I've been thinking about how we divide the world into different layers. We like to think of money as one thing, infrastructure as another, and distribution as something completely different. This is clearer and simplistic. A dollar is a dollar, a bank is a bank, and a payment network is a payment network. But none of this is true. Money is always inextricably linked to the systems that circulate it, and the systems that circulate it are always tied to who controls its use. Every time money moves through the system, those who control it profit from it. We just pretend otherwise because it's convenient. What's happening now isn't that cryptocurrencies are blurring these lines; it's that these lines never existed in the first place, and everyone is just realizing it now. For me, this illusion has finally been shattered, and it stems from a seemingly mundane factor: interest rates. Your bank savings account only offers a meager 0.4% interest rate, while a stablecoin backed by the same government bonds offers 4% to 5%. This clearly demonstrates some kind of market failure. Clearly, what we call "money" and what we call "infrastructure" are never separate entities. Banks offer such low interest rates not because banking costs are high, but because they can. They control both the funds and the channels, and they've decided to keep the interest rate differential for themselves. The issuer creates the currency. The blockchain transfers the currency. The platform distributes the currency. For a brief moment, we could clearly see each layer and price them independently. Once people could see the layers clearly, they realized that whoever controlled one would lose profit. The rational approach was to control all of them. Now everyone is scrambling to rebuild the technical architecture, fearing someone else will get there first. For years, stablecoins were simple. Tether and Circle dominated the market with USDT and USDC, creating a seemingly unbreakable duopoly. Together, they controlled 90% of the stablecoin market. Their business model was straightforward. They held customer funds in Treasury bonds, yielding 4% to 5% annually, paid no interest to customers, and pocketed the difference. In 2024, Tether earned $13 billion, and Circle had $1.7 billion in revenue. Not bad for a company that essentially operated like a money market fund and didn't share profits. But then the question is: what if we distributed yields to holders? Since the end of 2024, the market share of yield-generating stablecoins has tripled, reaching over $14 billion in market capitalization and currently accounting for over 6% of the total stablecoin market. JPMorgan analysts predict that if this growth continues, yield-generating stablecoins could account for as much as half of the market. If Tether holds a 5%-yielding Treasury bond and you hold 0%-yielding USDT, then theoretically, for every $100 you hold, someone else is earning $5. If this number is expanded to hundreds of billions of dollars, it represents one of the most significant transfers of wealth in the digital age, flowing silently from holders to issuers. Banks Aware of Competition At the Blockchain Summit in Washington, D.C., Senator Kirsten Gillibrand articulated the banking industry's concerns, which view interest-bearing stablecoins as an existential threat. "Do you want stablecoin issuers to pay interest? Probably not, because if they did, you wouldn't have to keep your money in your local bank." The U.S. Treasury Department calculated that allowing interest-bearing stablecoins could drain $6.6 trillion from bank deposits. Standard Chartered Bank goes further, estimating that emerging market banks alone could lose $1 trillion over the next three years. In countries experiencing double-digit inflation, stablecoins aren't speculative. They're a survival mechanism, a way to hold onto dollars when local currencies depreciate. So the banks did what any rational incumbent would do. They lobbied for the GENIUS Act, which passed in July 2025 and explicitly prohibited stablecoin issuers from paying yield or interest to holders. Problem solved, right? Not quite. The GENIUS Act prohibited issuers from paying interest, but made no mention of intermediaries. Circle quickly realized this. Instead of paying interest directly to USDC holders, Circle shared reserve revenue with Coinbase through a business partnership. Coinbase then used this money to pay USDC rewards to its customers. From an economic perspective, holders received at least some of the proceeds. From a legal perspective, it was Coinbase, not Circle, that made the payments. The arrangement wasn't even subtle. Circle and Coinbase publicly described it as a revenue-sharing model, and in 2024, they jointly generated $1.7 billion in revenue. Other platforms quickly followed suit. PayPal, through a similar partnership with issuer Paxos, offers balance rewards for PYUSD. This income doesn't come from thin air. It comes from the same Treasury bonds that have always backed these stablecoins, simply through an additional intermediary. The Bank Policy Institute is understandably unhappy. They are urging Congress to end the so-called "interest payment workaround" by prohibiting indirect payments by affiliates and agents. Whether regulators will take action depends on how the final rule interprets "interest payment" and whether intermediaries will be categorized with issuers. Currently, this loophole remains in place, and trading volume is significant. For Tether and Circle, the solution has always been liquidity and ubiquity. USDT and USDC are widely accepted, integrated by all major exchanges, and embedded in all DeFi protocols. Their network effects have always been their defensive moat. But that moat is beginning to crumble. While banks and regulators quibble over semantics, something more fundamental is happening. Tether and Circle's combined market share peaked at 91.6% in March 2024. By the end of 2025, it had fallen to 86% and continues to decline. This isn't just due to the availability