Trillion Feast of Stablecoins: Who’s Making Money?

# The Stablecoin Ecosystem: Who’s Really Profiting from the "Blood" of Crypto?  

By Cole  

In the volatile world of cryptocurrency, Bitcoin and Ethereum are the headline-grabbing stars, while stablecoins (such as USDT and USDC) serve as the "blood," "fuel," and "chips" of this vast ecosystem. They connect every part of the crypto space: acting as a safe haven for traders to hedge against volatility, and serving as the underlying settlement tool in the world of DeFi (Decentralized Finance).  

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

When you give $1 to an issuer (like Circle), you get 1 USDC token in return. Holding this token earns you no interest. And when you exchange it back for dollars, you only get $1.  

Yet these issuers are raking in massive profits. Circle’s revenue in 2024 reached $1.7 billion, while Tether’s profits hit an astonishing $13 billion that same year.  

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

## The Core "Money Printer"  

The business model of stablecoin issuers is simple to the point of being "boring," yet extraordinarily powerful due to its scale. At its heart, it relies on an age-old financial strategy: leveraging "float."  

This is similar to a bank taking demand deposits or a money market fund (MMF) operating—but with a crucial difference: **issuers pay no interest at all on these "deposits" (the stablecoins you hold)**.  

In the era of near-zero interest rates (before 2022), this model barely turned a profit. But as the U.S. Federal Reserve (Fed) launched a series of aggressive interest rate hikes in recent years, U.S. Treasury yields soared. Circle and Tether’s profits subsequently "took off overnight."  

It’s no exaggeration to say that the multi-billion-dollar valuations of these stablecoin giants are essentially **leveraged bets on the Fed’s macro policy of "higher interest rates for longer"**. Every Fed rate hike acts like a direct "subsidy" to this industry. If the Fed returns to zero interest rates in the future, the core revenue of these issuers will vanish instantly.  

Of course, beyond interest income, issuers have a second revenue stream: **institutional fees**.  

- **Circle (USDC)**: To encourage large clients like Coinbase to use its services, Circle offers free minting (depositing funds). It only charges a nominal fee when institutions redeem (withdraw funds) more than $2 million in a single day. Circle’s strategy is clear: **maximize the size of its reserves (growing the "float" pool)**.  

- **Tether (USDT)**: Tether takes a far more "penny-pinching" approach. It charges institutional clients a 0.1% fee for both minting and redemption (with a minimum fee of $100,000). Tether’s strategy: **maximize revenue from every transaction (collecting both interest and fees)**.  

## The Strategic Showdown: Circle vs. Tether  

While their business models share the same foundation, Circle and Tether have taken diametrically opposite paths in managing their hundreds of billions of dollars in reserves. This has led to stark differences in their risk profiles, transparency, and profitability.  

### Circle (USDC): Compliance and Transparency  

Circle has gone to great lengths to position itself as a trustworthy, regulation-friendly "model student." The core of its strategy is not "trust me," but rather "trust BlackRock."  

Circle’s reserve structure is extremely conservative and transparent. Instead of managing its tens of billions of dollars in reserves itself, it has "outsourced" this trust to BlackRock—the world’s largest asset manager.  

Most of Circle’s reserves are held in a vehicle called the "Circle Reserve Fund" (ticker: USDXX). This is a U.S. SEC-registered government money market fund, fully managed by BlackRock. According to data from November 2025, the fund’s portfolio is remarkably unexciting: **55.8% in U.S. Treasury repurchase agreements and 44.2% in U.S. Treasuries**.  

Circle’s unspoken message is: "To all institutions and regulators—your concerns about reserve safety are addressed. My money isn’t locked in some mysterious bank account; it’s managed by BlackRock in an SEC-regulated fund, invested solely in the safest U.S. Treasuries."  

This is a clever strategic defense. Circle sacrifices some potential returns (it pays management fees to BlackRock) in exchange for long-term trust from institutions and regulators.  

### Tether (USDT): Aggressiveness and Windfall Profits  

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

Tether has long faced criticism over its lack of transparency (it relies on "attestation reports" from BDO rather than full financial audits). However, its investment strategy is far more aggressive and diversified than Circle’s—resulting in stunning profits.  

Let’s break down Tether’s reserves as of Q3 2025:  

- **"Conservative" portion (similar to Circle)**: U.S. Treasury bills ($112.4 billion), overnight reverse repurchase agreements ($18 billion), and money market funds ($6.4 billion).  

- **"Aggressive" portion (things Circle would never touch)**:  

 - Precious metals (gold): $12.9 billion  

 - Bitcoin: $9.8 billion  

 - Secured loans: $14.6 billion  

 - Other investments: $3.8 billion  

See the pattern? Tether isn’t just earning interest on U.S. Treasuries—it’s also taking on **commodity risk (gold)**, **cryptocurrency volatility risk (Bitcoin)**, and **credit default risk (those $14.6 billion in undisclosed loans)**.  

Tether doesn’t operate like a money market fund at all. It’s more like an "internal hedge fund"—and its source of capital is the interest-free USDT held by users worldwide.  

This is the secret behind Tether’s $13 billion profit in 2024. It doesn’t just earn interest; it also gambles on capital gains from Bitcoin and gold, while chasing higher risk-adjusted returns through lending.  

This also explains why Tether emphasizes its "excess reserves" (or "net assets," which stood at $11.9 billion as of August 2024). This money isn’t "profit" that can be freely distributed—it’s a **capital buffer**, a "risk mitigation fund" that Tether must set aside. It needs this fund to absorb potential massive losses from its risky assets (Bitcoin, loans) and prevent USDT from "depegging" (losing its 1:1 peg to the U.S. dollar).  

Tether has no choice but to maintain high profits—it’s the only way to sustain its high-risk asset game.

