1. Introduction: The systemic role of stablecoins is reshaping the logic of global finance
Over the past five years, stablecoins have evolved from a supporting tool for crypto trading to a core asset in on-chain finance, becoming increasingly embedded in the global financial system. Against the backdrop of the Federal Reserve's interest rate hike cycle nearing its end, the US dollar's hegemony under threat, and cross-border payment systems seeking efficiency reforms, stablecoins are gaining widespread acceptance as the "on-chain dollar." From the passage of the GENIUS ACT in the United States in July 2025 , to the recognition of stablecoins as "digital dollar alternatives" by multiple G7 countries, to the inclusion of stablecoins in emerging markets' foreign exchange policies, a financial race for "anchored assets" has begun. Stablecoins are not only a liquidity engine in DeFi but also a critical bridge between Web3 and the real economy. This article will systematically examine the types, development trends, regulatory landscape, sovereignty competition, and investment opportunities of stablecoins.
II. Market Status: Hundreds of Billions of Yuan in Volume, Structural Diversification, and Explosive Use Cases
The stablecoin market has surpassed $ 250 billion in value and is highly concentrated. Tether 's USDT holds a commanding position, with a market capitalization of $ 150.335 billion, representing a 61.27% share , nearly single-handedly supporting half of the market. Close behind is Circle 's USDC , with a market capitalization of $ 60.822 billion and a 24.79% share. Together, the two hold approximately 86.06% of the total stablecoin market , forming a classic "duopoly." This structure is deeply embedded in the infrastructure of the crypto-financial market, with USDT and USDC establishing strong user networks and a foundation of trust across diverse regions and ecosystems.
USDT is currently the most widely used stablecoin. Its strengths lie not only in its market capitalization and circulation, but also in its global presence and wide range of practical use cases. It is widely distributed across multiple mainstream blockchains, including TRON , Ethereum , BNB Chain , and Solana . TRON is particularly active, accounting for over half of all USDT issued. TRON's relatively low transaction fees make USDT a top choice for OTC and CEX clearing in regions such as Asia, Latin America, and the Middle East . Furthermore, USDT plays an irreplaceable role in cross-border remittances, stable value storage, and DeFi liquidity provision in emerging markets . For example, in high-inflation countries like Venezuela, Turkey, and Nigeria, USDT has become a de facto "alternative dollar" for citizens and even a settlement tool within the gray market. This role as an "on-chain dollar" has enabled it to gradually evolve from a trading tool to a base currency, assuming some of the functional roles of a "stable asset."
More importantly, Tether 's profit model reflects its strong financial capabilities and influence in the capital market. In the first half of 2025 , Tether achieved a net profit exceeding $ 5.7 billion, making it one of the most profitable companies in the entire crypto industry. The majority of this profit comes from its substantial holdings of short-term U.S. Treasury bonds, which not only support its stablecoin reserves but also give it real influence in the short-term interest rate market. Research shows that every 1% of Tether's share of the U.S. Treasury market can impact short-term interest rates by 3.8 to 6.3 basis points. Its structural penetration of the U.S. Treasury market even exceeds the holdings of some small and medium-sized sovereign nations. Against this backdrop, USDT is no longer simply an on-chain utility token, but is evolving into a "stablecoin financial institution," its systemic influence on global financial markets is growing.
In contrast, USDC 's development path has focused more on compliance and institutional friendliness. It enjoys a higher level of trust and integration within the US domestic market, the financial services system, and Web3 enterprise payments. Circle continues to collaborate with regulators and promote transparent audits, legal reserves, and stable interest rate distribution, aiming to establish a "standard paradigm" for stablecoins. However, this cautious development approach has made USDC relatively conservative in high-speed trading markets like Asia. It serves more as a secure, auditable, and traceable "trust stablecoin" within DeFi , attracting interest from institutions integrating TradFi and CeFi . However, its grassroots circulation and transaction frequency still lag behind USDT .
