In-Depth Research Report on Stablecoins: The Anchor Asset of the Next-Round Financial Revolution

I. Introduction: Stablecoins' Systemic Role Is Reshaping the Logic of Global Finance

Over the past five years, stablecoins have evolved from mere tools supporting crypto trading into core assets of on-chain finance, and they are gradually integrating into the global financial system. As the U.S. Federal Reserve gets closer to the end of its rate-hike cycle, the dollar's dominance is under shock, and cross-border payment systems search for greater efficiency, stablecoins, often seen as "on-chain dollars", are gaining broad acceptance. From the Stablecoin Transparency Act passed in the U.S. in 2024, to the G7 countries' recognition of stablecoins as "digital dollar alternatives", and the inclusion of stablecoins in foreign exchange policy discussions by emerging markets, a global financial race around "anchor assets" is already underway.

Stablecoins are not only the liquidity engines of DeFi but also a vital bridge between Web3 and the real-world economy. This report provides a systematic analysis of stablecoin types, development trends, regulatory landscapes, sovereign competition, and investment opportunities.

II. Market Overview: Hundreds of Billions in Size, Structural Divergence, and a Boom in Use Cases

Currently, the total stablecoin market has surpassed $250 billion in total value and is highly concentrated. Specifically, USDT, issued by Tether, holds an absolute lead with a market cap of $150.335 billion, accounting for 61.27% of the market and single-handedly supporting half of the entire sector. USDC, issued by Circle, follows closely behind, with a market cap of $60.822 billion and a share of 24.79%. Together, the two represent roughly 86.06% of the entire stablecoin market, forming a classic "duopoly". This dominance has been deeply embedded in the infrastructure of the crypto financial market. USDT and USDC have each established robust networks of usage and trust foundations in different regions and ecosystems.

USDT is currently the most widely used stablecoin. Its strengths lie not just in its market cap and circulation scale but also in its global presence and extensive real-world use cases. It operates across various mainstream blockchains such as TRON, Ethereum, BNB Chain, and Solana, with TRON seeing the most active usage, accounting for over half of the total circulation. TRON’s relatively low transaction fees have made USDT the go-to choice for OTC and CEX clearing in regions such as Asia, Latin America, and the Middle East. Meanwhile, in emerging markets, USDT plays an indispensable role in cross-border remittances, value preservation, and DeFi liquidity provision. For example, in high-inflation countries such as Venezuela, Turkey, and Nigeria, USDT has effectively become the "alternative dollar" used by people and even serves as a settlement tool in shadow financial systems. This role as the "on-chain dollar" has allowed USDT to gradually evolve from a simple trading tool into a base currency, performing some of the functions associated with "stable assets".

More importantly, Tether's profit model reveals its strong financial strength and clout in capital markets. In the first half of 2025, Tether registered net profits of over $5.7 billion, making it one of the most profitable companies in the entire crypto industry. Much of these earnings came from its substantial holdings of short-term U.S. Treasury bills, which not only underpin its stablecoin reserves but also give it real sway in the short-term interest rate market. Research shows that for every 1% share Tether holds in the U.S. Treasury market, it can influence short-term rates by roughly 3.8–6.3 basis points, which means that its structural presence in the U.S. Treasury market surpasses the holdings of some small and medium-sized sovereign states. Against this backdrop, USDT is no longer just an on-chain utility token; it has gradually evolved into a "stablecoin financial institution" with growing systemic influence on global markets.

By contrast, USDC has pursued a growth path centered on compliance and institutional friendliness. It enjoys greater trust and integration within the U.S. domestic market, the financial services system, and corporate payment use cases in Web3. Circle continues to work closely with regulators and push forward in areas such as transparent audits, fiat reserves, and stable rate distribution, seeking to establish a "standard paradigm" for the stablecoin sector. However, this development path, focused on prudence, makes USDC appear conservative in fast-moving markets like Asia. It functions more as a "trusted stablecoin" that ensures security and audit traceability in DeFi, earning favor from institutions bridging TradFi and CeFi. Yet in terms of grassroots circulation and transaction frequency, it still lags behind USDT.

