Backed by the dollar, stablecoins are designed to maintain a stable value. Long relegated to a crypto niche, they are now establishing themselves as international tools for fast, inexpensive transfers and also as a refuge from volatility.

An essential tool

In concrete terms: you deposit $1, a USDC (or USDT depending on the issuer) is created for you, and that dollar remains in reserve, available at any time. These stable cryptocurrencies also serve as a gateway between blockchains and are attractive for their efficiency, particularly for international transfers.

The enthusiasm is also due to a supportive regulatory framework. The GENIUS Act, supported by the US Senate, marks a major step forward for the sector. The market capitalization of stablecoins has jumped 22% since January, reaching $251bn. Two players dominate: Tether (USDT, $155bn) and Circle (USDC, $61bn), with the latter having recently made a grand entrance on the stockmarket.

Evolution of stablecoin capitalization since January 1 2018. (source: Coinglass)

 

A unique countercyclical mechanism

The business model is based on a simple relationship: the higher US rates rise, the more revenues increase. This is because stablecoins place their reserves in highly liquid assets such as short-term Treasury bills. And since they do not pay any returns to their users, the interest received is gross profit.

In the event of a crisis or market panic, demand for these stable assets skyrockets, as does their revenue. And if rates rise at the same time, the gain is twofold. Conversely, when rates fall, revenues slow, but the model remains solid. A favorable asymmetry.

This is how the monetary situation of the last two years has particularly favored this model.

Changes in three-month US Treasury bill rates (source: Ycharts)

The mechanism works both ways. So when rates were low, so were revenues. Sudden losses in revenue could even prompt these stablecoins to charge fees that have been avoidable until now, such as transaction fees.

The correlation here is striking.

(Circle's market capitalization as of December 31, 2020: $3.9bn).

Government protégés

Last month, an academic paper was published on the impact of stablecoins on the decline in US Treasury yields.

In Q1 2025, Tether held 1.6% of outstanding Treasury bonds. Tether is one of the world's most active players in the US debt market and ranks amongst the world's largest holders, ahead of many countries.

Demand for stablecoins could therefore reduce sovereign financing costs on short maturities.

Tether's assets are now audited regularly and their distribution is public.

Breakdown of Tether's assets as of March 31, 2025

Distribution

(source of both illustrations: Transparency)

A future worth $3.7 trillion?

The American bank Citi estimates that stablecoins could exceed $3.7 trillion by 2030. Circle, in its IPO filing, states that 99% of its revenue comes from interest on reserves (understand Circle's business from A to Z). There are therefore two key variables: the size of the reserve and the level of interest rates.

To maintain stability, issuers favor short-term assets, which are less sensitive to interest rate fluctuations. This is a prudent choice for a model that could establish itself as a unique anti-crisis investment.