The global cross-border payment market has surpassed $45 trillion. Dollar-denominated stablecoins now command over 90% of the cryptocurrency market share. The passing of the U.S. GENIUS Act, bringing stablecoins under federal regulation, marks a pivotal moment. We are witnessing a technology-driven financial revolution. Stablecoins, digital assets combining the stability of fiat currency with the liquidity of cryptocurrencies, are rapidly altering the foundational logic of the global monetary system. This analysis explores the current state, competitive landscape, and profound impact of the stablecoin industry in 2025.
An Analysis of the Current Market Structure and Competitive Landscape
Market Size and Dominant Players
The global stablecoin market has solidified into a "duopoly" in 2025, with USDT and USDC collectively holding nearly 90% of the market share. As of June 2025, the total market capitalization of stablecoins has shattered the $240 billion barrier, representing a staggering 170-fold increase since 2017. This figure now accounts for 7% of the total cryptocurrency market cap and exceeds the money supply of many emerging market nations, underscoring stablecoins' emergence as a formidable financial force.
Fiat-collateralized stablecoins maintain absolute dominance, with USD-backed variants comprising over 85% of this segment. This highly concentrated market structure highlights both first-mover advantages and the enduring influence of the U.S. dollar in the digital finance arena. Notably, regions like Hong Kong and Singapore are actively cultivating local stablecoin ecosystems through regulatory sandboxes and other innovative frameworks, aiming to challenge the current monopoly held by dollar stablecoins.
The Industry Value Chain and Business Models
A complete upstream and downstream industry chain has matured around stablecoins. The upstream issuance segment benefits directly from scale expansion. Midstream exchanges and blockchain infrastructure support circulation, while downstream application scenarios continue to diversify. A significant trend is the entry of traditional financial institutions via "brokerage + exchange" partnership models, evidenced by collaborations such as Interactive Brokers with OSL and Futu with HashKey.
Regarding profitability, issuance entities primarily rely on interest rate spreads from reserve assets, which constitute over 90% of their revenue. For instance, USDT invests the majority of its reserves in U.S. Treasury bills and reverse repurchase agreements, with these assets making up 77% of its holdings in 2024. While this business model is efficient, it has sparked debates on whether these "digital banks" should be subject to analogous regulatory frameworks.
Evolving Use Cases: From Trading to Critical Financial Infrastructure
Core Application Scenarios
Stablecoins have evolved far beyond their initial role as a medium of exchange for cryptocurrency trading. They now function as multidimensional financial infrastructure across four key areas:
- Crypto Asset Trading: They facilitate over 80% of all cryptocurrency trade settlements, providing a bedrock of continuous demand.
- Cross-Border Payments: Stablecoin payment volume reached $15.6 trillion in 2024, surpassing the combined totals of Visa and Mastercard. Their ability to settle transactions in seconds at a fraction of the cost of traditional banks is transformative.
- Store of Value: In nations experiencing hyperinflation, stablecoins have become a vital tool for wealth preservation.
- Decentralized Finance (DeFi): They are the fundamental building blocks for an entirely new, open financial ecosystem.
Real World Asset (RWA) tokenization represents the most promising growth vector. Boston Consulting Group predicts the RWA market could reach $16 trillion by 2030, with an estimated 30-50% of stablecoin flow directed into this sector. Projects like Ant Group's tokenized photovoltaic assets and RealT's real estate tokenization in the U.S. exemplify the unique value stablecoins provide in bridging the virtual and real economies.
Inherent Advantages and Associated Challenges
The dual nature of stablecoins—combining the value stability of fiat with the technical advantages of crypto—makes them irreplaceable in specific contexts. They reduce cross-border payment costs to between 1/10th and 1/100th of traditional banking fees and slash settlement times from 3-5 days to mere seconds. A pilot program for a stablecoin co-branded card by JD.com and Visa in the Middle East demonstrated this, reducing cross-border settlement costs from 6% to just 0.1%.
