether reserve asset composition 2022–2024
The above figure shows the proportion of different asset categories in reserves in each quarter, from deep to shallow: cash reserves, U.S. Treasury bonds (held directly or indirectly), and total Tenther tokens, showing that the proportion of U.S. Treasury bonds has increased significantly since 2022.
This optimized asset allocation has significantly increased Tether's total profit while significantly improving the stability and sustainability of its profitability. By the end of the first quarter of 2025, Tether's reserve assets had increased to approximately $149.3 billion, with $143.6 billion in circulating USDT; of which nearly $120 billion was invested in U.S. Treasuries (including approximately $98.5 billion in direct holdings and approximately $23 billion in indirect holdings through repurchase agreements and funds).
Source: Tether 2025 Q1 Financial Report
In the first quarter of 2025, USDT circulation increased by another $7 billion month-on-month, and the number of user wallet addresses increased by about 46 million. Tether achieved operating profits of more than $1 billion in the quarter, mainly from U.S. Treasury bond investment income; in terms of risky assets, the income from gold holdings basically offset the impact of price fluctuations of crypto assets such as Bitcoin, and did not significantly drag or boost net profits.
Comparing the first quarter of 2024 with the first quarter of 2025, we can find that the former has huge book gains due to the surge in the crypto market, while the latter has returned to "normal" profits dominated by interest income. This shows that Tether's current profits mainly rely on predictable interest income, and the additional volatility brought by risky assets is secondary and intermittent.
UST+USDe’s profit model
In the development path of algorithmic stablecoins, UST is a landmark case and a representative of the industry's early large-scale experiments on the "uncollateralized monetary policy model". Its core architecture relies on a long-term commitment to the Anchor Protocol's annualized 20% return, which is not based on real interest rate spreads or on-chain profitability, but a subsidy system supported by the Terra Foundation, the LUNA issuance mechanism, and external financing subsidies.
UST itself does not create actual returns, but meets users' expectations for interest by continuously injecting new capital, thereby building a financial structure that seems stable but is actually highly dependent on incremental funds. In the Anchor protocol, a large number of users simply deposit UST and wait for high returns, while the protocol does not have a clear lending target or asset return path, creating the illusion of "subsidy as income". When user confidence is shaken and large-scale redemptions occur, LUNA is forced to mint depreciating tokens to cope with the pressure of exchange, thus entering an irreversible "death spiral" and causing the entire system to collapse in a short period of time. Anchor's so-called 20% annualized return is in fact an advance payment for future ecological development, rather than any real, sustainable commercial profit. Once users start selling UST and minting LUNA to redeem US dollars, the price of LUNA will collapse, and this is exactly the source of funds for the subsidy system, constituting a fatal self-destructive chain.
Anchor’s 20% annualized return initially came from the Terra community reserve pool (raised from LUNA financing) and subsequent capital injections from institutional investors such as Jump Capital.
In this model, users get high returns, but the protocol continues to burn money. It is not the users who pay for the returns, but the LUNA holders and the Terra Foundation who bear the losses.
USDe attempts to build a synthetic stablecoin system that does not rely on US dollar reserves through a delta-neutral hedging structure. In the Ethena protocol, when users pledge ETH or stETH to mint USDe, the protocol will open an equivalent short position on a centralized exchange or some on-chain perpetual platforms, attempting to achieve price stability through hedging profits and losses between spot and derivatives.
In this structure, the stability of USDe does not come from asset guarantees, but from capital hedging. When the prices of assets such as ETH fluctuate, the floating profits/losses of the mortgaged assets offset the contract profits and losses, achieving an approximate "risk neutral" state. This makes USDe a "synthetic dollar" that does not rely on reserves, and its stability comes from hedging logic rather than reserve guarantees.
If users want to obtain additional income, they can convert their USDe into sUSDe and participate in the protocol spread distribution. The source of income is mainly the funding rate obtained from short positions in the perpetual contract market, that is, when long funds are more active, the reverse subsidy to short becomes the interest source for holders. The other income comes from the interest or handling fees paid by the mortgagee. The protocol design level redistributes the systemic surplus to sUSDe holders.