While the USDT and USDC duopoly is unlikely to be broken in the short term, emerging stablecoin projects have emerged strongly in recent years, becoming a noteworthy new variable in the market structure. The most representative example is Ethena 's USDe , a "synthetic stablecoin" backed by hedging ETH perpetual swap positions and yield protocols. Since its launch in early 2024 , USDe's market capitalization has skyrocketed from $ 146 million to $ 4.889 billion, an increase of over 334 times, making it one of the fastest-growing stablecoin projects in the past two years. Its growth is driven in part by the burgeoning " DeFi fixed income" narrative and also demonstrates genuine market demand for non-custodial, contract-driven stablecoins. Furthermore, USD1 and USD0 have also garnered investor interest in various narratives and are gradually tapping into the demand for stablecoins in specific scenarios. However, judging by their market capitalization and user base, these emerging stablecoins have yet to fully disrupt the mainstream landscape, and their development still requires further strengthening in areas such as risk management, market adaptation, and liquidity development.
In general, the current stablecoin market has entered a phase of extreme concentration and a clear dominant position. USDT, through its immense scale, robust on-chain liquidity, and penetration into macro-financial instruments, has become one of the most systemically important assets in the cryptoeconomy. USDC , on the other hand, represents the development of compliant and transparent stablecoins, possessing stronger institutional trust. Emerging stablecoins offer experimental and diverse options, injecting vitality into the market. As global crypto regulatory policies gradually take shape, the stablecoin market will face both the challenges of regulatory overhauls and the benefits of financial disintermediation. Whether USDT can maintain its dominant position, whether USDC can expand its influence, and whether emerging stablecoins can break through will remain key areas of focus in the market's evolution over the next few years.
3. Regulatory Game: Stablecoins are a new variable in financial stability
The rapid growth of stablecoins is propelling an asset class, once a fringe cryptocurrency tool, to the center of macro-financial policy and regulatory discussions. As their popularity and applications expand, stablecoins are no longer simply technological innovations or decentralized experiments, but have become a key variable that can influence monetary policy, capital flows, and even systemic financial risks. Global regulators are engaged in a subtle and profound power struggle in the face of this trend: on the one hand, they seek to establish rules and boundaries for this new asset class and maintain the stability of the traditional financial system; on the other hand, they must acknowledge that stablecoins are filling gaps in the existing financial system, particularly in cross-border payments, dollar substitution, and financial inclusion, playing an increasingly important role.
Currently, the regulatory approaches of major economies regarding stablecoins are not converging, but rather exhibiting clear strategic divergence. For example, the United States has seen its regulators embroiled in a protracted policy dispute over stablecoins. On the one hand, the U.S. Treasury, the Securities and Exchange Commission ( SEC ), the Commodity Futures Trading Commission ( CFTC ), and other agencies have offered differing interpretations of the nature of stablecoins, with no consensus remaining on core issues such as whether stablecoins are securities, whether they belong to the payment system, and whether they should be issued by banks. On the other hand, the dollar-dominated international financial order makes it difficult for the United States to ignore the potential impact of stablecoins on its monetary policy transmission mechanism and international financial standing. Tether 's holdings of hundreds of billions of dollars in short-term U.S. Treasury bonds have already had a measurable impact on money market interest rates, making stablecoins no longer a "cryptocurrency issue" to be shelved, but a real financial variable. Recently, the U.S. Congress has been gradually advancing the Clarity for Payment Stablecoins Act and strengthening the regulatory framework for "issuer licensing, reserve audits, and bank custody," attempting to provide clear market expectations. However, this process is destined to be slow amidst the political and technological turmoil.
