Moving Beyond "Easy Profits": Stablecoin Giants Explore Revenue Models Beyond Treasury Bonds
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Moving Beyond "Easy Profits": Stablecoin Giants Explore Revenue Models Beyond Treasury Bonds
Competition intensifies as traditional finance enters the market, yield-generating stablecoins rise; Tether and Circle explore "Plan B," while Coinbase pushes for a "on-chain interest" overhaul.
Navigating Web3 tides with focused insightsHello everyone,
This is the third edition of Stable Weekly, where we dive deep into the profound transformation currently reshaping the stablecoin market.
For years, stablecoin issuers have relied primarily on interest income generated from holding reserve assets pegged to fiat currencies—such as U.S. Treasury bonds. However, this traditional revenue model is now facing mounting challenges. Uncertainty around high interest rates, intensifying competition, and growing user demand for yield are making it increasingly difficult to sustain profitability based solely on reserve yields.
In response, major players in the market are charting divergent paths. Tether, the dominant stablecoin issuer, has chosen a bold and diversified strategy, transforming itself into an investment holding company with strategic stakes in agriculture, media, sports, and cutting-edge technologies. It has also allocated a portion of its profits to digital assets like Bitcoin. Tether reported over $13 billion in profit in 2024, providing strong financial backing for its expansive diversification efforts.
Circle, by contrast, is pursuing a different approach—focusing on strengthening its core business and technical infrastructure. This includes launching the USDCKit SDK to streamline payment integration and actively preparing for an IPO. Circle appears to be positioning itself for greater regulatory clarity, especially regarding "on-chain yield." Coinbase CEO Brian Armstrong recently called for legislative reform to allow stablecoin holders to directly receive interest from reserves.
Notably, the rise of yield-bearing stablecoins is increasing competitive pressure on traditional models. JPMorgan predicts these yield-generating stablecoins could capture up to 50% of the market. At the same time, traditional financial institutions such as Northern Trust, ICE, and Mastercard are entering the space, exploring applications for stablecoins and tokenized assets.
As Shawn from Artichoke Capital pointed out, stablecoins resemble money market funds (MMFs), and their ultimate value will depend on real-world adoption—in areas such as cross-border payments, DeFi, and the broader digital economy.
The stablecoin market is at a pivotal juncture. The interest-driven profit model is being reevaluated, and diversification, technological innovation, and practical utility will define the next phase of competition. This newsletter explores these trends in depth, offering insights into what lies ahead.
Spotlight Analysis
🎯 Stablecoins are the digital world’s money market funds (MMFs)
Shawn from Artichoke Capital presents an insightful analogy in "Stablecoins and the parallels with Money Market Funds", arguing that stablecoins are essentially the digital era's version of money market funds (MMFs). This comparison effectively captures how both financial instruments solve similar problems across different eras.
In the early 1970s, the U.S. financial system had clear inefficiencies: checking accounts paid no interest, and corporate savings options were limited. The market needed a solution—enter MMFs. They offered corporations an efficient way to manage cash, bypassing outdated banking regulations.
Today, MMFs hold over $7.2 trillion in assets and have become a cornerstone of the financial system.
History is repeating itself—in the form of stablecoins. Stablecoins address similar pain points in the digital economy, serving as a digital extension of the U.S. dollar. Most stablecoins are pegged to the dollar, naturally extending its influence into the global digital realm.
Like MMFs, stablecoins maintain relatively stable value and serve as tools for holding idle capital. But unlike traditional finance, stablecoins operate on blockchains and are permissionless—anyone with a crypto wallet can hold and transact them.
The skepticism stablecoins face today—systemic risk, regulatory arbitrage, impact on traditional banks—mirrors the early criticisms leveled against MMFs. History shows that financial innovations solving real problems eventually find appropriate regulatory frameworks.
The true potential of stablecoins lies not only in digitizing the dollar but also in providing foundational infrastructure for decentralized finance. Stablecoins can be seen as the circulatory system of DeFi.
