Stablecoin issuers are demonstrating exceptional profitability within the cryptocurrency market, with industry leader Tether projecting record-breaking earnings even as new U.S. regulations aim to curb interest payments to holders.
These companies capture between 60% and 75% of the total revenue generated by various crypto protocols. This includes decentralized exchanges, lending platforms, and blockchain infrastructure. This makes the stablecoin sector the most profitable segment of the entire crypto industry.
Tether, the issuer of the largest stablecoin, USDT, forecasts profits of $15 billion this year. Chief Executive Officer Paolo Ardoino stated the company expects a 99% profit margin.
This efficiency positions Tether among the most profitable companies globally on a per-employee basis. Its business model relies on backing stablecoins with liquid, low-risk assets.
The core of the stablecoin business model involves holding user deposits in high-yield, low-risk instruments. These include U.S. Treasury bonds and cash equivalents. Issuers retain the interest generated from these holdings as profit, rather than distributing it to users.
The U.S. government formalized this model with the GENIUS Act in July. The law prohibits payment stablecoin issuers from offering interest or yields to their holders.
This regulation aims to classify payment stablecoins as stable digital money, separate from investment products or financial instruments that generate returns. It differentiates them from traditional bank deposits.
Rising competition is pushing some stablecoin issuers to explore alternative value distribution strategies. USDe, now the third-largest stablecoin by market capitalization, offers yields through a synthetic dollar model.
Coinbase has also begun rewarding users who hold USDC on its platform. The exchange currently offers an annual yield of 3.85% (APY).
This practice technically avoids the GENIUS Act’s restrictions because a third party, Coinbase, provides the yield, not the stablecoin issuer itself. This marks a shift in how value might be shared within the crypto ecosystem.
Tether is seeking to raise additional capital to expand USAT, its regulated, USD-backed stablecoin version in the United States. Competition among issuers is intensifying across the sector.
The stablecoin market may evolve into distinct segments: regulated models akin to traditional banking and experimental models pursuing innovative value participation. User loyalty will likely be determined by trust, transparency, and innovation.