The Trillion-Dollar Feast of Stablecoins: Who's Making Money?
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The Trillion-Dollar Feast of Stablecoins: Who's Making Money?
Let's take a look at how the stablecoin system works, and who the real winners of this feast are.
Navigating Web3 tides with focused insightsBy: Cole
In the turbulent world of crypto, Bitcoin and Ethereum are the stars, while stablecoins (like USDT and USDC) serve as the "blood," "fuel," and "chips" of this vast ecosystem. They connect everything—serving as a safe haven for traders avoiding volatility and as the foundational settlement layer in the DeFi (decentralized finance) world.
You may use them every day, but have you ever stopped to ask the most basic question:
You hand $1 to an issuer (e.g., Circle) and receive 1 USDC token in return. You hold that token, earning no interest. When you redeem it later, you get back exactly $1.
Yet these issuers are making enormous profits. Circle generated $1.7 billion in revenue in 2024, while Tether posted a staggering $13 billion profit that same year.
So where is this money coming from? Let’s examine how the stablecoin system works—and who the real winners are at this feast.
The Core “Money Printer”
The business model of stablecoin issuers is simple to the point of being almost “boring,” yet immensely powerful due to its scale. At its core, it's an age-old financial practice: playing with “float.”
It’s like a bank taking in demand deposits or a money market fund (MMF), but with one crucial difference—it pays zero interest on those “deposits” (the stablecoins you hold).
In the zero-interest era (before 2022), this model earned almost nothing. But as the Federal Reserve aggressively raised rates in recent years, U.S. Treasury yields soared. Circle and Tether’s profits took off accordingly.
Put simply, the multi-billion-dollar valuations of these stablecoin giants are essentially leveraged bets on the Fed’s macro policy of “higher for longer.” Every rate hike by the Fed acts like a direct “subsidy” to this industry. If the Fed returns to zero rates in the future, the core income of these issuers will vanish overnight.
Of course, beyond interest income, issuers have a second revenue stream: institutional fees.
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Circle (USDC): To incentivize large clients like Coinbase, Circle makes minting (depositing) free. Only when institutions redeem (withdraw) large amounts daily (over $2 million) is a nominal fee charged. Circle’s strategy: maximize the size of its reserves (“grow the float”).
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Tether (USDT): Tether is far more aggressive. It charges a 0.1% fee on both minting and redemption for institutional clients (minimum $100,000). Tether’s strategy: maximize revenue per transaction (it wants both interest and fees).
Circle vs. Tether: A Strategic Showdown
While their core business models are similar, Circle and Tether take radically different approaches to managing their tens of billions in reserves—leading to vastly different risk profiles, transparency levels, and profitability.
Circle (USDC): Compliance and Transparency
Circle positions itself as a trustworthy, regulation-embracing “good student.” Its strategy isn’t “trust me,” but rather “trust BlackRock.”
Circle’s reserve structure is extremely conservative and transparent. Instead of managing billions itself, it outsources trust to the world’s largest asset manager—BlackRock.
The bulk of Circle’s reserves are held in a vehicle called the “Circle Reserve Fund” (ticker USDXX), a government money market fund registered with the SEC and fully managed by BlackRock. As of November 2025, the fund’s portfolio was mind-numbingly safe: 55.8% in U.S. Treasury repos and 44.2% in U.S. Treasuries.
Circle’s message is clear: “Institutions and regulators worried about reserve safety—we’ve solved it. Our funds aren’t sitting in some mysterious bank account, but held by BlackRock in an SEC-regulated fund, invested solely in the safest U.S. Treasuries.”
This is a brilliant strategic defense. Circle sacrifices some potential returns (paying management fees to BlackRock) in exchange for long-term institutional and regulatory trust.
Tether (USDT): Aggression and High Returns
If Circle is a meticulous accountant, Tether is a bold hedge fund manager.
Tether has long been criticized for lack of transparency (relying on BDO’s “attestation reports” instead of full audits), but its investment strategy is far more aggressive and diversified—resulting in extraordinary profits.
Here’s what filled Tether’s reserves as of Q3 2025:
“Conventional” assets (similar to Circle): U.S. Treasury bills ($112.4B), overnight reverse repos ($18B), money market funds ($6.4B).
“Aggressive” assets (which Circle would never touch):
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Precious metals (gold): $12.9B
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Bitcoin: $9.8B
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Secured loans: $14.6B
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Other investments: $3.8B
See the difference? Tether isn’t just earning Treasury interest—it’s also exposed to commodity risk (gold), crypto volatility (Bitcoin), and credit default risk (those $14.6B mystery loans).
Tether doesn’t operate like a money market fund; it functions more like an “internal hedge fund,” funded by globally held, interest-free USDT.
This is the secret behind Tether’s $13 billion profit in 2024. It earns interest, speculates on capital gains from Bitcoin and gold, and collects higher-risk returns through lending.
It also explains why Tether emphasizes its “excess reserves” (or “net assets,” $11.9B as of August 2024). This sum isn’t freely distributable “profit”—it’s a “capital buffer,” a mandatory “risk reserve” set aside to absorb potential massive losses from risky assets (Bitcoin, loans) and prevent USDT from “depegging.”
Tether must maintain high profits to sustain its high-risk asset game.
