Market competition is heating up, traditional finance is entering the scene, and yield-bearing stablecoins are on the rise; Tether and Circle are exploring "Plan B," while Coinbase is pushing for "on-chain interest" reforms.
Hello, readers!
This is the third issue of Stable Weekly, and this week's report will take you deep into the stablecoin market, which is undergoing profound changes.
For a long time, stablecoin issuers primarily relied on interest income generated from holding reserve assets pegged to fiat currencies (such as U.S. Treasury bonds). However, this traditional profit model is facing severe challenges, as the uncertainty of a high-interest-rate environment, increasingly fierce market competition, and potential user demand for yields make it difficult to rely solely on reserve interest.
In the face of this transformation, major players in the market are exploring different development paths. Stablecoin giant Tether has chosen an aggressive diversification strategy, actively transforming into an investment holding company, extending its reach into agriculture, media, sports, and even cutting-edge technology, and strategically investing part of its profits into digital assets like Bitcoin. Tether achieved over $13 billion in profits in 2024, providing a solid foundation for its diversification strategy.
Circle, on the other hand, has taken a different path, focusing on building its core business and technological infrastructure, such as launching the USDCKit SDK to simplify payment integration and actively preparing for an IPO. Circle seems to be looking forward to further clarity in the regulatory environment, especially regarding "on-chain interest," with Coinbase CEO Brian Armstrong recently publicly calling for legislative reforms to allow reserve interest to be directly distributed to holders.
It is noteworthy that the rise of yield-bearing stablecoins is putting greater competitive pressure on traditional stablecoins, with JPMorgan expecting their market share to grow significantly. Meanwhile, traditional financial institutions such as Northern Trust, ICE, and Mastercard are also entering the market, exploring the applications of stablecoins and tokenized assets.
As Shawn from Artichoke Capital pointed out, stablecoins share similarities with money market funds, and their ultimate value will depend on their real-world applications, such as cross-border payments, DeFi, and the broader digital economy.
The current stablecoin market is at a critical turning point. The traditional profit model driven by interest is being reassessed, and diversification, technological innovation, and practical applications will become key to future competition. This newsletter will delve into these trends and developments, hoping to provide you with more insights.
Focus Observations
🎯 Stablecoins are the money market funds (MMF) of the digital world
Shawn (Artichoke Capital) presented an insightful perspective in “Stablecoins and the parallels with Money Market Funds”, arguing that stablecoins are the money market funds (MMF) of the digital world. This analogy accurately captures the commonality of how both financial instruments address similar issues in different eras.
In the early 1970s, the U.S. financial system had a significant efficiency gap: bank checking accounts paid no interest, and corporate savings options were limited. The market needed a solution, leading to the birth of MMFs. They provided companies with an efficient way to manage cash, bypassing outdated banking rules.
Today, MMFs hold over $7.2 trillion in assets and have become a key component of the financial system.
Now history is repeating itself in the form of stablecoins. Stablecoins provide solutions to similar pain points in the digital economy and serve as a digital output of the dollar. Most stablecoins are pegged to the dollar, naturally extending the dollar's influence into the global digital realm.
Like MMFs, stablecoins maintain relatively stable values, becoming tools for holding idle funds. However, the difference is that stablecoins are based on blockchain technology and possess permissionless characteristics—anyone with a cryptocurrency wallet can hold and trade stablecoins.
The questions facing stablecoins today—systemic risk, regulatory arbitrage, and their impact on traditional banks—are strikingly similar to those faced by MMFs at their inception. History shows that financial innovations that genuinely solve real problems will ultimately find suitable regulatory frameworks.
The true potential of stablecoins lies not only in their role as a digital output of the dollar but also in the infrastructure layer they provide for decentralized finance, with stablecoins serving as the circulatory system of DeFi.
In the short term, stablecoins may primarily serve the retail user market and regions outside the U.S., especially where traditional financial systems are inefficient. In the long run, platforms with a large user base will play a decisive role in driving adoption.
Financial history shows that when new tools can more efficiently address fundamental needs, adoption often occurs faster and more broadly than expected. It is worth noting that the focus should not solely be on Bitcoin—stablecoins may be the most profound contribution of the crypto world to traditional finance.
🎯 Beyond Treasury Bonds: Tether's Diversification Strategy
Stablecoin giant Tether is undergoing a strategic transformation. This company, known for issuing the USDT pegged to the dollar, is actively extending its reach into diversified areas beyond its core business. This move is not coincidental but a response to the limitations of its existing business model and the intensifying market competition.