The situation in the European Union (EU) is slightly different. The EU pioneered a comprehensive cryptoasset regulatory framework, MiCA ( Markets in Crypto-Assets Regulation ), which specifically establishes two regulatory categories for stablecoins: "Electronic Money Tokens ( EMTs )" and "Asset Reference Tokens ( ARTs )." It also imposes stringent requirements on transparency, reserves, capital, and issuance limits. While MiCA is widely considered one of the "strictest" cryptoasset laws in the world, its introduction also sends a clear signal: regulators are no longer seeking to suppress cryptocurrencies, but rather intend to incorporate them into the system and impose institutional constraints. For stablecoin issuers, entering the European market will require obtaining local licenses and accepting central bank-level regulatory requirements. This undoubtedly raises the barrier to entry and may also force large stablecoin issuers to transition to compliance.
Meanwhile, the regulatory landscape in Asia exhibits a mix of pragmatism and competition. For example, Singapore, Japan, and Hong Kong have adopted relatively flexible regulatory frameworks for stablecoins, emphasizing a balance between risk management, user protection, and financial innovation. The Hong Kong Monetary Authority recently explicitly supported the development of fiat-pegged stablecoins and even proposed the possibility of promoting a "local Hong Kong dollar stablecoin," demonstrating a policy-level openness to the prospect of "regionalized on-chain currencies." Gulf states in the Middle East, such as the UAE and Saudi Arabia, are also actively introducing stablecoin clearing mechanisms, promoting the coexistence of central bank digital currencies ( CBDCs ) and stablecoins, with the goal of building a next-generation cross-border payment network. This suggests that amid regulatory uncertainty in the US and EU, an increasing number of emerging markets are using stablecoins as a lever to compete for a voice in fintech rulemaking.
At the heart of the regulatory battle over stablecoins lies a more fundamental issue: the intractable conflict between monetary sovereignty, financial stability, and technological innovation. For decades, the right to issue currency and the payment and clearing systems have largely been controlled by central banks and commercial banks. However, stablecoins, as privately-led digital currencies, have rapidly embedded themselves in global payments, transactions, financing, and value storage in just a few years, bypassing traditional currency generation pathways. This disintermediation challenges the core logic of the traditional financial order and poses a hidden threat to the central bank's role as the "lender of last resort." In particular, during a systemic crisis or black swan event, if stablecoin users collectively run on their funds without official backing, this would inevitably pose significant liquidity risks to the entire on-chain financial ecosystem and stablecoin issuers, potentially impacting the tradfi market and triggering broader risk spillovers.
For this reason, we see that central banks and regulators around the world have yet to reach a consensus on how to define stablecoins. They are neither traditional electronic money nor fully qualified bank liabilities. Rather, they are more like a "third currency" suspended between traditional finance and crypto networks, yet unable to be fully incorporated into existing legal frameworks. Regulatory wrangling over this murky area will continue for years to come. Meanwhile, some central banks are actively exploring CBDCs to compete with stablecoins for dominance in payments and stored value. For example, China's digital renminbi, the European Central Bank's digital euro, and India's e-rupee have all entered the stage of field testing and small-scale circulation. Behind this trend lies the emerging strategic competition and cooperation between official monetary systems and on-chain stablecoins.
Ultimately, stablecoins are no longer just a "sidekick" in the crypto world; they are becoming a bridge connecting on-chain and off-chain, tradition and innovation. They can be a solution for financial inclusion, an amplifier of systemic risk, and a catalyst for the reshaping of global financial power structures. Regulatory policy will play a key role in this process: it can accelerate the transformation of stablecoins toward compliance, enhancing their functional attributes as a "new digital dollar," or it can stifle their vitality and innovation through excessive restrictions, forcing capital and technology to flow to more policy-friendly regions. Therefore, the future of stablecoins depends not only on technological evolution and market choices, but also on the outcome of the global regulatory ecosystem. Stablecoins are not an isolated race, but a deep competition for the next generation of currency and the reconstruction of global financial rules.
4. Trend Outlook: Decentralization, Multi-Currency, and Protocol-Native Stablecoins
The stablecoin market is evolving from its first phase, dominated by centralized USD stablecoins, to a second phase characterized by a coexistence of decentralized, multi-currency, and protocol-native stablecoins. This evolution is not simply an expansion of the number of currencies, but rather a comprehensive reconstruction of the stablecoin logic paradigm, underlying governance structure, and monetary sovereignty model. The development of this new generation of stablecoins not only demonstrates the technological and capital innovation capabilities within crypto finance but also reflects the proactive transformation of the on-chain monetary system in addressing the shortcomings of the traditional financial system, expanding its application boundaries, and engaging with regulators.
