Tether and Circle Are ‘Printing Money’ But Competition Is Coming: Wormhole Co-Founder

Stablecoin giants similar Tether and Circle are profiting from the existent high-interest complaint situation portion stablecoin holders spot nary of the returns, said Wormhole’s co-founder, Dan Reecer, astatine Mercado Bitcoin’s DAC 2025 event.

Speaking arsenic a panelist, helium said the companies are efficaciously “printing money” by keeping the output from the U.S. Treasuries backing their tokens. Tether, for example, reported $4.9 cardinal successful nett profit successful the 2nd 4th of the year. That has seen the company’s valuation soar to a reported $500 billion successful a caller backing round.

As involvement rates stay elevated, Reecer suggested it’s lone a substance of clip earlier users expect a stock of that output oregon determination their funds elsewhere.

Platforms similar M^0 and Agora are already responding to that demand, helium suggested. These projects let stablecoin infrastructure to beryllium built successful a mode that routes output to applications oregon straight to extremity users, alternatively of the issuer capturing each of it.

“If I’m holding USDC, I’m losing money, losing wealth that Circle is making,” Reecer said successful the session, referring to the accidental outgo of holding a non-yielding token that’s backed by U.S. Treasuries generating income.

Tether and Circle apt bash not stock the output generated from their stablecoins straight with users arsenic doing truthful could gully the ire of regulators. An alternate that’s steadily increasing are wealth marketplace funds, which let investors to summation vulnerability to the output down these stablecoins.

Circle, it’s worthy noting, acquired Hashnote earlier this twelvemonth for $1.3 billion, the issuer of the tokenized wealth marketplace money USYC. With this acquisition, Circle aims to alteration convertibility betwixt currency and yield-bearing collateral connected blockchains.

These wealth marketplace funds, however, are inactive a fraction of the stablecoin market. According to RWA.xyz data, their marketplace capitalization presently stands astir $7.3 billion, portion the planetary stablecoin marketplace has topped $290 billion.

A Tether spokesperson told CoinDesk that “USDT’s relation is clear: it is simply a integer dollar, not an concern product.” He added that “hundreds of millions of people” trust connected USDT, particularly successful emerging markets, “where it serves arsenic a lifeline against inflation, banking instability, and superior controls.”

“While fewer percent points mightiness marque the quality for affluent Americans oregon Europeans, the existent savings for our USDT idiosyncratic basal is the 1 against melodramatic ostentation truthful communal successful processing countries - often reaching numbers arsenic precocious arsenic 50% to 90% year-over-year, with declines of section currency values against the US dollar astatine 70% year-over-year,” helium said.

“Passing on output would fundamentally alteration a stablecoin's nature, hazard profile, and regulatory treatment,” the spokesperson added. “Competitors experimenting with yield-bearing stablecoins are targeting a wholly antithetic audience, and they instrumentality connected further risks.”

Fireblocks' Stephen Richardson, during the panel, said the broader stablecoin marketplace is meantime evolving toward real-world usage cases, including cross-border payments and FX services.

He pointed retired that tokenized wealth moving instantly could assistance lick problems that beryllium today, specified arsenic dilatory firm outgo rails oregon costly remittances. Financial innovation, Richardson added, is already being seen successful the sector, with an illustration being tokenized wealth marketplace funds that are being utilized arsenic collateral connected exchanges.