Core logic of the revenue model: AUM (the USD value of assets deposited by users in the protocol smart contract) × arbitrage annualized interest rate
Funding rate difference: The protocol opens short orders in the perpetual market to hedge against ETH fluctuations. When the market has strong long demand (normal), the funding rate paid by the longs to the shorts becomes the protocol income.
Mortgagee fees/interest rate spreads: USDe holders convert their USDe into sUSDe and receive interest rate spreads at the protocol layer.
Vault product fees: Institutions access hedging paths through customized strategies, allowing institutions to hedge directly in the futures market, increasing capital utilization efficiency and strengthening the fee income logic of the protocol layer, which is a relatively stable part of its profit model.
According to Token Terminal data, from Q2 2024 to Q2 2025, USDe's AUM experienced a fluctuation from US$2.7 billion to US$6.6 billion, with a growth rate of 144.6%. Quarterly revenue fluctuated greatly, increasing from US$47 million to US$126 million, and then retreating to around US$48 million.
Even so, its annualized arbitrage interest rate has always remained in the range of 3% to 15%, showing a cyclical structure, which means that Ethena does not rely on a fixed exchange or node for arbitrage, but has built a relatively stable arbitrage strategy system, but the yield rate is market-dependent on the structural bull market.
Although this model is a substantial improvement over UST, it still relies heavily on the depth of the derivatives market, the positive sustainability of the funding rate, and the liquidity of market makers. When the derivatives funding rate reverses, or the market fluctuates too much and the hedging fails, USDe may also collapse. Therefore, "stable returns" actually rely more on the interest rate dividend when the overall crypto market is in a structural bull market, and it is difficult to say that it is completely sustainable.
USDe hedging costs remain high
From the perspective of profit model, UST's so-called income relies more on additional issuance, subsidies and narrative stacking, which is a risky model that lacks a real transaction closed loop; while USDe attempts to rebuild the "reputation" of algorithmic stablecoins with stronger financial engineering design, but its fundamental income is still limited by the bull market capital premium and hedging market structure. The comparison between the two not only represents the rise and fall of algorithmic stablecoins, but also outlines that in the innovation of stablecoin architecture, the real challenge comes from the unification of stabilization mechanism and income mechanism.
Stablecoins revolutionize traditional banks and their downstream
Inclusive finance, which was discussed a few years ago, is to allow more low-income users to enjoy financial services such as bank wealth management/loans/insurance. Why did China attach so much importance to inclusive finance at that time and once included inclusive finance in the 13th Five-Year Plan? ——It is because the country needs to allow groups that were originally ignored by the mainstream financial system (such as rural residents, self-employed individuals, and small and micro enterprises) to enjoy basic financial services, such as loans, deposits, insurance, etc.; finance is a resource allocation tool. If it only serves the top groups, it will aggravate the gap between the rich and the poor. Inclusive finance can spread financial dividends to the middle and lower classes and enhance economic resilience. The core is that the CAC (customer acquisition cost) of traditional finance is actually very high, which leads to the reluctance of traditional banks/insurance/brokerages and other financial institutions to reach low-income users. But stablecoins are completely different. The CAC of stablecoins is 0, because all back-end work is completed through blockchain. Due to the network effect, Circle does not need to go to remote counties to open online stores to attract customers and open accounts. New users obtain USDC through OTC or C2C.
Secondly, stablecoins are more permissionless than traditional banks, and have higher composability and privacy. Any USDC user can conduct unlicensed financial management/loans/payments on the chain.
This has led to stablecoins reshaping traditional banks and their downstream industries. What is happening now is that stablecoins are reshaping central banks (Tether/Circle), CEXs are reshaping traditional exchanges and commercial banks (Binance/OKX/Coinbase), asset management companies are reshaping private banks (Amber/Matrixport), and stablecoin third-party payment companies are reshaping traditional cross-border payment companies (Bridge). In the future, more downstream industries of traditional banks will be reshaped. In addition to the above, brokerages, insurance, etc. may also be reshaped.
Conclusion
Stablecoins are evolving from "digital mapping of the US dollar" to digital assets with native returns and universal use worldwide. Driven by institutional reconstruction and technological innovation, they are gradually replacing some functions of traditional finance and becoming a key infrastructure for cross-border payments, asset management and financial inclusion. The reshaping of traditional roles such as central banks, commercial banks, payment institutions and even securities and insurance companies has just begun.