For a long time, Tether primarily profited from the income generated by holding its massive USDT reserve assets (currently over $140 billion, including more than $113 billion in U.S. Treasury bonds). However, this model has inherent growth limitations. Relying solely on Treasury bond interest income is not sustainable, especially in the context of future interest rate fluctuations and uncertainties in the macroeconomic environment. Additionally, regulatory pressures limit Tether's ability to directly share reserve income with USDT holders, putting it at a disadvantage in competition with traditional financial institutions.
At the same time, the rise of yield-bearing stablecoins is posing increasing competitive pressure on Tether. These stablecoins, which can provide interest returns to holders, are expected by JPMorgan to see their market share grow from 6% to 50%. This undoubtedly presents a significant challenge to traditional stablecoins (like USDT) that cannot offer similar yields.
In response, Tether has begun actively seeking new growth engines, and its diversification investment strategy is clearly visible, covering multiple different industries:
Significantly increased its stake in Latin American agricultural company Adecoagro (AGRO) to 70%, seen as a strategic layout for the real economy and diversified asset allocation.
Invested in acquiring shares of the Italian media company Be Water, aiming to explore digital content and emerging technology fields.
Acquired a minority stake in the Italian football club Juventus FC, attempting to combine digital assets with the sports industry to expand brand influence.
Made substantial investments in video platform Rumble and brain-computer interface company Blackrock Neurotech, showcasing its interest in cutting-edge technology and innovation.
Tether's series of diversification initiatives aims to mitigate business risks, reduce excessive reliance on a single stablecoin issuance and reserve management, open up new profit growth points with potentially higher returns, and ensure the company's long-term sustainable development. Notably, Tether achieved over $13 billion in profits in 2024, providing a solid financial foundation for its aggressive diversification strategy.
🎯 Stablecoins should earn interest, Coinbase CEO discusses the necessity of legislative reform
Coinbase CEO Brian Armstrong proposed in the article “Unlocking On-Chain Interest is a Win-Win” that the U.S. should amend stablecoin legislation to allow consumers to earn interest on their reserve assets, just like traditional bank accounts. The current legal framework has failed to keep pace with the times, artificially limiting the potential of stablecoins and causing losses for the general public and the U.S. economy.
Stablecoins are typically backed 1:1 by fiat currencies like the dollar, and issuers invest these reserve assets in low-risk instruments, such as short-term U.S. Treasury bonds. The interest generated is usually retained by the issuer. The core idea of "on-chain interest" is to directly distribute the interest generated by these reserve assets to stablecoin holders, similar to an interest-bearing checking account.
However, regulatory barriers prevent this natural flow. The main reasons hindering the realization of on-chain interest are that existing laws have not kept pace with technological developments. Unlike traditional interest-bearing checking and savings accounts, stablecoins currently do not enjoy the same exemptions under securities law, making it challenging to pay interest to users. New stablecoin legislation should be developed to clear the obstacles for all regulated stablecoins to directly provide interest to consumers, allowing them to operate like ordinary savings accounts without excessive disclosure requirements and tax implications.
Why this change is crucial:
U.S. consumers could earn close to market yields (4.75%) instead of the meager returns from banks (0.41%).
The unbanked global population could gain dollar stability and yields with just a mobile phone.
Strengthening the dollar's position and attracting global users into the dollar ecosystem.
The current barriers are purely due to regulatory lag—traditional checking accounts can pay interest, and regulated stablecoins should receive the same treatment.
Regulation and Compliance
🏛️ UK Financial Regulator Plans to Start Issuing Formal Licenses to Crypto Companies in 2026
Key Points:
The UK Financial Conduct Authority (FCA) stated that it will begin issuing formal licenses to crypto companies next year after fully consulting with the industry and establishing new rules.
Hundreds of companies previously attempted to join the FCA's temporary crypto registration list but failed; the new regulatory mechanism will be stricter and more comprehensive.
Why It Matters:
This marks a transition of the UK regulatory framework from a temporary registration system to a formal licensing system, providing a clear compliance path for crypto businesses such as stablecoin issuers and exchanges.
A stricter regulatory regime may raise the entry barriers for the industry but will also create a more stable and predictable operating environment for compliant businesses.
New Product Launches
👀 Circle Launches USDCKit SDK to Simplify USDC Payment Integration and Automation
Key Points:
Circle has released a developer SDK called USDCKit, aimed at simplifying USDC payments on Circle Wallets, automating processes, and enhancing compliance.
