Every October, our Q3 Commentary takes on a shiny new topic. In past years we’ve explored crypto, cannabis, GLP-1s, and SPACs – each a story about innovation and hype colliding with reality. This year, we’re focused on something that’s not new, but newly relevant: stablecoins.
After July’s passage of the GENIUS Act and Circle's IPO filing, the topic’s gone from a simmer to full boil. We’ll go ahead and say it: Widespread stablecoin adoption isn't a “maybe.” It's an inevitability.
So we all need to understand them better.
What Are Stablecoins?
Forget the blockchain buzzwords: a stablecoin is a digital dollar. It moves like email, not a mail truck. One coin equals one dollar. The price doesn't fluctuate. That's the entire design.
Why care? Because you get dollar stability with internet speed.
There are three broad types, but only one dominates in practice:
- Fiat-backed stablecoins (USDC, USDT): Each token is backed 1-to-1 by cash or Treasuries. Simple, transparent, widely used, and what we’re focused on today.
- Crypto-backed stablecoins (DAI): Collateralized by other cryptocurrencies. Niche and complex.
- Algorithmic stablecoins: Tried to stay pegged using code and market incentives – until TerraUSD collapsed in 2022, taking $40B with it. Proof that backing matters.
Who Are the Major Players?
Today, Tether (USDT) dominates the global stablecoin market with $175 billion in circulation. It's particularly popular in emerging markets, where access to traditional banking is limited. Regulators continue to raise questions about reserve transparency, and Tether continues to be vague - but it also continues to grow. Momentum, it turns out, can be a powerful defense.
Circle (USDC) has become the "institutional choice", with around $65 billion in circulation. It offers monthly attestation reports, transparent reserves, and a cooperative relationship with regulators – essentially the stablecoin you can mention in a compliance meeting without raising eyebrows.
Then there’s PayPal (PYUSD), launched in 2023. It’s still small, but strategically important. With more than 400 million PayPal/Venmo users, it represents the first seamless bridge between stablecoins and everyday consumers - people could soon be using stablecoins without even realizing they’ve entered the crypto world.
Behind them, an impressive list of corporations are either experimenting with or preparing to issue stablecoins such as: Amazon, Walmart, JPMorgan, Bank of America, Citi, Wells Fargo, SOFI, Fiserv, and even the Trump family's World Liberty Financial. When both Silicon Valley and Wall Street are building in the same direction, it’s worth paying attention.
Why Do Stablecoins Matter?
Two reasons: speed and cost.
This is why the total market has exploded from essentially zero in 2019 to over $250 billion by 2025, with daily transaction volumes now exceeding those of Visa and Mastercard combined.
On speed: traditional bank transfers through SWIFT can take 1-5 business days, often touching several intermediary banks along the way. Credit card payments appear instant but take 2-3 days to settle between institutions. Even PayPal and Venmo - instant inside their own systems - take 1-3 business days to withdraw. Stablecoins settle in 15 seconds to 15 minutes, final and irreversible. No holds. No "processing.” Just done.
On cost: sending money internationally through SWIFT can easily cost $25-50 in fees, plus hidden correspondent fees, plus 1-3% exchange rate spreads. Credit cards take 2-4%, and PayPal charges roughly 5% for cross-border payments. By comparison, stablecoin transactions typically cost between $0.01 and $20 depending on blockchain congestion. Crucially, the cost is fixed, not percentage-based. Moving $100 costs the same as moving $10 million (for now).
The GENIUS Act Changed Everything
On July 18, 2025, President Trump signed the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins) into law, the first federal regulatory framework for stablecoins. And it changes everything.
What it does:
- 100% reserve requirement: Every stablecoin must be backed one-to-one with high-quality liquid assets;
- Monthly public disclosure: Actual details about what backs each token;
- Federal oversight: Large issuers (over $10 billion) face federal banking regulation;
- No yield: Issuers can't pay interest, preventing direct competition with banks for deposits, though many (like Paypal) have found loopholes through "rewards;"
- Strict licensing: Only "permitted payment stablecoin issuers" can operate. Others face $100,000/day penalties;
- AML/CFT requirements: Anti-money laundering programs meeting federal standards.
