The trillion-dollar feast of stablecoins: Who is making money?

Article by: Cole

In the turbulent world of cryptocurrencies, Bitcoin and Ethereum are the stars attracting everyone’s attention, while stablecoins (such as USDT and USDC) serve as the “blood,” “fuel,” and “chips” of this vast ecosystem. They connect everything, acting as safe havens for traders to avoid volatility and as the underlying settlement tools in the DeFi (Decentralized Finance) world.

You might use them every day, but have you ever thought about a fundamental question:

You give $1 to the issuer (like Circle) in exchange for 1 USDC token. You hold this token, which doesn’t earn any interest. When you exchange it back for dollars, you only get back $1.

However, these issuers are making huge profits. Circle’s revenue in 2024 reached $1.7 billion, while Tether recorded an astonishing profit of $13 billion in 2024.

Where does this money come from? Let’s take a closer look at how the stablecoin system operates and who the real winners of this feast are.

The “Printing Press” at the Core

The business model of stablecoin issuers is so simple it’s almost “boring,” yet it’s incredibly powerful due to its scale. Essentially, it’s an ancient financial model: playing with “float.”

It’s like a bank taking in demand deposits or a money market fund (MMF), but with a key difference — they don’t need to pay any interest on these “deposits” (your stablecoins).

In the era of zero interest rates (before 2022), this model barely made money. But with the Fed’s recent aggressive rate hikes, US Treasury yields soared. Profits for Circle and Tether have “skyrocketed” accordingly.

It’s no exaggeration to say that the hundreds of billions of dollars in valuation for these stablecoin giants are essentially a macro bet on the Fed “maintaining higher interest rates for longer.” Every Fed rate hike is like a direct “subsidy” to this industry. If the Fed returns to zero interest rates in the future, the core income of these issuers will vanish instantly.

Of course, besides interest, issuers have a second source of income: institutional fees;

Circle @USDC@: To encourage large clients like Coinbase to use USDC, Circle’s minting (depositing) is free. Only when institutions redeem (withdraw) more than $2 million per day do they charge a nominal fee. Circle’s strategy is to maximize the size of reserves (“float”).

Tether @USDT@: Tether is more “opportunistic.” Whether minting or redeeming, Tether charges a 0.1% fee (minimum $100,000). Its strategy is to maximize revenue from each transaction (interest and fees).

Strategic Duel: Circle vs. Tether

Although their business models are fundamentally similar, Circle and Tether take two very different paths in managing their hundreds of billions of dollars in reserves. This results in vastly different risk profiles, transparency levels, and profitability.

Circle @USDC@: Compliance and Transparency

Circle strives to position itself as a trustworthy, regulation-friendly “model student.” Its core strategy isn’t “trust me,” but “trust BlackRock.”

Circle’s reserve structure is extremely conservative and transparent. It doesn’t manage the hundreds of billions itself but outsources this trust to the world’s largest asset manager — BlackRock.

Most of Circle’s reserves are held in a tool called “Circle Reserve Fund” (ticker: USDXX). It’s a government money market fund registered with the SEC in the US, managed entirely by BlackRock. As of November 2025, the fund’s portfolio is extremely boring: 55.8% US Treasury repurchase agreements and 44.2% US Treasuries.

The implicit message from Circle is: “Regulators and institutions, your concerns about reserve safety are addressed. My funds aren’t in some mysterious bank account but are managed by BlackRock in an SEC-regulated fund, investing only in the safest US Treasuries.”

This is a clever defensive strategy. Circle sacrifices some potential earnings (paying management fees to BlackRock) in exchange for long-term trust from institutions and regulators.

Tether @USDT@: Aggressive and Highly Profitable

If Circle is a meticulous accountant, Tether is more like an aggressive hedge fund manager.

Tether has long been criticized for its lack of transparency (relying on BDO’s “attestation report” rather than full audits), but its investment strategy is far more aggressive and diversified than Circle’s, leading to astonishing profits.

As of Q3 2025, Tether’s reserves include:

• “Conventional” assets (like Circle): US Treasury securities ($112.4 billion), overnight repurchase agreements ($18 billion), money market funds ($6.4 billion).

• “Aggressive” assets (Circle would never touch):

  • Precious metals (gold): $12.9 billion

  • Bitcoin: $9.8 billion

  • Collateralized loans: $14.6 billion

  • Other investments: $3.8 billion

Do you see it? Tether not only earns interest from US Treasuries but also bears risks from commodities (gold), cryptocurrency volatility (Bitcoin), and credit default risk (the $14.6 billion mysterious loans).

Tether’s operation isn’t just a money market fund; it’s more like an “internal hedge fund,” with its funds coming from the global users holding interest-free USDT.

This is the secret behind Tether’s $13 billion profit in 2024. It earns interest, bets on capital gains from Bitcoin and gold, and also earns higher risk-adjusted returns through lending.

This explains why Tether emphasizes its “excess reserves” (or “net assets,” as of August 2024, $11.9 billion). This money isn’t “profit” that can be freely distributed; it’s a “capital buffer” — a “rainy day fund” Tether must hold to absorb potential losses from risky assets like Bitcoin and loans, preventing USDT from “de-pegging.”

Tether must maintain high profits to support its risky asset game.