Although this duopoly formed by USDT and USDC is unlikely to be overturned in the short term, recent years have seen the sharp rise of new stablecoin projects, which have become new variables worth watching in the market structure. The most representative example is USDe, launched by Ethena, a "synthetic stablecoin" backed by hedged ETH perpetual positions and yield protocols. Since its debut in early 2024, USDe's market cap has skyrocketed from $146 million to $4.889 billion, a surge of more than 334-fold, making it one of the fastest-growing stablecoin projects in the past two years. Its rapid rise is partly fueled by the hype surrounding the "DeFi fixed income" narrative and partly by proof of genuine market demand for non-custodial, contract-driven stable assets. Moreover, USD1, USD0, and others have also attracted capital within their respective narrative sectors, gradually tapping into demand for stablecoins in specific scenarios. However, judging by market cap and user base, these emerging stablecoins are not yet strong enough to reshape the mainstream landscape and must further strengthen risk controls, market adaptability, liquidity infrastructure, and other areas to advance.

In sum, the stablecoin market has now entered a phase of extreme concentration with a clearly defined dominance structure. With its unmatched scale, powerful on-chain circulation capacity, and penetration into macro-financial instruments, USDT has become one of the most systemically important assets in the crypto economy. USDC, by contrast, represents the compliance-driven and transparency-oriented path for stablecoin development and is more institutionally trustworthy. Emerging stablecoins bring experimental and diversified options, injecting vitality into the market. With the gradual implementation of global crypto regulatory policies, the stablecoin market will face the challenge of compliance reshuffling and enjoy the benefits brought about by the wave of financial disintermediation. Whether USDT can maintain its dominance, whether USDC can extend its reach, and whether new stablecoins can stand out will remain central themes in the evolution of the stablecoin market in the coming years.

III. Regulatory Tug-of-War: Stablecoins Are a New Variable in Financial Stability

The explosive growth of stablecoins is pushing what was once a "peripheral crypto tool" into the spotlight of macro-financial policy and regulatory debates. As their scale expands and use cases multiply, stablecoins are no longer just technical innovations or decentralization experiments; they have become key real-world variables with the potential to influence monetary policy, capital flows, and even systemic financial risk. Confronted with this trend, global regulators are in the midst of a subtle yet profound power struggle: On the one hand, they attempt to establish rules and boundaries for this new class of asset to preserve the stability of the traditional financial system. On the other hand, they have to acknowledge that stablecoins are filling gaps in the existing financial system, particularly in areas like cross-border payments, dollar substitution, and financial inclusivity, where their role is increasingly vital.

Currently, major economies are taking clearly divergent strategies rather than following a unified path on stablecoin regulation. For example, U.S. regulators remain embroiled in prolonged policy debates over stablecoins. On the one hand, the U.S. Department of Treasury, Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and other departments offer differing interpretations regarding the nature of stablecoins and have yet to reach consensus on core issues such as "wether stablecoins are securities", "whether they qualify as payment systems", and "whether they should be issued by banks". On the other hand, the dollar-dominated global financial order makes it impossible for the U.S. to ignore the potential impact of stablecoins on its monetary policy transmission mechanisms and its international financial standing. The short-term U.S. Treasury bills held by Tether, which are worth hundreds of billions of dollars, already have a measurable effect on money market rates, turning stablecoins from a "crypto topic" that could be set aside into a tangible financial variable. Recently, the U.S. Congress has been pushing forward with the Clarity for Payment Stablecoins Act and reinforcing a regulatory framework based on "issuer licensing, reserve audits, and bank custody". This aims to provide the market with clear expectations, but in the tug-of-war between politics and technology, the process is unlikely to move quickly.