USDCKit reduces the complexity of integrating traditional stablecoin payment infrastructure by providing pre-built intuitive tools, helping businesses scale USDC payments more efficiently.
Why It Matters:
As market demand for stablecoin payments grows, USDCKit provides developers with efficient and scalable tools, allowing them to focus on product development rather than infrastructure, potentially accelerating the mainstream adoption of stablecoins.
The SDK particularly targets payment service providers and cross-border remittance platforms, reducing operational costs and engineering complexity through automated fund flows, supporting high transaction volumes, enhancing compliance management, and enabling cross-chain USDC transfers, thus speeding up time to market.
👀 Northern Trust to Provide Custody and Cash Management Services for Stablecoin Issuer Haycen
Key Points:
Traditional financial giant Northern Trust will provide custody and cash management services for Haycen, a stablecoin issuer focused on trade finance.
Haycen offers stablecoin-based solutions for non-bank lenders in global trade and has received funding support from the UK government.
Why It Matters:
This marks a recognition by traditional financial institutions of the potential applications of stablecoins in trade finance, which could promote modernization and efficiency in the sector.
The trade finance industry is vast but in urgent need of modernization, still relying on manual workflows that are costly for participating banks and businesses. Haycen's stablecoin solution offers a new option for the $20 trillion annual trade flow through instant settlement and reduced friction in cross-border transfers.
👀 NYSE Parent Company ICE to Explore Using Circle Stablecoins and Tokenized Funds to Develop New Products
Key Points:
ICE will explore the potential uses of USDC and the tokenized money market fund USYC in derivatives exchanges, clearinghouses, and other businesses.
This initiative is part of a broader trend among U.S. financial giants to integrate digital assets, stablecoins, and tokenization into their services against the backdrop of an improving regulatory environment.
Why It Matters:
This signifies that traditional financial institutions are accelerating the adoption of blockchain technology and digital asset solutions, representing an important milestone in the convergence of TradFi (traditional finance) and DeFi (decentralized finance).
The improving regulatory environment is prompting more mainstream financial giants to enter the cryptocurrency and tokenization space.
👀 USD₮0 Launches on Unichain, Enhancing DeFi Scalability and Capital Efficiency
Key Points:
The cross-chain version of the world's largest stablecoin, USD₮, known as USD₮0, has launched on Unichain.
Unichain users can now experience lower slippage, reduced trading costs, and faster transaction speeds, as well as more efficient DeFi capital allocation.
All deployments of USD₮0 comply with the ERC-7802 standard, ensuring consistency and scalability within the broader Superchain network.
Through Stargate Finance, Rollups and protocols within the wider Superchain ecosystem can also access USD₮ liquidity via bridged USD₮0.
👀 Mastercard is Building Its Next-Generation Payment Network on Blockchain, Aiming to Become the "Venmo" of Cryptocurrency
Key Points:
Mastercard is actively expanding its blockchain and cryptocurrency capabilities to serve consumers and financial institutions, seizing opportunities in the industry.
Its goal is to replicate its vast card network model in the blockchain space, facilitating digital asset transactions and hoping to attract banks to join through its "multi-token network," having already partnered with JPMorgan and Standard Chartered on cross-border payments and tokenization.
Why It Matters:
This move aims to simplify the flow of funds between traditional finance and decentralized finance, filling gaps in compliance frameworks and user experience, potentially positioning Mastercard as a key infrastructure provider in the cryptocurrency space, creating competitive barriers similar to those in traditional payments.
As the regulatory environment becomes clearer and traditional financial institutions show increased interest in digital assets, Mastercard's positioning is likely to benefit from industry growth and could drive broader adoption of digital assets.
Market Adoption
🌱 Ethereum Stablecoin Supply Hits All-Time High, Surpassing $132.4 Billion for the First Time
Key Points:
The total supply of stablecoins on the Ethereum network has reached an all-time high, surpassing $132.4 billion for the first time in nearly three years.
The supply of stablecoins on Ethereum increased by $321 million in the past day, $1.407 billion in the past week, and $2.786 billion in the past month.
The total global stablecoin market has exceeded $200 billion, with USDT leading at a market cap of $142 billion, followed by USDC at $49 billion.
Ethereum accounts for 58% of the global stablecoin supply, with Tron at 31% and Binance Smart Chain at 3%.