Comparison of Circle and Tether Reserve Composition (data as of Q3/Q4 2025)
Where Do the Profits Go?
How are these billions in profits distributed? This once again reveals a stark contrast between the two companies.
Circle (USDC): The Burden of Revenue Sharing with Coinbase
Despite high revenue, Circle’s net profit has long been dragged down by a massive cost—the revenue-sharing agreement with Coinbase.
Circle and Coinbase (co-founders of USDC) agreed back in 2018 to share interest income generated from USDC reserves. Coinbase is entitled to 50% of the “residual payment basis.”
This deal is calculated based on USDC holdings on the Coinbase platform. Yet by 2024, only about 20% of total USDC circulation was on Coinbase, yet this outdated agreement still gave it rights to roughly 50–55% of total reserve income.
This distribution cost “erodes most of Circle’s profits.” The share paid to Coinbase rose from 32% in 2022 to 54% in 2024. In Q2 2025, Circle’s total revenue was $658 million, but “distribution, transaction, and other costs” alone reached $407 million.
Thus, Coinbase isn’t just a partner—it’s effectively a “synthetic equity holder” in USDC’s core revenue stream. It’s both Circle’s largest distribution channel and its biggest cost burden.
Tether (USDT): The Opaque “Black Box”
Tether’s profit allocation remains a completely opaque “black box.”
Tether (USDT) is owned by iFinex, a private company registered in the British Virgin Islands (BVI). iFinex also owns and operates the well-known crypto exchange Bitfinex.
The $13 billion in profits reported by Tether flows entirely into its parent company, iFinex.
As a private entity, iFinex isn’t required to disclose detailed costs and dividends like publicly traded Circle. But based on historical records and public data, the money goes three ways:
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Shareholder dividends: iFinex (Bitfinex) has a history of paying massive dividends to its private shareholders (such as executives like Giancarlo Devasini)—for example, $246 million in 2017.
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Retained as capital buffer: As mentioned, Tether keeps huge profits (e.g., $11.9B) on its balance sheet as “net assets” to hedge against risks from Bitcoin and loan holdings.
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Strategic investments (or internal transfers): Tether/iFinex uses these profits for diversified ventures, boldly entering fields like AI, renewable energy, and Bitcoin mining. There are also longstanding complex internal fund flows between Tether and Bitfinex (e.g., the infamous Crypto Capital scandal).
Thus, Circle’s profit distribution is public, costly, and locked-in. Tether’s is opaque, discretionary, and fully controlled by a small internal group at iFinex—these funds becoming ammunition for building their next business empire.
How Can Regular Users Get a Slice?
If issuers capture all the Treasury interest, how can we—crypto users—earn within this ecosystem?
The money we earn doesn’t come from issuers, but from demand among other crypto users—by providing services (liquidity, loans) and bearing on-chain risk.
There are three main strategies:
Strategy 1: Lending
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How it works: Deposit your USDC or USDT into algorithmic money markets like Aave or Compound.
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Who pays you: Borrowers—usually leveraged traders or HODLers who need cash but don’t want to sell their Bitcoin/Ethereum.
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How it operates: Protocols like Aave and Compound automatically match lenders and borrowers, adjusting rates in real time based on supply and demand. You (the lender) earn most of the interest, while the protocol treasury takes a small cut.
Strategy 2: Providing Liquidity
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How it works: Deposit your stablecoins (typically in pairs like USDC/USDT or USDC/DAI) into liquidity pools on decentralized exchanges (DEXs).
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Leading platform: Curve Finance
Curve is specifically designed for swaps between stablecoins (e.g., USDC to USDT), using algorithms to achieve minimal slippage (spread).
Who pays you: Traders. Every time someone swaps USDC for USDT on Curve, they pay a tiny fee (e.g., 0.04%), which is distributed proportionally to liquidity providers.
Bonus rewards: To incentivize liquidity provision, Curve also “airdrops” its governance token (CRV) as extra rewards.
Why it’s popular: Since all assets in the pool are pegged to $1, you face almost no impermanent loss risk—making it an ideal “rent-collecting” strategy.
Strategy 3: Yield Farming
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How it works: This involves various complex “nested” strategies aimed at maximizing yield.
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Example: You can
1) Deposit USDC into Aave;
2) Use that USDC as collateral to borrow ETH;
3) Invest the borrowed ETH into other high-yield pools.
Risks: This is the riskiest strategy. You face smart contract hacks, sharp drops in collateral value (ETH) leading to liquidation, and the sudden collapse of protocol incentives.
Summary
In the end, the stablecoin story is about two economies.
The first is a private, off-chain feast: issuers (Tether/Circle) invest our “idle” reserves into U.S. Treasuries and split the resulting billions in interest with their shareholders and corporate allies (like Coinbase)—while token holders get nothing.
The second economy is one we built ourselves—the vibrant, on-chain DeFi world. Here, users earn yield from fees and interest paid by other users through lending and liquidity provision.
This highlights a core irony: a decentralized ecosystem whose “lifeblood” is supplied by highly centralized, profit-driven “banks.” The future of this massive industry rests on two pillars: the high-rate macro environment that issuers depend on, and the sustained demand from DeFi users for speculation and leverage.
How long these two pillars will last may be the trillion-dollar question at the heart of this entire sector.
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