What you actually own when you hold a stablecoin
A stablecoin is a token on a blockchain that promises to be worth one unit of fiat currency, almost always the U.S. dollar. The biggest examples, USDT from Tether and USDC from Circle, circulate in the tens to hundreds of billions of dollars. To most users they feel like cash: you send USDC across the world in seconds, you park it in a DeFi protocol to earn yield, and you cash out at a 1:1 rate.
That experience hides an important fact. The token in your wallet is not a dollar. It is an IOU from a private company that says, in effect, "send this back to us and we will wire you a dollar." The issuer holds your dollar (or the equivalent in cash and Treasuries) on its balance sheet, mints tokens against it, and stands ready to redeem them. Every dollar of stablecoin supply is therefore also a dollar of issuer liability and a dollar of issuer assets sitting somewhere in the financial system.
That structure is the entire business. Stablecoins look like payments infrastructure to the user, but on the issuer's books they look like a giant, very short-duration, very low-cost funding account. The float is the product, and the yield on the float is the revenue.
The risks behind the business model
Before we dig into the revenue stack, it is worth being honest about what can go wrong, because the same float that produces the income is also the source of every catastrophic stablecoin failure.
Reserve risk. The issuer promises a 1:1 redemption. If reserves are not actually there, or are sitting in assets that suddenly cannot be sold at par, the peg breaks. This is exactly what happened to TerraUSD in 2022, where the "reserve" was a sibling token whose price collapsed, and to a lesser extent what users feared during the Silicon Valley Bank failure in March 2023, when Circle disclosed $3.3B of USDC cash trapped at the failed bank and USDC briefly traded as low as $0.87.
Counterparty and custody risk. Reserves are held at banks, custodians, and money market funds. Each of those is a counterparty whose failure can delay or impair redemptions.
Regulatory and de-peg risk. An issuer can be sanctioned, fined, or ordered to freeze specific addresses. Tether has been sanctioned by the U.S. Treasury for use by sanctioned actors, and individual stablecoins have been delisted from exchanges following enforcement actions.
Interest-rate risk. Most reserve income comes from short-term Treasuries. If the Fed cuts rates aggressively, revenue falls quickly. If regulators force issuers to hold more cash and fewer Treasuries, the same thing happens.
Concentration risk. A handful of issuers, primarily Tether and Circle, dominate the market. A failure at one of them would cascade through every DeFi protocol, exchange, and cross-border payment rail that depends on its token.
The primary engine: T-bill yield on the float
The biggest line item, by an order of magnitude, is interest earned on reserves. When you mint 1 USDC, you wire $1 to Circle. Circle parks that dollar in a regulated bank for a few days, then sweeps it into short-dated U.S. Treasuries and repo. While the token is outstanding, that Treasury earns whatever the going short rate is.
In the high-rate environment of 2023 to 2024, with the federal funds rate above 5%, this was extraordinarily profitable. Tether reported over $10B in profit in 2024, the vast majority from interest on reserves against roughly $130B+ of USDT supply at year-end. Circle, which is publicly listed and audited quarterly, reported $1.67B in 2024 revenue and over $150M in net income in some quarters, almost entirely from reserve income on a USDC float that hovered between $30B and $45B.
The economics are simple. If an issuer holds roughly 100% of supply in 4-week Treasuries yielding 5%, a $50B float produces about $2.5B of gross interest per year. Operating costs are low. Compliance, legal, audit, and a small staff are a rounding error compared to the float. The result is operating margins that most banks would envy, and a return on equity that has drawn comparisons to MoneyGram, Western Union, and even small specialty lenders.
This is why Circle's June 2024 IPO and subsequent valuation moves are watched so closely. The company is, in effect, a publicly traded claim on the interest rate spread between the short end of the U.S. Treasury curve and the implicit zero rate paid to stablecoin holders.
Secondary revenue: fees, integration deals, and chain incentives
The float is the headline, but it is not the whole story. A few second-order streams matter, especially at the margin.
Mint and redemption fees. Minting USDC in small sizes from a Circle Mint account is free; redeeming in small sizes used to carry a small fee. Larger institutional clients negotiate customized pricing. Tether has historically charged higher redemption and wire fees, and has occasionally charged new clients to mint USDT, including a reported $1B tokenization deal with Tron-adjacent entities. These fees look small compared to the float, but they are high-margin and they fall directly to the bottom line.
Wallet, exchange, and chain integration deals. When a wallet, exchange, or blockchain wants to support a particular stablecoin, it often pays the issuer for listing, liquidity support, or co-marketing. These deals are typically not disclosed in detail, but they show up in issuer P&Ls as service revenue, and they explain why issuers compete fiercely to be the default stablecoin on a given chain or in a given wallet.
Chain incentive programs. This is the most distinctive stream. In 2024 to 2025, Tether announced several large incentive programs aimed at boosting USDT usage on Tron, including a reported $150M+ Tron-based incentive program and integrations with Tron-adjacent AI infrastructure. The economic logic is that USDT on Tron captures high-value retail and emerging-market remittance flow, and Tether is willing to spend some of its float income to defend and grow that share against Circle, which is heavily concentrated on Ethereum and Base.