🌱 Tokenized Treasuries Surge Over 500% Year-on-Year, Yet Only Account for 2% of the Stablecoin Market
Key Points:
The market value of tokenized U.S. Treasuries has surged from $800 million to $5.2 billion, with $1 billion growth in just the past two weeks, primarily driven by products from BlackRock and Securitize.
While stablecoin issuers like Tether benefit from reserve income, passing on yields to users triggers stricter regulatory obligations.
The yield transmission mechanism and regulatory uncertainty are the main barriers limiting the rapid expansion of tokenized Treasuries, as entering the investment product space faces more complex compliance requirements.
🌱 Ripple Partners with Chipper Cash to Enhance Payment Efficiency in Africa Using XRP
Key Points:
Ripple has partnered with African payment provider Chipper Cash to utilize Ripple Payments and XRP for cross-border payments.
Chipper Cash has 5 million users across nine African countries, and this partnership will help users receive global funds quickly and around the clock.
The application of XRP further solidifies its role as a global cross-border payment solution, helping to address the high costs and inefficiencies of traditional payment systems in Africa.
🌱 Tokenized Gold Market Cap Hits New High of $1.4 Billion, Trading Volume Surpasses $1.6 Billion
Key Points:
Tokenized gold has seen growth, reaching a historical market cap of $1.4 billion, with trading volumes exceeding $1.6 billion. Tether's XAUT (market cap $749 million) and Paxos' PAXG (market cap $653 million) dominate the market; physical gold prices have surpassed $3,000 per ounce, boosting demand.
The overall market cap has reached $231 billion, growing for 18 consecutive months; USDT's market cap is $144 billion, but its market share has dropped to 62.1%; USDC has grown by 7%, nearing a market cap of $60 billion.
Emerging trends: The USD stablecoin USDtb launched by Ethena has attracted over $1 billion in assets, ranking as the 8th largest stablecoin; the MiCA framework is promoting the development of euro stablecoins, with Circle's EURC market cap increasing by 30% to $15.7 million, accounting for 45% of the euro stablecoin market.
Tokenized gold reflects increased demand for safe-haven assets, indicating significant market potential.
The trend of diversification in the stablecoin market is emerging, with regionalization and regulatory compliance under the MiCA framework bringing new opportunities.
Capital Layout
💰 Tether Increases Stake in Latin American Agricultural Giant Adecoagro to 70%, Stock Price Rises 7%
Key Points:
Agricultural Investment: Tether announced that it has increased its stake in the Latin American agricultural company Adecoagro from 51% to 70%, acquiring shares at $12.41 each. Following this news, Adecoagro's stock price rose 7% in pre-market trading to $11.95.
Diversification: Tether is also expanding its investments in the entertainment industry, acquiring a 30.4% stake in the Italian media company Be Water for €10 million.
Why It Matters:
Tether's agricultural investment demonstrates its strategic expansion into areas outside of crypto, seeking stable and sustainable sources of income.
Its diversified layout helps mitigate risks and further solidifies its position as the world's largest stablecoin issuer, while attracting more attention from traditional investors.
💰 Circle Hires Investment Bank to Advance IPO Process, Expected to Submit Application Documents by End of April
Key Points:
Although USDC's market cap exceeded $50 billion in 2022, it significantly dropped due to the Silicon Valley Bank incident, and has now rebounded to about $60 billion, a historical high, its revenue is highly dependent on interest income.
Circle's valuation has decreased from $9 billion in February 2022 to about $5 billion in the recent secondary market, while the valuation sought in this IPO is between $4 billion and $5 billion.
Why It Matters:
Circle's IPO will test market confidence in the stablecoin business model, especially given its reliance on a single source of income (currently, interest income accounts for 99% of the company's revenue).
Progress in U.S. Congressional legislation regarding stablecoins is a positive signal for Circle, potentially bringing a more favorable regulatory environment for its business development.
As cryptocurrency and traditional financial institutions enter the stablecoin space, market competition intensifies, and Circle needs to demonstrate its ability to diversify its business to attract investors.
💰 Stablecoin Issuer Giant Tether Acquires 8,888 Bitcoins in Q1, Total Holdings Reach 92,646
Key Points:
Tether purchased 8,888 bitcoins in the first quarter of 2025 for $735 million.
As of now, Tether's total bitcoin holdings have exceeded 92,647, valued at approximately $7.8 billion. This move is part of the company's strategy to allocate 15% of its quarterly profits to purchasing bitcoin as a reserve asset since May 2023.
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