Outlier Ventures: The Current State of Stablecoin Development in 2025

Author: Greysen Cacciatore, Research Assistant at Outlier Ventures; Jasper De Maere, Research Director at Outlier Ventures;

Translation: Golden Finance xiaozou

The market value of USD stablecoins has surpassed $220 billion, accounting for 1% of the US money supply. With US stablecoin legislation set to allow new issuers such as banks, fintech companies, enterprises, and governments to enter the market, it is approaching a turning point that will fundamentally change the competitive landscape, distribution models, and industry innovation. More importantly, the underlying business models of stablecoin issuers provide innovative opportunities for the US government: expanding the base of short-term debt buyers through financial engineering and leveraging digital currencies to extend the global influence of the dollar.

1. Key Points of This Article

• The total market value of dollar stablecoins has exceeded $220 billion, accounting for approximately 1% of the M2 money supply in the United States, with a year-to-date growth of 59.7% and a year-on-year increase of 40.9% in the proportion of M2.

• Stablecoin issuers have become the 20th largest direct holder of U.S. Treasury securities globally, surpassing sovereign nations such as Germany and Mexico, highlighting market growth potential and creating strategic opportunities for the U.S. to align stablecoin regulation with fiscal/geopolitical objectives.

• Although Tether and Circle still dominate the stablecoin market with an 89% market share, U.S. legislation is opening the door for new participants such as banks and enterprises—the vast distribution channels of these institutions could reshape the competitive landscape.

2. From Niche to Macro: Scaling the Digital Dollar

Stablecoins will undoubtedly become the main theme in the cryptocurrency field by 2025. As of the first quarter of 2025, the market capitalization of USD stablecoins has surpassed $220 billion (accounting for 99.8% of the total fiat-backed stablecoins), which is about 1% of the US M2. The total market capitalization has grown by 59.7% over the year, and the USD stablecoin/M2 ratio has increased by 40.9% year-on-year (see the chart below).

This trend not only reflects the robust growth of the digital dollar but also indicates the accelerated migration of economic activities towards distributed ledger infrastructure. Last year, the settlement value of stablecoins exceeded $24 trillion, and with their characteristics of stability, high liquidity, and programmability as a medium of exchange, stablecoins have proven themselves to be the infrastructure for blockchain finance and commerce.

Looking ahead to 2025, stablecoins are increasingly demonstrating their global financial influence in the sovereign debt market and geopolitical landscape. Their business model provides the U.S. government with a unique opportunity to reinforce dollar hegemony through digital assets: by legislating incentives for new issuers to operate in the U.S., it can both expand the base of short-term debt buyers through financial engineering to stimulate demand for U.S. Treasuries and strategically extend the influence of the dollar. Clear regulation will also attract businesses, institutions, and even governments to consider issuing stablecoins, creating a new competitive landscape in the market.

3. Stablecoin Companies: The New Main Force in the U.S. Treasury Market

General understanding in the digital asset industry: The stablecoin business model is extremely beneficial for issuers. Most stablecoins are backed by 1:1 cash and highly liquid assets (mainly short-term U.S. Treasury bonds). However, unlike banks or money market funds, stablecoin issuers do not distribute the earnings from reserve assets to holders, but enjoy the interest spread themselves—creating significant income streams based on interest rate environments and stablecoin demand.

At the global macro level, this model is giving rise to a new structural demand for U.S. Treasury bonds. The two issuers, Tether and Circle, collectively hold $116 billion in U.S. Treasuries, placing stablecoin companies among the top 20 direct holders of U.S. Treasuries, surpassing sovereign nations such as Germany and Mexico (see the chart below).

This phenomenon signifies that stablecoins are no longer just the infrastructure of the crypto-native market, but also a new force in global finance. As their role in the US treasury market becomes more prominent, the US gains an innovative opportunity to align the adoption of stablecoins with national fiscal interests. US Treasury Secretary Scott Bessent clearly stated last month at the White House Crypto Summit: "We will maintain the dollar's status as the world's dominant reserve currency, and stablecoins are the tools to achieve this goal", indicating that authorities are viewing stablecoins as a strategic tool to defend the dollar's hegemony.

Looking deeper, each new issuer is a channel for the digital dollar to penetrate the global economy. In emerging markets where inflation persists, capital controls are strict, and local currencies are unstable, stablecoins provide individuals and businesses with a convenient hedging tool. Through proactive legislation, the United States can accelerate global stablecoin adoption, enhancing the accessibility of the dollar while expanding the influence of monetary policy. In this way, stablecoins are both a lever for domestic fiscal strength and a new tool for the globalization of the dollar.

4. Future Outlook: Evolution of New Issuers and Market Landscape

With the accelerated improvement of the U.S. stablecoin regulatory framework, the overall market structure of stablecoins is about to undergo a transformation. Last week, the U.S. Securities and Exchange Commission's Corporate Finance Division clearly stated that dollar-pegged stablecoins backed by low-risk liquid assets do not constitute securities. In conjunction with the STABLE Act and the GENIUS Act, this will pave the way for powerful new participants such as enterprises, fintech companies, banks, and governments. New issuers with mature distribution channels are likely to reshape the competitive landscape and innovation directions while strengthening the overall role of stablecoins in financial commerce.

Currently, Tether and Circle dominate the stablecoin market with an 89% market share (see the chart below), and this concentration reflects the historical impact of first-mover advantage and network effects.

While it is still uncertain whether market share can be eroded, the risk reduction brought by clear regulation will give new issuers with strong financial channels the opportunity to challenge existing giants. Banks and leading fintech companies, in particular, have advantages—they can integrate stablecoin products into existing capital market infrastructure and customer distribution networks. In addition to financial institutions, large consumer-facing enterprises also hold great potential: with a massive user base and brand loyalty, they can incentivize users to use the stablecoins they issue through promotional discounts.

Overall, as the number of issuers increases, user experience will become a key bottleneck. When there are hundreds of stablecoins issued by institutions/enterprises/governments in the market, elegant solutions are needed to address issues such as blockchain infrastructure, cross-chain interoperability, instant redemption, atomic swaps, and deposit/withdrawal channels, in order to drive scaling and adoption.