However, the industry faces significant challenges. The collapse of the algorithmic stablecoin UST highlighted the risks of flawed model design. Regulatory divergence across jurisdictions creates high compliance costs, while technical vulnerabilities in smart contracts and the threat of hacking pose persistent security risks to funds. These factors will continue to shape the industry's development trajectory.
Future Outlook: Regulatory Evolution and Reshaping Global Finance
The Accelerating Build-out of Global Regulatory Frameworks
2025 stands as a pivotal year for stablecoin regulation. The U.S. GENIUS Act establishes a federal regulatory framework, the EU's Markets in Crypto-Assets (MiCA) regulation has come into full effect, and Hong Kong's Stablecoin Ordinance is now enforced. These regulatory moves converge on several core principles: transparency of reserve assets, licensing of issuance entities, and stringent risk management.
Notably, regulatory approaches differ significantly by region. The U.S. views stablecoins as an "extension of the dollar," China is focused on the development of its digital yuan (e-CNY), and the EU has adopted a "stablecoins alongside a digital euro" strategy. This divergence reflects differing national considerations regarding monetary sovereignty and financial stability.
The Long-Term Impact on the Global Monetary System
The rise of stablecoins is actively reshaping the global monetary landscape. In the short term, the dominance of dollar stablecoins reinforces the dollar's hegemony in the digital age, creating a new cycle of "physical dollar → stablecoin → U.S. Treasury debt." Citi Bank forecasts that stablecoins could hold between $1.2 and $3 trillion in short-term U.S. Treasuries by 2030, becoming a significant force underpinning U.S. debt.
In the long run, the inherent openness of the technology creates a window for a more multipolar development. As Hong Kong, Singapore, and other regions promote the development of local currency-denominated stablecoins, monetary competition in the digital realm is likely to become more diverse. This competition will extend beyond mere technical superiority to encompass institutional environment, market trust, and ecosystem development.
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Frequently Asked Questions
Q1: What is the difference between a stablecoin and a Central Bank Digital Currency (CBDC)?
A1: A CBDC is a digital form of a nation's sovereign currency and is legal tender. Stablecoins are typically issued by private entities and maintain their value stability through collateral reserves. Technologically, digital yuan (e-CNY) utilizes authorized consortium blockchain, whereas mainstream stablecoins operate on public, permissionless blockchains.
Q2: Why is Real World Asset (RWA) tokenization considered the most promising use case for stablecoins?
A2: RWA involves tokenizing physical assets like real estate and bonds, a total market estimated at $867 trillion. Currently, only a minuscule fraction (approx. 0.0013%) of these assets exist on-chain. Stablecoins act as the essential unit of account and medium of exchange within the tokenization process, enabling fractional ownership and enhanced liquidity for these massive asset classes.
Q3: What are the primary regulatory concerns for stablecoins across different countries?
A3: Core regulatory focus areas include: ensuring reserves are fully-backed and auditably transparent, vetting the qualifications of issuers, protecting investors, and enforcing Anti-Money Laundering (AML) compliance. Regulations like the U.S. GENIUS Act also include provisions such as prohibiting interest payments to holders to prevent destabilizing competition with traditional banks.
Q4: How can an average investor participate in the stablecoin ecosystem?
A4: Investors can purchase major stablecoins through licensed and regulated exchanges. Some may also choose to participate in activities like staking on DeFi platforms to earn yield. It is crucial to understand and strictly adhere to the investor qualification requirements and regulations specific to your jurisdiction, as these vary significantly across the globe.
Q5: What are the main risks associated with holding stablecoins?
A5: Key risks include potential de-pegging events if the issuer's reserves are inadequate or not truly 1:1, regulatory changes that could impact usability or legality, counterparty risk associated with the issuing entity, and technical risks like smart contract bugs or exchange hacks. It's vital to use well-established, transparent, and compliant stablecoins and platforms.
Q6: How might stablecoins affect traditional banking systems?
A6: Stablecoins could potentially divert deposits away from traditional banks, weakening their lending capacity and potentially impairing the transmission of monetary policy. In response, this disruption is likely to force traditional banks to accelerate their own digital transformation efforts, potentially leading to the adoption of similar technologies and offering new digital asset services.