In the European Union, the situation is slightly different. The EU pioneered a comprehensive regulatory framework for crypto assets, the Markets in Crypto-Assets Regulation (MiCA), which establishes two specific regulatory categories for stablecoins, i.e., electronic money tokens (EMTs) and asset-referenced tokens (ARTs). In addition, this framework sets out relatively strict requirements on transparency, reserves, capital, and issuance caps. While widely viewed as one of the most stringent crypto-asset laws in the world, MiCA sends a clear signal: Regulators are no longer simply trying to suppress crypto but are instead seeking to bring it into the system and impose institutional constraints. For stablecoin issuers, entering the European market will require obtaining local licenses and complying with central bank-level regulatory requirements, which undoubtedly raises the barriers to market entry and may encourage large stablecoin issuers to transition toward full compliance.

Meanwhile, the regulatory landscape in Asia is where pragmatism and competition coexist. For example, jurisdictions like Singapore, Japan, and Hong Kong have adopted relatively flexible stablecoin regulatory frameworks that emphasize balancing risk management, user protection, and financial innovation. The Hong Kong Monetary Authority has recently expressed clear support for the development of fiat-referenced stablecoins, even raising the possibility of launching "local stablecoins backed by Hong Kong dollars", signaling a policy-level openness toward the prospects of "regionalized on-chain currencies". In the Middle East, Gulf states such as the UAE and Saudi Arabia are actively introducing stablecoin clearing mechanisms and promoting the coexistence of central bank digital currencies (CBDCs) and stablecoins, aiming to build the next generation of cross-border payment networks. It is clear that, against the backdrop of regulatory uncertainty in the U.S. and EU, more and more emerging markets are turning to stablecoins as a strategic lever to compete for influence in setting the fintech rules.

At the core of the stablecoin regulatory tug-of-war lies a more fundamental issue: the conflicts between monetary sovereignty, financial stability, and technological innovation are beyond reconciliation. In the past decades, the power to issue currency and operate payment and clearing systems has largely been in the hands of central banks and commercial banks. However, in just a few years, stablecoins, as "digital currencies dominated by private issuers", have rapidly embedded themselves into global payments, trading, financing, and value storage, bypassing traditional currency creation pathways. This disintermediation challenges the foundational logic of the existing financial order and presents a subtle threat to the central bank's role as "lender of last resort". Especially in the event of a systemic crisis or a black-swan event, if stablecoin holders were to engage in a mass redemption without official backing, it would undoubtedly pose severe liquidity risks to the entire on-chain financial ecosystem and stablecoin issuers, potentially affecting the TradFi market and triggering broader risk spillovers.

This is precisely the reason why central banks and regulators worldwide have yet to reach a unified consensus on "how to define stablecoins". They are neither traditional electronic money nor fully qualified bank liabilities. Instead, they are more likely a "third form of currency" suspended between traditional finance and blockchain networks, still unable to be fully integrated into existing legal frameworks. The regulatory battles over this gray area will continue in the years to come. At the same time, some central banks are actively pushing forward CBDCs to compete with stablecoins for dominance in payments and value storage. For example, China's digital yuan, the European Central Bank's digital euro, and India's digital rupee have all entered pilot programs or limited circulation. Behind this trend is the emerging strategic relationship of competition and cooperation between the official monetary system and the on-chain stablecoin system.

In the final analysis, stablecoins are no longer just an "auxiliary tool" of the crypto world but are becoming a bridge between on-chain and off-chain systems and between tradition and innovation. They could be a solution for financial inclusion, an amplifier of systemic risk, and the fuse igniting the restructuring of global financial power. In this process, regulatory policy will play a decisive role: It could accelerate the shift of stablecoins toward compliance, strengthening their function as a "new digital dollar"; or stifle their vitality and innovation through excessive restrictions, pushing capital and talent toward jurisdictions with friendlier policies. Therefore, the future of stablecoins will depend not only on technological iteration and market choices but also on the outcome of the global regulatory tug-of-war. Stablecoins are not an isolated sector but part of a deeper contest over the next form of money and the rewriting of the global financial rules.

