Stablecoins have emerged as the backbone of the cryptocurrency ecosystem, offering price stability while retaining blockchain’s efficiency. This article examines stablecoins business models, revenue strategies, and the leading projects driving adoption in decentralized finance (DeFi) and global payments.
What Are Stablecoins?
Definition and Core Function
Stablecoins are blockchain-based digital currencies pegged to stable assets like fiat currencies (e.g., USD, EUR) or commodities (e.g., gold). Unlike volatile cryptocurrencies, they maintain a 1:1 value ratio with their underlying collateral, enabling reliable transactions, remittances, and savings. According to Coinbase, stablecoins combine the benefits of crypto—speed, transparency, and borderless transfers—with the stability of traditional finance, making them indispensable for everyday use in Web3.
Mechanisms for Stability
Stablecoins achieve price stability through four primary models:
- Fiat-Backed: Reserves held in bank accounts (e.g., USDC, Tether)
- Crypto-Backed: Overcollateralized with cryptocurrencies (e.g., DAI)
- Algorithmic: Algorithmic supply adjustments (e.g., USDe)
- Commodity-Backed: Pegged to physical assets like gold
Gemini’s research highlights that fiat-backed models dominate, representing over 75% of the $200B+ stablecoin market due to their simplicity and regulatory compliance.
How Stablecoin Issuers Generate Revenue
To understand stablecoins business model, is important to structure the different sources of income that these projects have.
Reserve Interest and Investments
Stablecoin companies invest collateral reserves in low-risk, interest-bearing assets like U.S. Treasury bonds. For example, Circle (issuer of USDC) allocates reserves to cash and short-duration government securities, generating yield while maintaining liquidity. Benzinga reports that Tether earned $6.2B in 2024 from its $90B+ reserve portfolio, primarily through Treasury bill investments.
Transaction Fees
Platforms charge fees for minting, redeeming, or transferring stablecoins. Binance integrates FDUSD with a 0.1% fee on conversions, while decentralized protocols like MakerDAO impose stability fees on DAI loans.
Enterprise Solutions
PayPal leverages its PYUSD stablecoin to reduce cross-border payment costs for merchants, charging fractional fees compared to traditional systems. Similarly, Ripple’s upcoming RLUSD targets institutional clients with tailored settlement solutions.
Lending and Yield Products
DeFi platforms like Aave use stablecoins for lending pools, where issuers earn a percentage of interest. Chainalysis notes that 68% of DeFi transactions involve stablecoins, creating recurring revenue streams for protocols.
Famous Stablecoins Business Models
Let’s see in details some of the most famous and interesting stablecoins business models.
1. Tether (USDT)
Tether’s USDT dominates with a $144B+ market cap. Its revenue stems from:
- Reserve Investments: Profits from Treasuries and corporate bonds
- Lending: Institutional loans (e.g., $1B to Celsius Network in 2021)
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Transaction Fees: 0.1% on conversions via exchanges
Despite scrutiny over reserve transparency, USDT remains critical for crypto trading pairs, processing $18B daily.
2. USD Coin (USDC)
Circle’s USDC prioritizes regulatory compliance, holding reserves in cash and short-term Treasuries. Revenue streams include:
- Interest Income: Generated from $28B+ reserves
- Institutional Services: APIs for enterprises like Visa
- Cross-Border Solutions: Partnerships with MoneyGram
USDC’s monthly attestation reports and MiCA compliance make it a trusted Euro on/off-ramp.
3. USDS (Decentralized Stablecoin)
USDS (ex DAI) operates via MakerDAO’s decentralized governance. Its model involves:
- Collateralized Debt Positions (CDPs): Users lock ETH or other assets to mint USDS, paying stability fees
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Protocol-Owned Reserves: Yield from $5B+ in RWA investments (e.g., U.S. Treasuries)
USDS’s decentralized structure avoids centralized control, appealing to DeFi purists.
4. PayPal USD (PYUSD)
PayPal’s PYUSD bridges traditional finance and crypto:
- Payment Fees: Lower costs for merchants vs. credit cards
- Reserve Management: Interest from $500M+ reserves
- Global Remittances: Partnerships with remittance firms
PYUSD’s integration with Venmo and B2B platforms positions it for mass adoption.
See also: What is Tokenomics?
Challenges and Future Outlook
Regulatory Hurdles
The EU’s MiCA framework mandates strict reserve auditing, while the U.S. debates federal oversight. Projects like USDC and EURC (Circle’s Euro stablecoin) lead in compliance, but smaller issuers face compliance costs.
Market Competition
Binance’s FDUSD and Ethena’s USDe (algorithmic stablecoin) are gaining traction. However, Tether’s liquidity dominance remains unchallenged, processing 70% of crypto trades.
Technological Innovation
Projects like Perena (Solana) aim to unify fragmented stablecoin ecosystems, while KAST’s credit card integration expands real-world usability.