In the short term, stablecoins may primarily serve retail users and regions outside the U.S., especially where traditional financial systems are inefficient. Long-term adoption will likely be driven by platforms with massive user bases.
Financial history suggests that when new tools efficiently meet fundamental needs, adoption tends to be faster and broader than expected. Importantly, while much attention goes to Bitcoin, stablecoins may represent crypto’s most profound contribution to traditional finance.
🎯 Beyond Treasuries: Tether’s Diversified Strategic Expansion
Tether, the stablecoin giant, is undergoing a strategic transformation. Known for issuing the dollar-pegged USDT, the company is now aggressively expanding beyond its core business. This shift is not random—it's a direct response to the limitations of its current business model and rising competitive pressures.
Historically, Tether has profited from interest earned on its vast reserve assets—over $140 billion, including more than $113 billion in U.S. Treasuries. Yet this model faces inherent growth ceilings. Relying solely on Treasury yields is unsustainable amid uncertain future rate environments and macroeconomic volatility. Moreover, regulatory constraints prevent Tether from sharing reserve earnings directly with USDT holders, putting it at a disadvantage compared to traditional financial institutions.
Meanwhile, the emergence of yield-bearing stablecoins poses a growing threat. JPMorgan forecasts that yield-bearing stablecoins could grow from 6% to 50% of the market share. This presents a significant challenge to traditional stablecoins like USDT that cannot offer comparable returns.
To counter this, Tether is actively pursuing new growth engines through a clearly defined, multi-sector diversification strategy:
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Increased stake in Latin American agricultural firm Adecoagro (AGRO) to 70%, signaling a strategic move into real economy assets and diversified holdings.
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Acquired shares in Italian media company Be Water, exploring opportunities in digital content and emerging tech.
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Purchased minority equity in Italian football club Juventus FC, merging digital assets with sports to expand brand reach.
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Made significant investments in video platform Rumble and brain-computer interface firm Blackrock Neurotech, showcasing interest in frontier technologies.
These moves aim to reduce reliance on stablecoin issuance and reserve management, diversify revenue streams, and unlock higher-return opportunities to ensure long-term sustainability. Notably, Tether’s $13+ billion profit in 2024 provides a robust financial foundation for this aggressive diversification.
🎯 Stablecoins Should Earn Yield – Coinbase CEO Advocates for Regulatory Reform
Coinbase CEO Brian Armstrong argues in "Unlocking On-Chain Yield is a Win-Win" that U.S. stablecoin legislation should be updated to allow consumers to earn interest on reserves—just like traditional bank accounts. Current laws lag behind technology, artificially limiting stablecoin potential and harming both consumers and the U.S. economy.
Stablecoins are typically backed 1:1 by fiat currencies like the U.S. dollar, and issuers invest those reserves in low-risk instruments such as short-term U.S. Treasuries. The resulting interest is usually retained by the issuer. The concept of “on-chain yield” is simple: distribute this interest directly to stablecoin holders, akin to an interest-bearing checking account.
Yet regulatory barriers block this flow. Existing laws haven’t kept pace with technological advances. Unlike traditional interest-bearing accounts, stablecoins don’t qualify for the same securities law exemptions, creating legal hurdles to paying yield. New stablecoin legislation should remove these obstacles, enabling regulated issuers to offer consumer yield without excessive disclosure or tax burdens—just like standard savings accounts.
Why this change matters:
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American consumers could earn near-market yields (~4.75%) instead of negligible bank returns (~0.41%)
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Unbanked populations worldwide could access dollar stability and yield with just a smartphone
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Strengthens the dollar’s global position by attracting users into the dollar ecosystem
The current barrier is purely regulatory inertia—traditional checking accounts can pay interest; regulated stablecoins should be treated equally.
