Stablecoin Giants Profiting from High-Interest Rates, Leaving Holders Empty-Handed
Stablecoin giants like Tether and Circle are currently reaping the benefits of the high-interest rate environment, while stablecoin holders are left without any returns on their investments. This issue was highlighted by Dan Reecer, the co-founder of Wormhole, during a panel discussion at Mercado Bitcoin’s DAC 2025 event.
Reecer pointed out that companies like Tether and Circle are essentially “printing money” by retaining the yield from the U.S. Treasuries that back their stablecoins. For example, Tether reported a net profit of $4.9 billion in the second quarter of the year, leading to a valuation of $500 billion in a recent funding round.
With interest rates remaining high, Reecer suggested that users will eventually demand a share of the yield generated by these stablecoins or seek out alternative investment options. Platforms like M^0 and Agora are already addressing this demand by redirecting yield to applications or directly to end users, rather than allowing the issuer to capture all of it.
Reecer emphasized the opportunity cost for stablecoin holders, stating, “If I’m holding USDC, I’m losing money, money that Circle is making.” This refers to the fact that holding a non-yielding stablecoin backed by income-generating U.S. Treasuries results in missed investment opportunities.
While Tether and Circle do not currently distribute the yield from their stablecoins directly to users, other platforms are emerging to fill this gap. Money market funds are becoming increasingly popular, allowing investors to access the yield behind stablecoins like USDC.
Circle recently acquired Hashnote, the issuer of the tokenized money market fund USYC, for $1.3 billion. This acquisition enables Circle to facilitate the conversion between cash and yield-bearing collateral on blockchain platforms.
Despite the growth of money market funds, they still represent only a small fraction of the stablecoin market. According to RWA.xyz data, the market capitalization of these funds stands at around $7.3 billion, while the global stablecoin market has exceeded $290 billion.
A spokesperson for Tether emphasized the role of USDT as a digital dollar rather than an investment product. He highlighted the importance of stablecoins like USDT in providing financial stability for millions of people in emerging markets facing high inflation rates and economic instability.
Passing along yield to stablecoin holders would fundamentally alter the nature, risk profile, and regulatory treatment of these assets, according to the Tether spokesperson. He noted that competitors offering yield-bearing stablecoins are targeting a different audience and assuming additional risks.
Stephen Richardson of Fireblocks added that the stablecoin market is evolving towards real-world applications like cross-border payments and FX services. Tokenized money has the potential to address existing challenges in the financial sector, such as slow corporate payment systems and costly remittances.
Overall, the stablecoin market is experiencing a period of innovation and growth, with new platforms and products emerging to meet the changing needs of users and investors. As the industry continues to evolve, stakeholders will need to adapt to ensure that stablecoins remain a viable and valuable asset class in the digital economy. Bullish group, majority owned by Block.one, is a leading player in the blockchain and digital asset industry. Both companies have significant interests in various blockchain and digital asset businesses, as well as holding a substantial amount of digital assets, including bitcoin.
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