Written by Kadar
Stablecoins were once seen as boring plumbing. A digital wrapper around dollars, useful for payments and trading but not much else. For years, two issuers — Tether and Circle — dominated this infrastructure layer, capturing nearly all of the growth in a sector now worth close to $300 billion.
But the stablecoin landscape is changing fast. What began as a duopoly is splintering. New entrants are emerging from every corner of finance: crypto-native protocols, fintechs, wallets, exchanges, and now even banks. The common realisation is that distribution and value capture are two sides of the same coin. Whoever controls user flows ultimately controls the economics.
Since inception, only Tether and Circle have managed to maintain meaningful market share. Tether’s USDT and Circle’s USDC together boast about $245 billion in supply, or roughly 85 percent of the market. That dominance has proven remarkably resilient.
Other challengers have come and gone. Maker’s DAI briefly peaked at $10 billion in early 2022. Terra’s doomed UST reached $18 billion before collapsing in spectacular fashion. Binance’s BUSD managed $23 billion before regulators in New York effectively shut it down. None of these alternatives sustained traction.
The incumbents’ advantage has always been path dependency. Once exchanges, wallets, and protocols integrate a stablecoin as the default, switching costs compound. Network effects build liquidity, and liquidity attracts users. For years, it seemed unbeatable.
That moat is no longer impenetrable. Tether and Circle’s combined market share peaked at more than 91 percent in March 2024. It has since fallen to around 86 percent. The decline is modest in absolute terms, but symbolically it marks the end of inevitability.
The forces behind this shift are structural. Intermediaries are increasingly rolling their own stablecoins. Exchanges, wallets, and fintechs see the opportunity to capture yield and control policy by launching white-label versions. Phantom’s new Phantom Cash is one example. The Global Dollar consortium, formed by Paxos, Robinhood, Kraken, Galaxy, and others, is another.
At the same time, a race to yield is under way. With Treasury bills paying around 4–5 percent, stablecoin issuers collect billions in interest each year. Tether pays nothing to users. Circle shares selectively, often via Coinbase. New challengers like Ethena’s USDe and Ondo’s USDY are built around yield-sharing from day one.
Regulatory clarity is also reshaping the market. The GENIUS Act in the United States and MiCA in Europe have established stablecoins as a regulated, full-reserve product. In practice, that means users care less about the brand name as long as reserves are safe and redemption works. Stablecoins are being commoditised.
In short, the product is standardising, distribution is fragmenting, and yield is up for grabs.
No case study illustrates the problem of misaligned economics more starkly than Solana.
Solana is the third-largest stablecoin chain, hosting roughly $14.5 billion of USDC and USDT. At current interest rates, those reserves generate nearly $580 million in annual revenue for the issuers. None of that flows back to Solana.
By contrast, Coinbase’s deal with Circle ensures that Base, Coinbase’s Ethereum layer-2, receives a meaningful share of USDC revenue. That money goes back into liquidity incentives, developer grants, and ecosystem growth. Every dollar of USDC on Base helps fund Base itself.