of yield-generating stablecoins; it's also due to the significantly lower cost and ease of issuing them. A few years ago, launching a white-label stablecoin meant calling Paxos and incurring high fixed costs. Today, you have options like Anchorage, Brale, M0, Agora, or Stripe's Bridge. Companies in the Galaxy Digital portfolio have already launched stablecoins at the seed stage using Bridge's infrastructure. The barrier to entry has been significantly lowered. Exchanges, wallets, and DeFi protocols realized they no longer needed to rely on USDC or USDT. They could issue their own stablecoins, internalize the returns, and return some of those returns to their users. Bridge co-founder Zach Abrams articulated the situation clearly: "If you use an off-the-shelf stablecoin to build a neobank, you can't fully achieve the returns you need to create an optimal savings account. Your reserve mix can't be customized. And you have to pay a 10 basis point redemption fee to withdraw your funds." So they stopped using off-the-shelf stablecoins. The popular Solana wallet Phantom recently launched Phantom Cash, a Bridge-issued stablecoin with built-in yield and debit card functionality. Hyperliquid launched an open bid for its own stablecoin, aiming to reduce its reliance on USDC and generate reserve yield for the protocol. Ethena has been particularly successful in marketing its revenue-sharing model to exchanges. MetaMask, the leading self-custodial Ethereum wallet, has also entered the stablecoin space. In partnership with Bridge and M0, MetaMask launched MetaMask USD (mUSD), integrating it directly into its wallet for on-chain use, exchange, and, soon, debit card payments. Thanks to MetaMask's in-wallet "stablecoin yield" feature, integrated with the Aave mining pool, users can now earn passive income not only on mUSD, but also on major stablecoins like USDC, USDT, and DAI. Other exchanges are also joining forces to form alliances. The Global Dollar Network, powered by Paxos, includes major players like Robinhood, Kraken, Anchorage, Galaxy, and Bullish. Every $1 billion in USDT deposited by investors generates approximately $50 million in annual funding for Tether. You provide trading infrastructure, custody, liquidity, regulatory compliance, and customer support. Tether provides the token. Guess who gets that $50 million? Blockchains want stablecoins, and stablecoin issuers want blockchains. This convergence works both ways. Hyperliquid holds approximately $6 billion in USDC. If all this activity were conducted on Hyperliquid's native stablecoin, USDH, both reserve earnings and transaction fees would flow back into the ecosystem for buybacks and growth. This is the sustainable revenue stream Circle currently controls. Following the success of USDH, other Layer 1 protocols have followed suit. Projects like Ethena are offering a "stablecoin-as-a-service" model, enabling the ecosystem to deploy compliant and yield-generating stablecoins without shouldering heavy technical or regulatory burdens. Stablecoin issuers are now launching their own chains. Why? Because running on external chains creates dependencies: performance issues, throughput bottlenecks, fees, wallets, and third-party cross-chain bridges. Each touchpoint introduces friction and, more importantly, value leakage. By launching their own chain, stablecoin issuers can vertically integrate the currency and settlement layers, taking control of both value and user experience. Circle's Arc is the most obvious example. Circle built Arc to run USDC with zero fees and instant settlement, and then created CCTP as the official cross-chain bridge for burning and minting native USDC on different chains, rather than wrapping it. Circle now controls this chain and all cross-chain flows.
Tether then launched Plasma, a new Layer 1 blockchain built specifically for stablecoin payments, powered by but not limited to USDT. Plasma's design focuses on enabling ultra-fast, zero-fee transfers of stablecoins, while removing unnecessary features from general-purpose chains. Its bridge, USDT0, currently handles $8 billion in trading volume, exceeding CCTP and Wormhole combined. What began as infrastructure for transferring tokens has evolved into a way to control liquidity and remove middlemen from capturing value between chains. Institutions are building entire technology stacks, and Stripe clearly demonstrates where this trend is headed. Stripe processes $1.05 trillion in transactions annually. Instead of building on Ethereum or Solana, it launched its own payment-optimized chain, Tempo. Why? Because at this scale, Stripe can't afford the congestion or governance risks associated with other chains. Tempo integrates with Bridge (for issuing stablecoins) and Privy (for wallets), providing a complete architecture: chain, coin, and custody. What strikes me most is that this doesn't seem like a disruption, but more like a revelation. Technology doesn't change the rules; it reveals them for what they are. Control of money is control of infrastructure, control of access. These were never three different things. They were one thing, just wearing three different masks. The optimistic view is that once everyone understands this, competition will improve the system. Perhaps a dozen vertically integrated architectures competing against each other will produce better results than just one. Perhaps regulatory clarity around stablecoins will prevent the worst abuses. Perhaps the costs of building and maintaining a complete architecture will naturally limit the ability of any single player to extract value. The pessimistic view, however, is that we're simply witnessing the same consolidation game unfolding faster and more visibly. The winners won't be those with more advanced technology or fairer economic models. They will be the ones who reestablish their monopoly fastest before anyone else.
One way or another, the illusion is gone. The next decade will tell us whether it matters or not.
Alex
Catherine
Anais
Miyuki
Kikyo
Weiliang
Weatherly