Regulation & Compliance
🏛️ UK Regulator Plans to Begin Licensing Crypto Firms in 2026
Key Takeaways:
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The UK Financial Conduct Authority (FCA) plans to begin issuing formal licenses to crypto firms next year, following industry consultation and new rule development
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Hundreds of firms previously failed to join the FCA’s temporary registration regime; the new framework will be stricter and more comprehensive
Why It Matters:
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Signals a transitionfrom temporary registration to full licensing, offering stablecoin issuers and exchanges a clear compliance pathway
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Stricter oversight may raise entry barriers but will create a more predictable operating environment for compliant firms
New Product Launches
👀 Circle Launches USDCKit SDK to Simplify USDC Payment Integration and Automation
Key Takeaways:
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Circle launched USDCKit, a developer SDK designed to simplify USDC payments, automate workflows, and enhance compliance on Circle Wallets
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By offering pre-built, intuitive tools, USDCKit reduces the complexity of integrating traditional stablecoin payment infrastructure, helping businesses scale USDC payments efficiently
Why It Matters:
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As demand for stablecoin payments grows, USDCKit offers developers scalable tools to focus on product development rather than infrastructure, accelerating mainstream stablecoin adoption
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The SDK targets payment service providers and cross-border remittance platforms, reducing operational costs and engineering complexity via automated flows, high-volume support, enhanced compliance, and cross-chain USDC transfers—speeding time to market
👀 Northern Trust to Provide Custody and Cash Management Services for Trade Finance Stablecoin Issuer Haycen
Key Takeaways:
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Traditional finance leader Northern Trust will provide custody and cash management services to Haycen, a stablecoin issuer focused on trade finance
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Haycen offers stablecoin-based solutions for non-bank lenders in global trade and has received funding from the UK government
Why It Matters:
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Signals institutional recognition of stablecoins’ potential in trade finance, potentially modernizing and improving efficiency in the sector
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Trade finance is a massive but outdated industry, reliant on manual processes and costly for banks and enterprises. Haycen’s solution enables instant settlement and reduced friction in cross-border transfers, offering a new option for $2 trillion in annual trade flows
👀 NYSE Parent ICE to Explore Stablecoins and Tokenized Funds with Circle for Financial Services
Key Takeaways:
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ICE will explore potential uses of USDC and the tokenized money market fund USYC across derivatives exchanges, clearinghouses, and other operations
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This reflects a broader trend of U.S. financial giants integrating digital assets, stablecoins, and tokenization into services amid improving regulation
Why It Matters:
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Highlights accelerating adoption of blockchain and digital assets by traditional finance, marking a key milestone in the convergence of TradFi and DeFi
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Improving regulatory conditions are encouraging more mainstream financial institutions to enter the crypto and tokenization space
👀 USD₮0 Launches on Unichain, Enhancing DeFi Scalability and Capital Efficiency
Key Takeaways:
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The cross-chain version of the world’s largest stablecoin, USD₮0, has launched on Unichain
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Unichain users now benefit from lower slippage, reduced transaction costs, faster speeds, and improved DeFi capital efficiency
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All USD₮0 deployments comply with the ERC-7802 standard, ensuring consistency and scalability across the broader Superchain network
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Through Stargate Finance, rollups and protocols across the Superchain ecosystem can access USD₮ liquidity via bridged USD₮0
👀 Mastercard Building Next-Gen Payment Network on Blockchain, Aiming to Be the 'Venmo' of Crypto
Key Takeaways:
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Mastercard is actively expanding its blockchain and crypto capabilities to serve consumers and financial institutions, capitalizing on industry growth
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It aims to replicate its massive card network model on blockchain, facilitating digital asset transactions, and hopes to attract banks to its “multi-token network”; already collaborating with JPMorgan and Standard Chartered on cross-border payments and tokenization
Why It Matters:
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This initiative aims to bridge TradFi and DeFi by simplifying capital flows and addressing gaps in compliance and user experience, potentially establishing Mastercard as a key crypto infrastructure provider with defensible advantages akin to its traditional payments dominance