First, decentralized stablecoins are experiencing a resurgence. In early models like DAI , overcollateralization and on-chain liquidation mechanisms were once considered the "ideal model" for censorship resistance and trustlessness. However, due to low capital efficiency and volatile price fluctuations, they briefly lost their dominance. However, since 2024 , driven by rising regulatory risks and increased settlement reliance on centralized stablecoins like USDT and USDC , decentralized currencies like DAI , sUSD , LUSD , and RAI have regained favor among developers and DeFi protocols, becoming important alternative currencies to combat regulatory crackdowns and payment censorship.
It's worth noting that the new generation of projects no longer rely solely on over-collateralization or algorithmic stabilization models, but instead integrate diverse asset portfolios, risk hedging, and on-chain interest rate adjustment mechanisms. For example, Ethena 's USDe stablecoin combines USD spot trading with a delta-neutral strategy of shorting perpetual contracts. This is the first time that on-chain derivatives have been introduced in stablecoin design to provide yield support for the stabilization mechanism, creating a new path for "yield-driven stablecoins." Its accompanying on-chain interest rate metric, DOR ( DeFi Option Rate ), further attempts to construct a native on-chain "yield curve," establishing a more realistic time value of money for stablecoins. These explorations demonstrate that stablecoins are not just asset instruments, but also serve as anchors for interest rates, exchange rates, and liquidity in on-chain financial markets.
Secondly, the trend toward multi-currency pegging is accelerating. While US dollar-denominated stablecoins remain a dominant force in the market, the growing global regulatory trend away from the dollar is prompting the crypto market to develop local currency or commodity stablecoins anchored to currencies such as the Euro ( EUR ), Japanese Yen ( JPY ), Chinese Yuan ( CNY ), Hong Kong Dollar ( HKD ), and even gold. These diversified stablecoins not only facilitate localized payment scenarios but also potentially become a crucial tool for residents of emerging markets to mitigate local currency devaluation and hedge against inflation. For example, Stasis 's EURS , Monerium 's EURe , and various Hong Kong dollar stablecoin trials are gradually expanding the non-USD stablecoin ecosystem. In markets such as Asia, Africa, and Latin America, particularly in countries with strict capital controls, stablecoins have become a crucial "intermediary currency" for the gray economy, crypto remittances, and e-commerce, generating real demand for multi-currency stablecoins.
At the same time, central banks around the world are gradually promoting compliant models that coexist with local currency-pegged stablecoins. Singapore, New Zealand, Hong Kong, and other jurisdictions are exploring compliant paths for banks and trusts to issue stablecoins through regulatory sandboxes. One possible model for the future is for centralized US dollar stablecoins to serve global liquidity and trading needs, while compliant local currency stablecoins provide domestic on-chain settlement for local residents, jointly building a dual-track on-chain monetary system.
More cutting-edge, the development of protocol - native stablecoins signals the deep embedding of stablecoins within the on-chain economy itself. Unlike standalone currencies like DAI or USDC , protocol-native stablecoins are endogenously issued by a public chain or DeFi protocol, collateralized by its own assets (such as staking tokens, gas , and Reliable Assets ), and dedicated entirely to the protocol. Typical examples include Curve 's crvUSD , the Aave community-driven GHO , MakerDAO 's sDAI , Oasis ' USK , and the potential re-collateralized stablecoins from the EigenLayer ecosystem. These currencies often combine liquidity staking and re-collateralization mechanisms with protocol governance and revenue distribution models, making stablecoin issuance a core component of the protocol's liquidity, governance, and revenue flow.