IV. Trend Outlook: Decentralized, Multi-Currency, Protocol-Native Stablecoins

The stablecoin market is shifting from its first phase, "dominated by centralized U.S. dollar stablecoins", into a second phase marked by the coexistence of "decentralization, multi-currency, and protocol-native designs". This evolution is not merely about expanding the number of currencies but about a comprehensive overhaul of the stablecoin paradigm, its underlying governance structures, and monetary sovereignty models. The development of the new generation of stablecoins reflects not only the technological and capital innovation capacity within crypto finance but also the on-chain monetary system's proactive transformation in responding to the shortcomings of the traditional financial system, expanding application boundaries, and navigating the regulatory tug-of-war.

To begin with, decentralized stablecoins are resurging. In early models such as DAI, overcollateralization and on-chain clearing mechanisms were once hailed as ideal censorship-resistant and trustless models. However, due to low capital efficiency and extreme price volatility, they lost dominance. However, since 2024, driven by mounting regulatory risks and growing settlement dependency associated with centralized stablecoins like USDT and USDC, decentralized cryptos such as DAI, sUSD, LUSD, and RAI have regained favor among developers and DeFi protocols, becoming key "alternative currencies" against regulatory crackdowns and payment censorship.

It should be noted that the new generation of projects no longer relies solely on pure overcollateralization or algorithmic stabilization models but instead combines diverse asset portfolios, risk-hedging strategies, and on-chain interest rate adjustment mechanisms. For example, Ethena's USDe stablecoin employs a delta-neutral strategy that pairs spot U.S. dollar holdings with short perpetual futures. This is the first time on-chain derivatives have been integrated into stablecoin design to support its stability mechanism through yield generation, pioneering a new pathway of "yield-driven stablecoins". Its accompanying on-chain interest rate indicator, the DeFi Option Rate (DOR), attempts to create an on-chain native "yield curve" to give stablecoins a more realistic time value of money. These explorations signal that stablecoins are not just asset tools but also anchors for on-chain financial market interest rates, exchange rates, and liquidity.

Second, the trend toward multi-currency pegging is gaining momentum. While U.S. dollar stablecoins still dominate the market, the global regulatory push toward de-dollarization is increasingly evident, prompting crypto markets to develop stablecoins pegged to the euro (EUR), yen (JPY), renminbi (CNY), Hong Kong dollar (HKD), and even gold or other commodities. These stablecoins pegged to diverse currencies help serve localized payment scenarios and may become critical tools for residents in emerging markets to hedge against local currency depreciation and inflation. For instance, EURS launched by Stasis, EURe introduced by Monerium, and various Hong Kong dollar stablecoin experiments are gradually expanding the non-U.S. dollar stablecoin ecosystem. In markets such as Asia, Africa, and Latin America, especially in countries with strict capital controls, stablecoins have become crucial "intermediary currencies" in gray economies, crypto remittances, and e-commerce trade, creating tangible demand for multi-currency stablecoins.

At the same time, central banks in various countries are exploring compliance models that coexist with local-currency-pegged stablecoins. Jurisdictions such as Singapore, New Zealand, and Hong Kong are experimenting with regulatory sandboxes to explore compliant paths for banks or trust companies to issue stablecoins. One possible future model is that centralized U.S. dollar stablecoins could serve global liquidity and trading needs, while compliant local-currency stablecoins cater to domestic residents for "domestic on-chain settlements", together forming a "dual-track" on-chain currency system.

At the frontier, the development of **protocol-native stablecoins** signals that stablecoins have become deeply embedded within the on-chain economy itself. Unlike independent cryptos such as DAI or USDC, protocol-native stablecoins are issued endogenously by a public blockchain or DeFi protocol, collateralized with assets native to that system (such as staked tokens, gas tokens, or RWAs), and exclusively serve the protocol. Typical examples include Curve's crvUSD, Aave community's GHO, MakerDAO's sDAI, Oasis's USK, and potential re-staked stablecoins that the EigenLayer ecosystem might introduce. These cryptocurrencies often integrate liquid staking, re-collateralization mechanisms, protocol governance rights, and revenue-sharing models, making stablecoin issuance a core component of protocol liquidity, governance rights, and income flows.