The GENIUS Act legitimized stablecoins—with Washington allowing the private sector to build out digital currency on top of central bank backed assets.
However, over 100 countries are exploring government-issued digital money. China’s e-CNY proves the technology works at scale—hundreds of millions of users, trillions in transactions, integrated into daily life. But also proves the surveillance concerns are justified. Europe's digital euro is being designed with privacy protections and ensuring it complements rather than replaces commercial banking.
Ultimately, technical feasibility is no longer the question. Social acceptance, privacy protections, and financial stability implications determine whether these succeed or fail. Get the implementation wrong, and people simply won't use your digital currency—they'll choose alternatives.
The Macro Story Nobody's Talking About
Stablecoin growth isn't just a crypto story—it's a macroeconomic one, with real implications for interest rates, currency values, banking stability, and global capital flows.
Short-Term Interest Rates
Stablecoin issuers hold nearly all reserves in short-term Treasury bills (typically 4- to 13-week maturities). Every new stablecoin issued adds direct demand for Treasuries.
According to the Bank for International Settlements (BIS), every $3.5 billion in stablecoin inflows lowers 3-month Treasury bill yields by roughly 2-2.5 basis points. With the market now above $250 billion and projected to hit $1.6 trillion by 2030 – the BIS estimates a potential impact of 5.7 to 7.15 basis points on short-term yields.
Why does that matter? Because lower Treasury yields mean cheaper government borrowing. With over $35 trillion in U.S. federal debt, even a few basis points translates into billions in annual interest savings for taxpayers. This dynamic isn't accidental—it's quietly becoming policy.
Long-Term Interest Rates
Of course, those same inflows don’t appear out of thin air – they come largely from bank deposits.
For every $1 entering stablecoins, $1 leaves the banking system. If banks lose 10% of deposits to stablecoins, credit extension by the banking industry would directly decline.
The result? Lower costs for government refinancing, higher costs for households and businesses. Less bank lending capacity means borrowers compete for scarcer credit, pushing up mortgage rates, corporate bond yields, and other long-term borrowing costs. You help the government's short-term refinancing but potentially hurt households trying to get mortgages and businesses trying to expand.
Who Wins and Who Loses?
We don’t see stablecoins as "new money", but as a new way to deliver the same dollar- like how streaming replaced DVDs. And with new distribution come new winners and losers.
Totally Screwed: Remittance firms like Western Union and MoneyGram, whose 6-10% transfer fees can’t survive this new reality. Traditional banks that resist adaptation will also feel the squeeze as deposits flow into digital dollars. Even title and escrow services could face automation as blockchain-based settlements handle verification and payment in seconds.
Must Adapt or Die: Payment processors like PayPal and Fiserv are racing to stay relevant. Visa and Mastercard are already building stablecoin infrastructure to remain indispensable. Merchant platforms such as Stripe and Toast will either integrate stablecoins – or lose clients to those who do.
Will Still Make Money: The big banks – JPMorgan, Bank of America, Citi – are piloting tokenized deposits to serve institutional clients. Hybrid fintechs like SoFi and Robinhood are building bridges between traditional and blockchain finance. And major asset managers – BlackRock, Franklin Templeton – have entered the arena, lending legitimacy and liquidity.
Biggest Winners of All: Stablecoin issuers themselves. Circle, for instance, earns 4.05% on its $65+ billion reserve portfolio of Treasuries – a staggering annual income stream, albeit rate-sensitive. Coinbase, Circle’s co-creator and custodian, benefits from trading, custody, and its equity stake, offering one of the most direct public exposures to this evolution.
The Bottom Line
Stablecoins aren’t coming – they’re already here. The question isn’t whether they’ll reshape global finance, but who captures the value and who gets left behind. Some institutions will adapt and thrive. Others will ignore the shift until it’s too late, joining Blockbuster in the business graveyard.
This isn’t about a new kind of money. It’s about a new kind of money movement – faster, cheaper, and borderless. In the long run, that’s not just innovation. That’s transformation.