TL;DR

I. Stablecoin Competition: From Medium of Exchange to Financial Infrastructure

1.1 The evolution of stablecoin roles: from a medium of exchange to a payment and settlement network

• The first stage of stablecoin development was as a medium of exchange. It solves the problems of US dollar pricing, hedging, and liquidity in crypto trading. USDT's long-term leadership relies on the liquidity inertia formed by exchanges, market makers, OTC networks, and users in emerging markets. For many users, USDT is not just a token, but an entry point into US dollar liquidity.
• The second stage is on-chain financial collateral. With the development of DeFi lending, DEX, perpetual contracts, and RWA protocols, stablecoins begin to serve as basic assets for collateral, clearing, market making, and yield products. At this time, stablecoins needed to be not only tradable, but also composable. USDC became increasingly important during this stage because it is more easily accepted by institutions, regulated trading platforms, and DeFi protocols.
• The third stage is the payment, treasury, and machine-to-machine payment stage. This stage is already underway. Stablecoins are no longer just serving native crypto users, but entering cross-border remittances, merchant payments, platform payouts, on-chain salaries, B2B settlements, and institutional fund transfers. After traditional payment institutions enter the market, the competitive logic of stablecoins further changes: while issuance scale still matters, the players that can secure lower distribution costs, a wider fiat on- and off-ramp network, stronger compliance licenses, and more stable reserve management capabilities may obtain higher profit margins in long-term competition.

1.2 Reconstructing the Stablecoin Value Chain: Issuance, Distribution, Settlement, Yield, and Compliance

• The first layer is the issuance layer, responsible for mapping off-chain US dollar assets to on-chain tokens, mainly represented by Tether, Circle, Paxos, etc.
• The second layer is the distribution layer, responsible for bringing stablecoins to users and enterprises. The main participants are exchanges, payment companies, wallets, etc.
• The third layer is the settlement layer, responsible for the circulation of stablecoins in exchanges, blockchains, payment networks, and merchant systems. The main participants are blockchains, trading platforms, merchant systems, AI Agent protocols, etc.
• The fourth layer is the yield layer, which determines how to allocate reserve yield, protocol revenue, market-making revenue, and derivatives revenue, including government bond interest, DeFi income, distribution income, protocol revenue, etc.
• The fifth layer is the compliance layer, which determines whether the issuing entity can continue to operate, whether it can reach institutional users, and whether it can complete redemption and settlement across jurisdictions.

II. Issuance and Distribution: Stablecoin Access Points Are Being Redefined

2.1 From Issuance Competition to User Access Competition

• The first type is the crypto-native distribution network, represented by USDT. Its core advantage comes from the liquidity system composed of exchanges, market makers, wallets, and OTC networks. Whether it is spot trading, contract margin, cross-border fund transfer, or on-chain asset allocation, USDT has become one of the most common underlying assets. Especially in emerging markets and high-frequency trading scenarios, USDT effectively serves as a digital dollar circulation medium. Its advantage is not in compliance, but in extremely strong availability and liquidity depth.
• The second category is institutional and enterprise distribution networks, represented by USDC. Compared to USDT, USDC's development path focuses more on the institutional market. Circle not only issues stablecoins, but also actively promotes USDC to enter banks, payment institutions, fintech platforms, and enterprise treasury management systems. Taking Circle's cooperation with Kyriba as an example, USDC has begun to be incorporated into enterprise fund allocation, cash management, and liquidity management processes. For companies, the value of stablecoins is no longer just a trading tool, but a new treasury management infrastructure. As more and more enterprises begin to experiment with on-chain settlement and cross-border treasury management, institutional networks are expected to become an important source of stablecoin growth.
• The third category is payment and application distribution networks. USDPT launched by Western Union, PYUSD launched by PayPal, and PYUSDx promoted by MoonPay and M0 all belong to this direction. Unlike traditional crypto institutions, these participants have mature payment channels, brand recognition, and user base. Their goal is not to enter DeFi first, but to embed stablecoins into existing payment systems and application ecosystems. For Western Union, stablecoins can become a new carrier for global remittance networks; for PayPal, stablecoins can further strengthen its digital payment ecosystem. As application platforms begin to have their own stablecoin entry points, the competition boundaries of stablecoins are also expanding from the financial market to the internet application layer.

2.2 The stablecoin market may move towards a two-tier structure

• The first layer is the universal stablecoin layer. Its main function is to support open market liquidity, cross-platform transfer, and global settlement. Users, institutions, and protocols need an asset with wide acceptance and high liquidity as a value exchange medium. Currently, USDT and USDC are most likely to continue to play this role. They have a large circulation scale, mature redemption mechanism, and extensive ecosystem support, so they can continue to serve as the foundation layer of the on-chain US dollar system.
• The second layer is the application-specific stablecoin layer . This type of stablecoin does not pursue becoming a universal asset for the entire market, but serves specific ecosystems and scenarios. For example, payment platforms can issue payment stablecoins, game ecosystems can issue game stablecoins, AI platforms can issue stablecoins for Agent payments, and enterprises may also issue stablecoins for internal settlement and treasury management. They emphasize ecosystem integration, user operation, and closed-loop business models, rather than market liquidity.