Treasury and B2B services. Circle sells Circle Mint, a treasury product for institutions that want to mint and redeem USDC at scale, and APIs that let fintechs integrate stablecoin payments. Tether has expanded into peer-to-peer communications (Keet), AI, and Bitcoin mining, using float income to fund diversification. These adjacent businesses are small relative to the core but increasingly material to issuers' strategies.
The new layer: tokenized money-market funds and the stablecoin convergence
The most important structural shift of 2024 to 2025 is that the boundary between stablecoins and traditional money-market funds is starting to blur, and issuers are increasingly on both sides.
Historically, a stablecoin was a tokenized dollar, and a tokenized money-market fund (MMF) was a separate product. In 2023, Franklin Templeton launched its BENJI token, an on-chain representation of the Franklin OnChain U.S. Government Money Fund. BlackRock's BUIDL fund, launched in 2024 on Ethereum with Securitize as the tokenization partner, reached over $500M in assets within months. Ondo Finance, Maple Finance, and others launched similar products.
The yields on these tokenized MMFs are very close to stablecoin issuers' own reserve yields, because the underlying assets are almost identical: short-term Treasuries and repo. That creates a convergence where the question is no longer "which stablecoin do I hold" but "which on-chain dollar do I hold, and who gets the spread?"
Issuers are responding in two ways. First, some, including Circle, are exploring their own tokenized MMF products, so that the yield on reserves accrues in part to a fund that the issuer itself distributes. Second, stablecoins themselves are becoming reserve-like: PayPal launched PYUSD, Ripple launched RLUSD, and a wave of bank-issued tokens (Frax, Paxos-issued products for PayPal and others) are entering the market. The competitive set has expanded from two or three crypto-native issuers to a list that now includes banks, payment networks, and asset managers.
The practical effect for users is that more on-chain dollars are now paying yield natively. That compresses the implicit subsidy that issuers previously captured, and it puts pressure on older stablecoins that pay nothing to holders while their issuer earns a full Treasury yield.
Issuer tokens and the IPO dividend
The final, and increasingly important, layer is what happens to the float income after it lands on the issuer's balance sheet. Until recently, that income was a private benefit, captured by the founders and pre-IPO investors of Tether and Circle. That is changing.
Circle's IPO in June 2024 put the float economics directly into public markets. Circle disclosed that essentially all of its revenue is reserve interest, and its valuation moves with both USDC supply and the short rate. As of late 2024 and into 2025, Circle's market capitalization ran between roughly $7B and $15B, reflecting both the scale of the float and the market's view of how long the high-rate environment will persist. Shareholders, not just token holders, now have a claim on the float.
Tether has taken a different route. While it has not IPO'd, it has steadily accumulated traditional assets (Treasuries, gold, Bitcoin mining, AI infrastructure) and has hinted that future value will accrue partly to a future "Tether token" or to holders of USDT through incentive programs. World Liberty Financial, the Trump-affiliated project that issues the USD1 stablecoin, has gone further, explicitly tying a portion of USD1's economics to a tradable WLFI token.
This is the part of the revenue stack that is hardest to model and most controversial. Issuer tokens create an alignment problem: the same company is issuing a dollar-pegged liability and a non-pegged equity-like token. If the issuer token does well, is that because the float did well, or because the issuer took more risk with the reserves? The honest answer is that disclosure, audit quality, and regulatory clarity are what separate a legitimate issuer from a future Terra-style failure.
What this means if you actually use stablecoins
For an everyday user, the business model mostly matters when something goes wrong. A few practical implications are worth keeping in mind.
Yield is not free. If a protocol offers you 8% on your USDC and the underlying Treasury yields 5%, the gap is being paid by somewhere. Sometimes it is a subsidy from the protocol's treasury. Sometimes it is a coupon from a real-world borrower. Sometimes it is the early stage of a Ponzi. Knowing the issuer's economics helps you judge whether a yield is plausible.
Issuer choice is a custody decision. When you hold USDT, you are taking Tether's credit risk. When you hold USDC, you are taking Circle's. When you hold PYUSD, you are taking Paxos's, which is itself chartered by the New York Department of Financial Services. The differences in regulation, audit frequency, and reserve composition are not academic; they show up in how each token behaves during a crisis.
The float is concentrating, not fragmenting. Despite the launch of many new stablecoins, USDT and USDC still account for the overwhelming majority of supply. New entrants like RLUSD, USD1, and PYUSD are growing fast in specific niches (institutional, payments, U.S. policy-aligned), but the network effects of an incumbent token are formidable.
Regulation will reshape the stack. The EU's MiCA framework, the U.S. GENIUS Act discussions, and similar proposals around the world are pushing issuers toward bank-like reserve rules, audited disclosures, and in some cases explicit licensing. The likely outcome is fewer issuers, more transparency, and possibly a future where the spread between reserve yield and what is paid to holders narrows as competition and disclosure increase.
Follow stablecoin issuers the smart way
Stablecoin issuers move tens of billions of dollars and react to interest rates, regulation, and on-chain competition in real time. Tracking their reserve yields, attestation reports, regulatory filings, and chain-specific incentive programs by hand is a losing game. Zippfeed surfaces stablecoin headlines with sentiment scoring (bullish, neutral, or bearish) and an importance rating, so you can separate real risks from noise and act on the stories that actually move the float.
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