This week, Circle’s IPO reignited enthusiasm across capital markets, bringing renewed attention to stablecoins and their strategic role in the financial ecosystem. As part of my advisory work, I had the opportunity to speak with several asset managers and venture capital firms about how they perceive the current landscape and future trajectory of stablecoins. I learnt a lot during these conversations, so I write this article which includes the most concerned topics in our conversations and my reflections on the matter.
Stablecoins have transitioned from the periphery of crypto to become one of the most consequential innovations in digital finance. As of mid-2025, they are no longer just trading instruments, but the backbone of a new financial layer that is programmable, global, and continuously operating.
1) What is the potential of stablecoins in payments and trading?
One of the most immediate and impactful areas where stablecoins demonstrate value is in payments and trading. Their price stability, instant settlement, and low transaction fees make them well-suited for cross-border transfers and retail payments. In contrast to traditional payment rails like SWIFT, which involve multiple intermediaries and settlement delays of 2 to 5 business days, stablecoins can settle in seconds, at a fraction of the cost. They are especially impactful in emerging markets where financial infrastructure is weak or volatile. In countries like Argentina or Nigeria, stablecoins like USDT and USDC are increasingly used for payroll, remittances, and daily commerce.
On-chain, stablecoins form the bedrock of decentralized finance. They serve as the dominant trading pairs on DEXs like Uniswap, collateral and borrowing assets on platforms such as Aave and Compound, margin units in derivatives like dYdX, and essential liquidity in automated market makers such as Curve and Balancer. In 2022, on-chain stablecoin transaction volume reached $11.1 trillion, rivaling Visa and surpassing PayPal, cementing stablecoins’ status as a serious competitor to traditional clearing systems.
2) How is the competitive landscape evolving? What is the structure of USD stablecoins versus RMB stablecoins?
From a macro perspective, the stablecoin market remains overwhelmingly dominated by USD-pegged assets, which account for more than 99% of the total market cap. Tether (USDT) leads in global retail adoption, particularly in Asia and emerging markets, due to its early mover advantage and broad exchange support. USDC, issued by Circle, is the most trusted among institutional players thanks to its transparent reserves, regulatory alignment, and regular attestations. First Digital USD (FDUSD), backed by Hong Kong-regulated custodians, and PayPal’s PYUSD are gaining traction in specific ecosystems, driven by distribution deals and fintech integrations.
By contrast, RMB-pegged stablecoins are still in their infancy. Despite geopolitical interest and the potential for Belt and Road-related adoption, capital controls and limited offshore RMB liquidity hinder their global scalability. However, regulatory sandboxes in Hong Kong may provide a testing ground for compliant RMB stablecoins in regional trade settlement.
3) What traditional industries are impacted, and what new opportunities arise?
Stablecoins are not only disrupting legacy infrastructure, but also opening new opportunities. They directly challenge banking institutions reliant on remittance and FX fees, and place pressure on traditional payment processors like Visa and PayPal to modernize their backend. At the same time, they enable new use cases: fintechs can launch globally interoperable wallets and cross-border services without direct banking partners; asset managers can offer tokenized funds with real-time settlement; and emerging markets can bootstrap financial inclusion without building traditional banking infrastructure.
4) How do stablecoin issuers generate revenue, acquire users, and build long-term sustainability?
On the issuer side, stablecoins are proving to be highly profitable. Most fiat-backed stablecoins are fully reserved in cash or U.S. Treasuries, enabling issuers to generate revenue through yield on reserves. Circle, the issuer of USDC, earned over $1.6 billion in 2024. Tether’s profit is estimated to exceed $3 billion annually. USDC in particular has a unique structure where a large portion of its reserve income is shared with Coinbase, its primary distribution partner. This agreement, signed in August 2023, established a three-year term through August 2026 with automatic renewal unless terminated by either party.
5) What happens when the Circle-Coinbase agreement expires?
The Circle-Coinbase agreement outlines a strategic partnership and revenue-sharing arrangement around USDC. Under this agreement, Coinbase receives 50% of the residual revenue generated from the reserves backing the USDC held on its platform. As of now, this has proven lucrative, with Coinbase estimated to have received between $480 million to $520 million annually in recent years.
This agreement is not expiring in 2025. It was signed in August 2023 and will run through at least August 2026, with automatic three-year renewals unless either party chooses to terminate. Therefore, no immediate disruption is expected. However, investors and market participants are watching this timeline closely, as any change—such as a decision not to renew or a restructured revenue model—could alter stablecoin distribution dynamics.
Should the agreement eventually be modified or discontinued, Circle may benefit from increased independence and higher retained earnings, especially given its growing list of institutional partners such as BlackRock and Stripe. Coinbase, meanwhile, would gain more freedom to experiment with new stablecoins or potentially launch a proprietary one—possibly integrated with its L2 platform, Base.
While the agreement remains intact, its existence underscores the importance of platform-level distribution in the success of a stablecoin. As the stablecoin landscape becomes more competitive—with entrants like FDUSD and PYUSD gaining traction—these strategic alliances, and how they evolve, will shape the trajectory of both stablecoin adoption and revenue flows.
Ultimately, stablecoins are no longer experimental. They are becoming essential financial infrastructure, with clear value propositions across payments, trading, lending, and cross-border finance. As legacy systems adapt or compete, and as issuer alliances shift, the stablecoin landscape in 2025 reflects a rapidly maturing industry that is poised to power the next generation of programmable finance.