III. The Fight for Settlement: Payment Networks, Corporate Treasuries, and AI Agents Enter the Market

3.1 Payment network competition: Stablecoins begin to enter the real commercial flow

3.2 Corporate treasury: stablecoins are entering company balance sheets

3.3 AI Agent payments: machines are becoming new settlement participants

IV. Reserve Yield Rights: The Core Profit Pool of the Stablecoin Business Model

4.1 Reserve assets: the most important source of profit for stablecoins

4.2 Profit distribution: stablecoin competition is entering a new phase of value redistribution

• One direction is yield-bearing stablecoins. Users can directly share part of the profits generated by reserve assets while holding stablecoins. Products such as sUSDD and sUSDe belong to this idea. Compared with traditional stablecoins, yield-bearing stablecoins are more like an on-chain money market fund, which can maintain a relatively stable value anchor and return profits to holders.
• Another direction is to reinvest reserve yield into ecosystem expansion. For example, some stablecoin issuers will use reserve yield to subsidize payment networks, liquidity incentives, or on-chain application growth, in order to enhance the distribution and settlement capabilities of stablecoins. The transfer network built around USDT in the TRON ecosystem, as well as emerging stablecoin infrastructure such as Plasma trying to attract users through lower-cost settlement experiences, essentially reflect the idea of transforming reserve yield into network growth.

4.3 From yield products to financial infrastructure

V. Opportunities and Risks: The Stablecoin Value Chain is Reshaping the Global Dollar System

5.1 Opportunities: stablecoins are becoming the next generation of dollar infrastructure

• The payment and settlement market still has huge growth potential. Traditional cross-border transfer systems have long suffered from high costs, low efficiency, and long settlement cycles, while stablecoins have natural advantages such as 24/7 operation, global accessibility, and programmable settlement. With institutions such as Visa, Mastercard, PayPal, Stripe, and Western Union gradually expanding into stablecoin infrastructure, stablecoins are gradually entering the mainstream payment system from the cryptocurrency market.
• Enterprise treasury management may become one of the most important incremental markets in the future. The cooperation between Circle and Kyriba shows that stablecoins have begun to enter the scenarios of enterprise fund allocation, cash management, and cross-border settlement. For multinational enterprises, stablecoins are not only a payment instrument, but also have the opportunity to become a new infrastructure for treasury management.
• Reserve yield is driving innovation in on-chain financial products. The development of yield-bearing stablecoins has enabled them to have both payment and income attributes. The lending, yield splitting, structured products, and asset management markets formed around reserve yield are building a new on-chain yield asset layer. This means that stablecoins will not only be a digital mapping of the US dollar in the future, but may also become important underlying assets in the global digital asset market.
• New scenarios such as AI Agent payments are opening up new demand space. When machines start to independently purchase APIs, data, content, or computing resources, stablecoins naturally have the advantages of programmatic payments and real-time settlement. Although this market is still in its very early stages, its long-term potential is worth paying attention to.
• Compliance is shifting from a limiting factor to a growth driver. Since 2025, the US Congress has continued to advance digital asset-related legislation such as the GENIUS Act and the CLARITY Act. Regardless of how the final bill details are adjusted, their common significance is to provide clearer regulatory expectations for the stablecoin industry. The establishment of a compliance framework not only means increased regulatory constraints, but also means that stablecoins are obtaining a "license" to enter the mainstream financial system.

5.2 Risks: beyond the growth narrative, practical constraints still matter

• Regulatory and compliance risks: Stablecoins are essentially connected to the fiat currency system, payment networks, and capital markets, so they are naturally in the core area of regulatory attention. With the gradual advancement of laws such as the GENIUS Act and the CLARITY Act, the future stablecoin market may shift from the current pattern dominated by crypto-native institutions to a market jointly participated by banks, payment institutions, and large fintech companies, putting pressure on smaller issuers and increasing market concentration. Some projects may gradually withdraw from the market due to their inability to meet new compliance requirements.
• Business model risk: The profitability of current mainstream stablecoins largely benefits from the high-interest-rate environment in the US. When reserve assets can provide higher returns, issuers can obtain considerable interest income. However, if the future enters a period of interest rate cuts, reserve returns may significantly decrease, and business models that rely on high-yield support will also face pressure. For yield stablecoins, this impact may be more obvious.
• Data bubble risk: In recent years, the trading volume of stablecoins has grown rapidly, but on-chain trading volume does not necessarily equate to real economic activity growth. A large number of transactions may come from arbitrage, market making, robot activities, and fund circulation between protocols. Compared with the trading volume itself, real payment scale, enterprise adoption, and long-term user growth can better reflect the actual development level of the industry. If the market relies too much on short-term data narratives, it may overestimate the actual penetration speed of stablecoins.
• Changes in the competitive landscape: In the past, the stablecoin market was mainly dominated by crypto-native institutions, but in the future, banks, payment companies, internet platforms, and fintech companies may all become important participants. With the lowering of the issuance threshold, market competition may evolve from competition between stablecoins to ecosystem competition between payment networks, financial institutions, and technology platforms. For existing issuers, maintaining liquidity advantages and network effect will become a long-term challenge.
• Systemic concentration risk: Currently, market liquidity and user scale are still highly concentrated in a few top stablecoins. Once there are problems with major issuers, reserve assets, or critical infrastructure, it may have a chain reaction to the entire industry. Therefore, as the industry continues to expand, risk diversification and infrastructure resilience building will also become increasingly important.

VI. Outlook and Conclusion: What Is the Endgame for Stablecoins?

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