Comparison of Reserve Asset Composition (Data as of Q3/Q4 2025)

Where does the profit go?

How are these hundreds of billions in profits allocated? This again reveals the stark differences between the two companies.

Circle @USDC@: The “chains” — Expensive Revenue Sharing with Coinbase

Although Circle’s revenue is high, its net profit has been dragged down by a huge cost — the revenue-sharing agreement with Coinbase.

Circle and Coinbase (co-founders of USDC) reached an agreement in 2018 to share the interest income generated by USDC reserves. Coinbase gets 50% of the “residual payment base.”

This agreement is based on USDC holdings on Coinbase’s platform. But by 2024, USDC on Coinbase accounts for only about 20% of total circulation, yet this old “outdated” agreement entitles Coinbase to roughly 50-55% of total reserve income.

This distribution cost “eats into most of Circle’s profit.” Payments to Coinbase rose from 32% of revenue in 2022 to 54% in 2024. In Q2 2025, Circle’s total revenue was $658 million, but just “distribution, trading, and other costs” amounted to $407 million.

Thus, Coinbase isn’t just a partner; it’s more like a “synthetic equity holder” in USDC’s core revenue stream. Coinbase is both Circle’s largest distribution channel and its biggest cost burden.

Tether @USDT@: The “Black Box”

Tether’s profit distribution is a completely opaque “black box.”

Tether @USDT@ is owned by a private company called iFinex, registered in the British Virgin Islands (BVI). iFinex also owns and operates the well-known cryptocurrency exchange Bitfinex.

The reported $13 billion profit flows entirely into iFinex, the parent company.

As a private company, iFinex isn’t required to disclose detailed costs or dividends like a public company. Based on historical records and public information, these funds go to three main destinations:

• Shareholder dividends: iFinex (Bitfinex) has a history of paying huge dividends to its private shareholders (e.g., $246 million in 2017).

• Retained as capital buffer: As mentioned, Tether keeps a large portion of its profits (e.g., $11.9 billion) as “net assets” on the books to hedge against risks from Bitcoin holdings and loans.

• Strategic investments (or internal reallocations): Tether/iFinex is diversifying into new fields like AI, renewable energy, and Bitcoin mining. There are also complex internal fund flows with Bitfinex (e.g., the famous Crypto Capital hole).

Therefore, Circle’s profit distribution is transparent, costly, and “locked” with Coinbase. Tether’s profit distribution is opaque, discretionary, and entirely controlled by a few insiders at iFinex. These funds are becoming ammunition for building their next empire.

How Can Ordinary Players “Get a Share”?

Since the issuers take all the interest from US Treasuries, how can we (crypto users) profit from this ecosystem?

Our earnings don’t come from the issuers but from other crypto users’ demand — by providing services (liquidity, loans) and taking on on-chain risks to earn yields.

There are three main strategies:

Strategy 1: Lending

How it works: Deposit your USDC or USDT into algorithmic money markets like Aave or Compound.

Who pays you? Borrowers — typically traders leveraging positions or cash-strapped “HODLers” who don’t want to sell their Bitcoin/Ethereum.

How it works: Protocols like Aave and Compound automatically match lenders and borrowers, adjusting interest rates in real-time based on supply and demand. You earn most of the interest, while the protocol takes a small fee.

Strategy 2: Providing Liquidity

How it works: Deposit your stablecoins (like USDC/USDT or USDC/DAI trading pairs) into decentralized exchange (DEX) liquidity pools.

Top platform: Curve Finance

Curve is designed specifically for stablecoin swaps (e.g., USDC to USDT), with algorithms that minimize slippage.

Who pays you? Traders. Every time someone swaps USDC for USDT on Curve, they pay a tiny fee (e.g., 0.04%), which is proportionally distributed to liquidity providers.

Additional rewards: To incentivize liquidity provision, Curve also airdrops governance tokens (CRV) as extra rewards.

Why is it popular? Since the pools contain pegged stablecoins, you almost never face “impermanent loss,” making it an ideal “rent collection” strategy.

Strategy 3: Yield Farming

How it works: This involves complex “layered” strategies aimed at maximizing yields.

Example: You can

1( Deposit USDC into Aave;

2. Use that USDC as collateral to borrow ETH;

3( Invest the borrowed ETH into other high-yield pools.

Risks: This is the riskiest approach. You face smart contract hacks, liquidation risks if ETH prices plummet, and the risk of protocol rewards drying up.

Summary

At its core, the story of stablecoins is a tale of “two economies.”

The first is a private, off-chain feast: issuers (Tether/Circle) invest your idle reserves into US Treasuries, earning billions in interest, which they share with shareholders and corporate allies (like Coinbase), leaving token holders empty-handed.

The second economy is the one we build ourselves — the vibrant, on-chain DeFi world. Here, users earn yields by lending and providing liquidity, funded by fees and interest paid by other users.

This reveals a core irony in the industry: a decentralized ecosystem whose “blood” is supplied by highly centralized, profit-driven “banks.” The future of this trillion-dollar empire hinges on two pillars: the macro environment of high interest rates that issuers rely on, and the ongoing demand for speculation and leverage from DeFi users.

How long can these two pillars last? Perhaps that’s the ultimate question for this trillion-dollar track.