Protocol-native stablecoins possess several key characteristics: enhanced composability, higher native liquidity, embedded governance mechanisms, and strong alignment with protocol growth. This design provides protocols with an autonomous monetary system, freeing them from reliance on external stablecoins like USDC , contributing to a more stable, decentralized, and censorship-resistant financial ecosystem. Furthermore, stablecoins can serve as a tool for protocol "monetary policy." For example, by controlling collateralization parameters, yield rates, and redemption mechanisms, they can regulate liquidity, thereby influencing the deflationary / inflationary cycles of the protocol's economic system, enabling a true "on-chain sovereign currency experiment."
In the long run, stablecoins will evolve simultaneously in three directions: ( 1 ) Centralized stablecoins strengthen regulatory compliance and serve the global payment market; ( 2 ) Decentralized stablecoins strengthen censorship resistance and DeFi embedding, becoming the base currency on the chain; and ( 3 ) Protocol-native stablecoins serve as autonomous monetary units in vertical financial ecosystems, serving the growth and stability of specific on-chain systems. These three are not mutually exclusive, but are likely to coexist in the long term, forming a dynamic structure of mutual penetration, collaboration, and competition.
Ultimately, the future of stablecoins won't be determined solely by their anchoring method, but rather by three key factors: their compatibility with the emerging financial system, their global settlement capabilities, and their ability to maintain transparency and resilience under regulatory pressure. This isn't just a battle for currencies in the crypto world; it's a battle to reshuffle the global financial architecture of the digital age. In this battle, stablecoins are both a strategic resource and the cornerstone of a new order.
5. Investment and Risk: Who will win the next phase of the stablecoin war?
Stablecoins have evolved from their initial role as a crypto safe haven to become the foundational infrastructure of the on-chain financial system. Their importance in terms of market capitalization, use cases, financial embeddedness, and even national policy is rapidly increasing. However, as their influence continues to expand, a "stablecoin war" is quietly unfolding. Who will dominate this market in the future will no longer be simply a competition of technology, capital, and market share; it will become a multi-dimensional, multi-layered, systemic competition. From the perspective of investors, we need to consider: Who will prevail in the next phase of stablecoins? And who might be exposed to risks and fall out of the market early amidst seemingly booming growth?
At present, the stablecoin investment track can be divided into four categories: ( 1 ) traditional centralized stablecoin issuers, such as Tether and Circle ; ( 2 ) emerging compliant stablecoin issuance platforms, such as Paxos , First Digital , and Monerium ; ( 3 ) DeFi protocol-driven stablecoins, such as MakerDAO , Ethena , and Curve ; ( 4 ) chain-native or L2 ecological stablecoins, such as Aave GHO , zkSync nUSD , and EigenLayer potential stablecoins.
In the traditional financial sector, Tether ( USDT ) is undoubtedly the current dominant force. Leveraging its strong market liquidity, a retail user base in Southeast Asia and Latin America, and its adaptability to gray finance scenarios, USDT 's market capitalization has continued to rise, even bucking the trend during the Federal Reserve's interest rate hike cycle. However, its investment value is limited by its low transparency in information disclosure, its heavy reliance on the banking system, and its legal framework operating in a murky area. From an investment perspective, Tether is a cash cow, but its growth ceiling has become apparent, and it faces long-term systemic risks from sudden changes in compliance and regulatory policies.
In contrast, Circle, the company behind USDC , is taking a more formal approach, collaborating closely with US regulators and exploring the development of a multi-chain issuance mechanism ( USDC is already natively issued on over ten chains). Future efforts to enhance the circulation of tokenized assets through listings and the introduction of RWA revenue sharing will strengthen its regulatory compliance defense. However, USDC lacks the advantages of a gray market in overseas markets, and its usage in DeFi is gradually being surpassed by USDT and DAI . Whether it can break through regulatory barriers and enter real-world use cases remains to be seen.
