TLDR
- Tether earned $4.9 billion profit in Q2 2025 by keeping U.S. Treasury yields from USDT backing
- Circle and Tether don’t share interest income with stablecoin holders despite high rates
- New platforms M^0 and Agora are building yield-sharing stablecoin infrastructure
- Money market funds like USYC offer alternative way for users to earn yield
- Stablecoin market worth $290 billion while yield-bearing alternatives only $7.3 billion
Major stablecoin issuers are generating massive profits from high interest rates while token holders receive nothing in return. Wormhole co-founder Dan Reecer criticized this business model at the DAC 2025 conference, saying companies like Tether and Circle are essentially “printing money.”
Tether posted $4.9 billion in net profit during the second quarter of 2025. The company’s valuation has surged to $500 billion in recent funding rounds, driven largely by income from U.S. Treasury bonds backing its USDT stablecoin.
The current system allows issuers to capture all yield from Treasury securities while stablecoin holders get no compensation. With interest rates remaining elevated, this arrangement has become increasingly profitable for companies but offers no benefit to users.
“If I’m holding USDC, I’m losing money, losing money that Circle is making,” Reecer explained, referring to the opportunity cost of holding non-yielding tokens backed by income-generating assets.
New Platforms Challenge the Status Quo
Several emerging platforms are working to change this dynamic. M^0 and Agora are developing stablecoin infrastructure that routes yield directly to applications or end users instead of keeping it for issuers.
These platforms represent a fundamental shift in how stablecoin economics could work. Rather than issuers capturing all returns, the yield would flow to token holders or decentralized applications.
Circle made a strategic move in this direction by acquiring Hashnote for $1.3 billion earlier in 2025. Hashnote issues USYC, a tokenized money market fund that allows users to earn yield from Treasury backing assets.
Money market funds provide an alternative path for users seeking returns. These products allow investors to gain exposure to the same yields that stablecoin issuers currently keep for themselves.
Market Dynamics and Regulatory Concerns
The yield-bearing token market remains small compared to traditional stablecoins. Money market funds have a combined market cap of approximately $7.3 billion, while the global stablecoin market exceeds $290 billion.
Tether and Circle likely avoid sharing yield directly due to regulatory concerns. A Tether spokesperson told media that “USDT’s role is clear: it is a digital dollar, not an investment product.”
The company emphasized that hundreds of millions of users rely on USDT in emerging markets to protect against inflation and currency devaluation. In developing countries, local currencies can decline 70% year-over-year against the dollar.
“Passing along yield would fundamentally change a stablecoin’s nature, risk profile, and regulatory treatment,” the Tether spokesperson said. Companies experimenting with yield-bearing alternatives target different audiences and assume additional risks.
Fireblocks executive Stephen Richardson noted the stablecoin market is evolving toward practical applications like cross-border payments and foreign exchange services. Tokenized money market funds are already being used as collateral on cryptocurrency exchanges, demonstrating growing real-world adoption.
The debate over yield distribution reflects broader questions about stablecoin economics as interest rates remain high and alternative platforms gain traction.