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With clearer regulation and rising institutional interest in digital assets, Mastercard’s strategy is well-positioned to benefit from industry growth and drive broader adoption
Market Adoption
🌱 Ethereum Stablecoin Supply Hits Record High, Surpassing $132.4 Billion
Key Takeaways:
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Total stablecoin supply on Ethereum reached a record high, surpassing $132.4 billion for the first time in nearly three years
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Ethereum’s stablecoin supply increased by $321 million in one day, $1.407 billion in one week, and $2.786 billion in one month
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Global stablecoin market exceeds $200 billion, led by USDT ($142B) and USDC ($49B)
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Ethereum accounts for 58% of global stablecoin supply, Tron 31%, Binance Smart Chain 3%
🌱 Tokenized Treasuries Grow Over 500%, Still Only 2% of Stablecoin Market
Key Takeaways:
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Tokenized U.S. Treasuries surged from $800M to $5.2B, with $1B added in just two weeks—driven by BlackRock and Securitize products
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While stablecoin issuers like Tether benefit from reserve yields, distributing returns to users triggers stricter regulatory obligations
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Yield distribution mechanisms and regulatory uncertainty remain key barriers to rapid expansion of tokenized treasuries, which face complex compliance when entering investment products
🌱 Ripple Partners With Chipper Cash to Improve African Payments via XRP
Key Takeaways:
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Ripple partners with African payment provider Chipper Cash to power cross-border payments using Ripple Payments and XRP
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Chipper Cash serves 5 million users across nine African countries; the partnership enables 24/7 fast receipt of global funds
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XRP reinforces its role as a global cross-border payment solution, addressing high cost and inefficiency in Africa’s legacy systems
🌱 Tokenized Gold Hits Record $1.4B Market Cap, Trading Volume Tops $1.6B
Key Takeaways:
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Tokenized gold reaches $1.4B market cap, trading volume exceeds $1.6B; Tether’s XAUT ($749M) and Paxos’s PAXG ($653M) lead; rising physical gold prices (over $3,000/oz) fuel demand
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Total market cap hits $231B, 18 months of consecutive growth; USDT at $144B, market share drops to 62.1%; USDC grows 7% to nearly $600B
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New trends: Ethena’s USDtb attracts over $1B, ranks 8th; MiCA drives euro stablecoin growth—Circle’s EURC up 30% to $157M, 45% of euro stablecoin market
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Tokenized gold reflects rising demand for digital safe-haven assets, signaling large market potential
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Diversification trend emerges in stablecoins, with regional and MiCA-compliant offerings opening new opportunities
Capital Moves
💰 Tether Increases Stake in $1.12B Agri-Firm Adecoagro to 70%, Stock Rises 7%
Key Takeaways:
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Agricultural Investment: Tether raises its stake in Latin American agribusiness Adecoagro from 51% to 70% at $12.41/share. Shares rose 7% pre-market to $11.95.
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Diversification: Tether expands entertainment investments, acquiring 30.4% of Italian media firm Be Water for €10M.
Why It Matters:
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Tether’s agri-investment signals strategic expansion beyond crypto, targeting stable, sustainable returns.
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Diversification reduces risk, strengthens its position as the world’s largest stablecoin issuer, and attracts traditional investors.
💰 Circle Hires Bankers to Advance IPO, Expected to File Publicly by Late April
Key Takeaways:
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Despite USDC’s market cap rebounding to ~$600B—a historical high after dropping post-SVB crisis—its revenue remains heavily dependent on interest income.
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Circle’s valuation has declined from $9B in Feb 2022 to ~$5B in secondary markets; the IPO seeks a $4–5B valuation.
Why It Matters:
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Circle’s IPO will test market confidence in the stablecoin business model, especially given its reliance on interest income (99% of total revenue).
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Progress on U.S. stablecoin legislation is a positive signal, potentially creating a more favorable regulatory landscape.
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With increasing competition from crypto-native and traditional finance players, Circle must demonstrate business diversification to attract investors.
💰 Stablecoin Giant Tether Adds 8,888 Bitcoin in Q1, Total Holdings Exceed 92,647 BTC
Key Takeaways:
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Tether purchased 8,888 BTC in Q1 2025 for $735 million
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To date, Tether holds over 92,647 BTC, valued at approximately $7.8 billion. This continues its strategy, initiated in May 2023, of allocating 15% of quarterly profits to Bitcoin as part of its treasury reserves.
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