TLDR
- Tether and Circle are keeping all yield from Treasury-backed stablecoins, with Tether reporting $4.9B Q2 profit
- New platforms like M^0 and Agora are emerging to route yield to applications or end users
- Tether argues USDT serves as protection against inflation in emerging markets, not as an investment
- Money market funds are growing but still represent only $7.3B compared to $290B global stablecoin market
- Stablecoins are evolving toward real-world use cases including cross-border payments and FX services
The stablecoin market is experiencing a shift as users begin questioning why they aren’t receiving any of the yield generated from the assets backing their tokens. Industry leaders Tether and Circle have been accumulating huge profits from high interest rates while stablecoin holders see none of these returns, according to Wormhole co-founder Dan Reecer.
Speaking at Mercado Bitcoin’s DAC 2025 event, Reecer claimed these companies are effectively “printing money” by keeping all the yield from U.S. Treasuries that back their tokens. Tether reported an impressive $4.9 billion in net profit for the second quarter of 2025, contributing to the company’s valuation reportedly reaching $500 billion in a recent funding round.
With interest rates remaining high, Reecer suggested users will eventually expect to receive a portion of this yield or move their funds elsewhere. “If I’m holding USDC, I’m losing money, losing money that Circle is making,” he explained, referring to the opportunity cost users face when holding non-yielding stablecoins backed by interest-generating Treasury securities.
This market gap is creating opportunities for newcomers. Platforms such as M^0 and Agora are addressing this issue by developing stablecoin infrastructure that directs yield to applications or directly to end users, rather than letting the issuer capture all the returns.
The Regulatory Challenge
Regulatory concerns appear to be a key factor in why major stablecoin issuers don’t share yield with users. Distributing these returns could potentially attract unwanted regulatory scrutiny, changing how these assets are classified and governed.
A growing alternative is the rise of tokenized money market funds, which allow investors to gain exposure to the yield behind stablecoins. Circle’s acquisition of Hashnote for $1.3 billion earlier this year signals movement in this direction. Hashnote issues USYC, a tokenized money market fund, and the acquisition aims to enable convertibility between cash and yield-bearing collateral on blockchains.
Despite this growth, money market funds remain a small segment of the overall stablecoin ecosystem. Data from RWA.xyz shows their market capitalization at approximately $7.3 billion, while the global stablecoin market has surpassed $290 billion.
Defending the Status Quo
Tether has defended its approach, with a spokesperson telling CoinDesk that “USDT’s role is clear: it is a digital dollar, not an investment product.” The company emphasized that millions of people, particularly in emerging markets, rely on USDT as “a lifeline against inflation, banking instability, and capital controls.”
The spokesperson explained that while small percentage yields might matter to users in developed economies, USDT’s primary value in developing countries comes from protection against much higher inflation rates, which can reach 50% to 90% annually.
“Passing along yield would fundamentally change a stablecoin’s nature, risk profile, and regulatory treatment,” Tether’s spokesperson added. The company believes competitors experimenting with yield-bearing stablecoins are targeting a completely different audience and taking on extra risks.
Evolution Toward Real-World Use Cases
Beyond the yield debate, the stablecoin market is evolving toward practical applications. Stephen Richardson of Fireblocks noted during the panel discussion that stablecoins are finding use in cross-border payments and foreign exchange services.
Richardson highlighted that instant tokenized money transfers could help solve existing problems like slow corporate payment systems and expensive remittance services. He pointed to tokenized money market funds being used as collateral on exchanges as an example of ongoing financial innovation in the sector.
As interest rates continue to influence the profitability of stablecoin issuers, the market appears headed for increased competition and innovation around how value is distributed between issuers and users of these digital assets.
The post Tether Reports $4.9 Billion Q2 Profit as Stablecoin Competition Increases appeared first on Blockonomi.
This articles is written by : Nermeen Nabil Khear Abdelmalak
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