Protocol-native stablecoins share the following features: stronger composability, higher native liquidity, embedded governance mechanisms, and tight alignment with protocol growth. This design allows protocols to operate their own monetary systems, reducing their reliance on external stablecoins like USDC. This helps foster more stable, decentralized, and censorship-resistant financial ecosystems. In addition, stablecoins may serve as tools for protocol-level "monetary policy". For example, they can manage liquidity by adjusting collateral parameters, yield rates, or redemption mechanisms. In this way, they can influence inflation/deflation cycles within the protocol's economic system, thereby conducting genuine "on-chain sovereign currency experiments".

Over the long term, stablecoins will evolve simultaneously toward three directions: **(1) Centralized stablecoins will strengthen regulatory compliance and serve global payment markets; (2) Decentralized stablecoins will focus on stronger censorship resistance and DeFi integration, becoming the base currency of the on-chain economy; (3) Protocol-native stablecoins will support the growth and stability of specific on-chain systems as autonomous monetary units within vertical financial ecosystems. ** These three are not mutually exclusive but are likely to coexist over an extended period, forming a dynamic structure of mutual penetration, collaboration, and competition.

Ultimately, the future of stablecoins will not be determined solely by their peg mechanism but by three decisive factors: whether they can be integrated into new financial systems, whether they possess global clearing capabilities, and whether they can remain transparent and resilient under regulatory pressure. This is not merely a currency battle in the crypto world but a broader contest to reshape the global financial architecture for the digital age. In this battle, stablecoins are both strategic resources and cornerstones of the new order.

V. Investment and Risks: Who Will Win the Next Stage of the Stablecoin War?

Stablecoins have gradually evolved from crypto safe havens to the infrastructure of on-chain finance. Their importance in market capitalization, use cases, integration into financial systems, and even influence on national policy has grown rapidly. However, as their influence expands, a "stablecoin war" is quietly underway. Who will dominate this market in the future will be decided not just by technology, capital, or market share but also through multidimensional, multilayered systemic competition. From an investor's perspective, we must think about: who will emerge victorious in the next stage of stablecoins? And who might be exposed to hidden risks and knocked out early in the midst of what appears to be booming growth?

Currently, the stablecoin investment sector can be divided into four major categories: (1) traditional centralized stablecoin issuers such as Tether and Circle; (2) emerging compliant stablecoin issuance platforms like Paxos, First Digital, and Monerium; (3) DeFi protocol-driven stablecoins such as MakerDAO, Ethena, and Curve; (4) chain-native or Layer 2 ecosystem stablecoins, including Aave GHO, zkSync nUSD, and EigenLayer's potential stablecoins.

In the traditional sector, Tether (USDT) is unquestionably the current hegemon. With its remarkable market liquidity, retail user base in Southeast Asia and Latin America, and exceptional adaptability to gray-market financial scenarios, USDT's market cap has continued to climb, even defying the trend during the Federal Reserve's interest rate hikes. However, its investment value is constrained by issues such as limited transparency in information disclosures, heavy reliance on the banking system, and a legal framework that operates in gray areas. From an investment standpoint, Tether is a "cash cow" enterprise, but its growth ceiling is becoming apparent, and it faces persistent systemic risks from potential shifts in compliance and regulatory policies.

Comparatively, Circle, USDC's issuer, is pursuing a "regular army" strategy, working closely with U.S. regulators while exploring a multi-chain issuance mechanism (USDC is natively issued on over 10 chains). If it can further enhance tokenized asset circulation through IPOs or revenue sharing from RWAs, it could build a stronger compliance moat. However, USDC lacks the gray-market channel advantage in overseas markets, and its usage in DeFi is gradually being eroded by USDT and DAI. Whether it can break out of its compliance niche and gain traction in real-world use cases remains to be seen.