What's truly worthy of attention is the emerging DeFi -driven stablecoin landscape. Ethena 's USDe , for example, bypasses traditional stablecoin reliance on fiat reserves, shifting towards on-chain yield models and algorithmic financial architectures. USDe 's popularity is no accident; it represents a new stablecoin paradigm characterized by yield support , algorithmic anchoring , and derivatives arbitrage. These projects possess significant scalability and composability. Once market-proven, they hold great potential for building a complete financial ecosystem centered around stablecoins, encompassing yield trading, liquidity mining, and re-staking.
But at the same time, it also implies three major risks:
Yield-driven stablecoins carry the risk of a hidden Ponzi structure. If the yield side (such as short ETH perpetual contracts) encounters extreme market conditions or a liquidity disruption, price decoupling or liquidation runs could occur, creating the risk of an "algorithmic stablecoin 2.0 crash."
The complexity of the mechanism exacerbates the system's opacity. These new models typically require users to have a high degree of trust in their automated liquidation and rebalancing mechanisms. However, in extreme market conditions, on-chain congestion, oracle failure, or insufficient DEX depth can all become blind spots in the stability mechanism.
Regulatory uncertainty is high. These stablecoins often bypass traditional fiat currency custody systems and are easily identified by regulators as "quasi-securities" or "unauthorized currency issuance," leading to regulatory crackdowns or frozen interfaces (such as delisting on centralized exchanges and blocking of bridge protocols).
Protocol-native stablecoins, such as crvUSD , GHO , and sDAI , are currently in the "ecosystem-driven" phase. Investment opportunities lie in capturing protocol growth dividends through "binding to governance tokens." For example, users holding CRV or AAVE can influence key parameters of their native stablecoins through voting, including use cases, liquidity incentives, and fee distribution. Stablecoin issuance is no longer simply a means of circulation; it becomes a core anchor for protocol governance and financial returns. This model provides investors with a clearer path to value capture and may shift the valuation focus of native tokens from pure transaction fees to on-chain currency dividends.
However, the limitation of the protocol's native currency is that its scale growth is strongly dependent on the market position, risk management capabilities and community activity of the parent protocol itself. In extreme cases, a risk loop of "protocol decline-stablecoin liquidity depletion" may occur.
In the long run, who will win the stablecoin war depends on five core capabilities:
A strong anchoring mechanism (whether it is traditional fiat currency reserves, on-chain asset hedging, or a complex structure) is the technical foundation for the long-term survival of stablecoins;
User-side penetration capability, that is, whether it can be widely used in real-world scenarios such as exchanges, payments, lending, cross-chain transactions, and settlements to avoid becoming a "spare currency";
Policy compliance capabilities and regulatory alignment, especially in financial stronghold markets such as Europe, the US, Southeast Asia, and the Middle East, determine the upper limit of growth.
Synergy with the on-chain ecosystem, particularly the degree of integration and native liquidity support within DeFi protocols;
Whether sustainable value capture logic can give holders long-term confidence through governance, profit distribution, and token economic structure.
Stablecoins are not "decentralized dollars," but rather bridge assets in the reshaping of the global monetary architecture. They must navigate the crossroads of regulation, liquidity, and trust, while also navigating the treacherous shoals of market volatility and technological evolution. In the future, the stablecoin war will not produce a single winner, but rather, within a multipolar landscape, multiple breakthroughs across diverse models, ecosystems, and user scenarios. What truly deserves investors' attention are those projects that can navigate the regulatory storm, build on-chain monetary systems, and ultimately bridge the real economy and virtual finance—these will become the "sovereign assets" of the crypto world.
VI. Conclusion: Stablecoins are the “sovereign anchor” of on-chain finance
Stablecoins are not speculative assets, but the core operating mechanism of the entire on-chain economy. They are the dollar lifeblood of the DeFi system, the energy source of Web3 payments, and a safety net for emerging countries against currency devaluation. Over the next five years, stablecoins will no longer be a "supporting role" in the crypto market but will become a key component of the new order of digital capitalism. Now is the starting point, not the end point, for a systematic layout of the stablecoin market.