# Comparison of Reserve Asset Composition between Circle and Tether (Data as of Q3/Q4 2025)  

## Where Does the Profit Go?  

How are these billions of dollars in profits distributed? This question reveals yet another stark difference between the two companies.  

### Circle (USDC)’s "Shackle": The Costly Revenue Split with Coinbase  

While Circle generates substantial revenue, its net profit has long been weighed down by a massive cost: the revenue-sharing agreement it struck with Coinbase.  

Circle and Coinbase (co-founder of USDC) reached an agreement back in 2018, under which the two parties agreed to share the interest income generated from USDC reserves. Coinbase is entitled to 50% of the "remaining payment base."  

This agreement is calculated based on the amount of USDC held on Coinbase’s platform. However, by 2024, USDC on Coinbase accounted for only about 20% of the total circulating supply. Yet this "outdated" early agreement still entitled Coinbase to approximately 50% to 55% of the total reserve income.  

This distribution cost "eats into most of Circle’s profits." The proportion of revenue Circle paid to Coinbase soared from 32% in 2022 to 54% in 2024. In Q2 2025, Circle’s total revenue reached $658 million, but "distribution, transaction, and other costs" alone hit $407 million.  

As such, Coinbase is more than just a partner to Circle—it is essentially a "synthetic equity holder" in USDC’s core revenue stream. Coinbase serves as both Circle’s largest distribution channel and its biggest cost burden.  

### Tether (USDT)’s "Black Box"  

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

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

All $13 billion in profits reported by Tether flows to its parent company, iFinex.  

As a private company, iFinex is not required to disclose detailed costs or dividends like Circle (a public company). However, based on historical records and public information, this money has three main destinations:  

1. **Shareholder dividends**: iFinex (Bitfinex) has a history of paying massive dividends to its private shareholders (such as executives like Giancarlo Devasini)—for example, it paid out $246 million in 2017.  

2. **Retained as capital buffer**: As mentioned earlier, Tether keeps a large portion of its profits (e.g., $11.9 billion) on its books as "net assets" to hedge against potential losses from its risky assets (such as Bitcoin and loans).  

3. **Strategic investments (or internal transfers)**: Tether/iFinex is using these profits to make diversified investments,高调进军（making high-profile forays into） new fields such as artificial intelligence, renewable energy, and Bitcoin mining. Additionally, there have long been complex internal fund flows between Tether and Bitfinex (e.g., the famous Crypto Capital scandal).  

In summary, Circle’s profit distribution is public, costly, and locked in (by Coinbase). In contrast, Tether’s profit distribution is opaque, discretionary, and fully controlled by a small group of insiders at iFinex—and this money is becoming the "ammunition" for building its next business empire.  

## How Can Ordinary Players "Get a Slice of the Pie"?  

Since stablecoin issuers take all the Treasury interest, how do we (crypto users), as stablecoin holders, make money in this ecosystem?  

The money we can earn does not come from issuers, but from the needs of other crypto users. We generate returns by providing services (liquidity, lending) and assuming on-chain risks.  

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. They are usually traders looking to leverage their positions or "HODLers" (long-term crypto holders) who need cash but don’t want to sell their Bitcoin/Ethereum.  

- **Mechanism**: Protocols like Aave and Compound automatically match lenders with borrowers and adjust interest rates in real time based on market supply and demand. You (the lender) earn most of the interest, while a small portion goes to the protocol’s treasury.  

### Strategy 2: Providing Liquidity  

- **How it works**: Deposit your stablecoins (typically trading pairs like USDC/USDT or USDC/DAI) into the "liquidity pools" of a decentralized exchange (DEX).  

- **Top platform**: Curve Finance  

Curve is specifically designed for swapping between stablecoins (e.g., USDC for USDT), and its algorithm enables extremely low slippage (price difference).  

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

- **Additional rewards**: To incentivize liquidity provision, Curve also offers additional "airdrops" of its governance token (CRV) as a bonus.  

- **Why it’s popular**: Since all assets in the pool are stablecoins pegged to $1, you barely face the risk of "Impermanent Loss"—making it an ideal "passive income" (rent-collecting) strategy.  

### Strategy 3: Yield Farming  

- **How it works**: This refers to various more complex "layered" strategies aimed at maximizing returns.  

- **Example**: You could:  

 1) Deposit USDC into Aave;  

 2) Use this USDC as collateral to borrow ETH;  

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

- **Risks**: This is the riskiest strategy. You face risks such as smart contract hacks, liquidation due to plummeting collateral (ETH) prices, and sudden depletion of protocol rewards.  

## Conclusion  

Ultimately, the stablecoin story is one of "two economies."  

The first is a private, off-chain feast: issuers (Tether/Circle) invest the "idle" reserves of users like you and me into U.S. Treasuries, then split the resulting billions in interest with their shareholders and corporate allies (e.g., Coinbase)—while stablecoin holders get nothing.  

The second economy is one we built ourselves: the dynamic, on-chain world of DeFi. Here, users earn returns from fees and interest paid by other users by providing lending and liquidity services.  

This reveals a core irony of the industry: a decentralized ecosystem whose "blood" is supplied by highly centralized, profit-maximizing "banks." The future of this massive empire hinges on two pillars: first, the high-interest macro environment that issuers depend on for survival; second, the sustained demand for speculation and leverage from DeFi users.  

How long these two pillars will hold is perhaps the true ultimate question for this trillion-dollar sector.  

## Disclaimer  

The views expressed in this article are solely those of the author and do not constitute investment advice from this platform. This platform makes no guarantees regarding the accuracy, completeness, originality, or timeliness of the information in the article, nor does it assume any responsibility for losses arising from the use of or reliance on the information contained herein.