At the recent DAC 2025 event hosted by Mercado Bitcoin, Dan Reecer, co-founder of Wormhole, highlighted the growing discrepancy between the profits made by leading stablecoin providers—Tether and Circle—and the stagnant earnings for stablecoin holders. Reecer emphasized that these companies are essentially “printing money” by capitalizing on the current high-interest rate environment while users are left without returns.
Tether reportedly achieved a net profit of $4.9 billion in the second quarter of this year. This financial success has boosted the company’s valuation to an estimated $500 billion during its latest funding round. Reecer noted that as interest rates remain elevated, stablecoin users may soon demand a share of these profits or risk migrating their investments to competing platforms.
In response to this demand for yield, emerging platforms like M^0 and Agora are innovating stablecoin infrastructures that enable the distribution of profits either directly to end users or applications. “If I’m holding USDC, I’m losing money, losing money that Circle is making,” Reecer stated, emphasizing the opportunity cost for those holding non-yielding stablecoins backed by U.S. Treasuries that are generating income.
While Tether and Circle typically do not share yield from their tokens with users—likely due to potential regulatory scrutiny—money market funds are gaining traction as a solution. These funds give investors the opportunity to realize returns linked to the yields of stablecoins. Circle’s recent acquisition of Hashnote for $1.3 billion, the issuer of the tokenized money market fund USYC, illustrates this trend. This move aims to facilitate the conversion of cash into yield-bearing collateral on blockchain platforms.
Despite the potential for money market funds, they still represent a small segment of the overall stablecoin market, which currently exceeds $290 billion. As per data from RWA.xyz, the market capitalization of money market funds stands at approximately $7.3 billion, indicating that traditional stablecoin operations continue to dominate.
A spokesperson for Tether defined USDT as a “digital dollar” rather than an investment vehicle. Highlighting the utility of USDT for millions, particularly in emerging markets, they pointed out that it serves as an essential buffer against issues like inflation and banking instability. “While increments in yield might impact affluent individuals in developed nations, for our users in countries facing hyperinflation, the potential savings are monumental,” the spokesperson elaborated, emphasizing that many foreign currencies face dramatic depreciation against the US dollar.
“Distributing yield would fundamentally reshape the nature of stablecoins, alter their risk profile, and invoke different regulatory responses,” they mentioned further. The spokesperson also noted that competitors creating yield-generating stablecoins are targeting different market segments and are exposed to additional risks.
Contributing to the discussion, Stephen Richardson from Fireblocks remarked on the evolution of the wider stablecoin market towards practical real-world applications, including cross-border payments and foreign exchange services. He stressed that the capability of tokenized money to facilitate instant transactions could address existing challenges such as delayed corporate payments and costly remittance methods. As innovation continues in this sector, he cited the rising use of tokenized money market funds as collateral on exchanges as a notable advancement.
With traditional stablecoin giants at a crossroads, the wave of innovation and competition is likely to reshape the landscape of digital finance, creating new opportunities and challenges for users and providers alike.