What truly deserves attention is the new wave of DeFi-driven stablecoins. Represented by Ethena's USDe, they bypass the reliance on fiat reserves typical of traditional stablecoins and turn to on-chain yield models and algorithmic financial architectures. USDe's meteoric rise is no accident. It embodies a new stablecoin paradigm of "yield support + algorithmic peg + derivatives arbitrage". These projects offer exceptional scalability and composability. Once proven in the market, they could build a complete financial ecosystem centered on stablecoins and revolving around yield trading, liquidity mining, and restaking.

However, they also carry three major risks:

Yield-driven stablecoins are exposed to Ponzi-like structural risk. If the yield stream (e.g., shorting ETH perpetual futures) breaks due to extreme market conditions or liquidity crunches, the price peg may fail, or redemption may face pressure, potentially leading to an "Algorithmic Stablecoin 2.0" meltdown.

Complex mechanisms reduce system transparency. These new models often require users to place deep trust in automated clearing and rebalancing systems. But in extreme conditions, on-chain congestion, oracle failures, or insufficient DEX depth could all become fatal blind spots in the stability mechanism.

The regulatory uncertainty is high. By circumventing traditional fiat custody frameworks, such stablecoins may easily be classified by regulators as "quasi-securities" or "unlicensed currency issuance", and may thus face crackdowns or interface bans (e.g., centralized exchange delistings, bridge protocol restrictions).

Meanwhile, protocol-native stablecoins like crvUSD, GHO, and sDAI are in an "ecosystem-coupled growth" phase. The investment opportunity here lies in capturing protocol growth dividends by "holding governance tokens". For example, CRV or AAVE holders can vote to adjust key parameters that may influence their native stablecoins' use cases, liquidity incentives, fee distribution, and more. Here, stablecoins are no longer just circulation instruments but core anchors of both protocol governance rights and financial income rights. This model provides investors with a clearer path for value capture and could shift the valuation focus of native tokens from "pure fees" to "on-chain monetary dividends".

The limitation of protocol-native stablecoins is that their growth depends heavily on the parent protocol's market position, risk management capacity, and community engagement. In extreme cases, a "protocol decline – stablecoin liquidity depletion" risk loop could emerge.

In the long run, victory in the stablecoin war will hinge on five core capabilities:

A resilient peg mechanism (whether traditional fiat reserves, on-chain asset hedging, or hybrid structures), which is the technical foundation for stablecoins' long-term survival;

User-side penetration ability, i.e., whether it can be extensively adopted in real-life scenarios such as exchanges, payments, lending, cross-chain transfers, and settlements, avoiding becoming a "self-circulating token";

Policy compliance and regulatory alignment pathways, especially in key financial markets like the U.S. and Europe, Southeast Asia, and the Middle East, which will define the ceiling for growth;

Synergy with on-chain ecosystems, particularly the degree of integration with DeFi protocols and the level of native liquidity support;

A sustainable value-capture logic, meaning whether it can boost long-term holder confidence through governance, revenue distribution, and tokenomics.

Stablecoins are not "decentralized dollars" but bridge assets in the restructuring of the global monetary architecture. It must stand at the crossroads of regulation, liquidity, and trust while navigating the challenges imposed by market volatility and technological evolutions. The stablecoin war will not crown just one single winner. Instead, breakthroughs will be made across diverse models, ecosystems, and user scenarios in the multipolar landscape. What investors should truly focus on are those bridge-type projects capable of weathering regulatory storms, building on-chain monetary systems, and ultimately linking the real economy with virtual finance. These will be the "sovereign assets" of the crypto world.

VI. Conclusion: Stablecoins Are the "Sovereign Anchor" of On-Chain Finance

Rather than speculative assets, stablecoins are the core operating mechanism of the entire on-chain economy. They are the dollar bloodstream of DeFi, the energy source of Web3 payments, and the safety belt for emerging countries to hedge against local currency depreciation. In the next five years, stablecoins will move from "supporting roles" in crypto markets to key building blocks in the new order of digital capitalism. We are now at the starting point, not the finish line, of a systematic move into the stablecoin sector.