Contents
1. Introduction
2. Short-Term: Rate Cut’s Impact
2.1. History Rhymes
2.2. Mutatis Mutandis (“Adapting Lessons to Current Conditions”)
2.3. Three Takeaways
3. Long-Term: Emerging New Market Dynamics
3.1. Stablecoin 2.0 Era
3.2. Case Study: Open Issuance
4. Winners & Losers
4.1. Losers
4.2. Winners
Summary
Anticipated interest rate declines will intensify competition among stablecoin issuers, as they race to expand asset bases and offset revenue losses.
This pressure is compounded by an emerging structural shift: white-label solution providers offering revenue-sharing models are capturing market share from intermediaries seeking to launch branded stablecoins. Bridge’s Open Issuance exemplifies the customizable solutions demanded in the next phase of stablecoin evolution.
Losers in the Stablecoin 2.0 era include incumbents, capital control regimes, and slow-reacting TradFi intermediaries. Winners are select white-label solution providers, asset managers, and nimble banks.
1. Introduction
As stablecoins attract growing attention, the sector's landscape is poised for significant shifts both in the short and long term. In the short term, rising expectations for a lower federal funds rate over the next 12 months signal a reduced yield environment for stablecoin reserves. In the long term, Hyperliquid's open auction for USDH heralds not only the proliferation of branded stablecoins but also the advent of revenue-sharing models between issuers and intermediaries. Against this backdrop, this report examines impending changes in the stablecoin issuance market and key issues in identifying potential winners and losers in the space.
Figure 1: How Long Will It Stay This Way?
As of 10/6/25
Source: DefiLlama
2. Short-Term: Rate Cut’s Impact
Often overlooked amid the hype surrounding stablecoins is the fact that stablecoin issuers’ profitability is beholden to the interest rate cycle; their revenue derives solely from interest income on their reserves, such as 3-month US Treasury bills. In essence, the stablecoin issuers’ business model resembles that of a hedge fund manager running a money market fund, where revenue is proportional to return on their asset and the size of the AUM
This is especially relevant now, as expectations are rising for short-term interest rates to decline over the next 12 months. The CME futures market currently prices in a 75-100 bp rate cut through the first half of 2026 (Figure 2).
Figure 2: 75-100 bp Rate Cuts Expected by June 2026
Source: Bloomberg
If market expectations materialize and push the 3-month Treasury bill rate down to, say, 3% from the current 3.86% (as of 10/3/25), simple math indicates that stablecoin issuers in aggregate would lose about $2.6B in annual interest income (=$300B market cap × 0.86%). That said, this calculation assumes ceteris paribus (other things equal), without accounting for the rate cuts’ second-order effects. In reality, a rate cut of this magnitude would significantly alter investors’ risk appetites, triggering capital reallocation across all asset-spectrums. To assess what this entails, we examine a recent rate cut episode as a reference – namely, the Fed’s 100 bp rate cuts from September. through December last year.
2.1. History Rhymes
During the Q4 2024 rate-cutting cycle, the yield on the 3-month U.S. Treasury bill declined from 4.65% to 4.25%. The cuts also ignited greater risk appetite, sparking rallies across risk assets, including crypto assets (Figure 3). This fueled demand for leverage and elevated stablecoin borrowing rate. As a result, the spread between on-chain USD yields and the 3-month Treasury bill widened, attracting yield-hungry capital from traditional banking. This dynamic drove a surge in stablecoin issuance, as stablecoins serve as the primary gateway for fiat on- and off-ramps (Figure 4). Presto’s 4/8/25 research report Unpacking Stablecoin’s Dual Drivers explores the relationship between the on-chain yield spread and stablecoin supply in greater detail.
Figure 3: Risk Assets Rallied During 4Q24 Rate-Cut Cycle
Source: Bloomberg
Figure 4: Positive On-Chain Yield Spread Helps Stablecoin Issuance
Source: DefiLlama, Presto Research
2.2. Mutatis Mutandis (“Adapting Lessons to Current Conditions”)
To analyze the impact of a lower yield environment more dynamically, we first project stablecoin supply at the end of the first half of 2026. We do this by applying the framework from the report Unpacking Stablecoin’s Dual Drivers to updated supply data, and assigning differentiated growth rates according to demand types. Our estimate is $454B, based on the assumptions outlined in Figure 6. Assuming 3% 3-month Treasury Bill rate in end-June 2026, the stablecoin issuers in aggregate are estimated to generate $2.2B revenue (Figure 5).
Figure 5: Supply Increase More Than Offsets Impact From Yield Decline
Source: DefiLlama, Bloomberg, Presto Research
Figure 6: Estimating Stablecoin Supply Based on Three Demand Drivers
Source: DefiLlama, Presto Research
2.3. Three Takeaways
The analysis yields three takeaways.
First and foremost, although the overall stablecoin market is poised for growth, competition among issuers will intensify as never before. This pressure is acute as issuers scramble to offset impending yield declines by expanding their asset bases.
Second, reserve yields face mounting pressure to be shared between issuers and intermediaries – a trend crystallized by Hyperliquid's public USDH auction. Intermediaries will increasingly demand a slice of the issuance economics, rendering reserve yields alone insufficient as the primary revenue model in the Stablecoin 2.0 era. Depending on the pace of this shift, even the $2.2 billion annual profit estimate for issuers above carries downside risk; the next section explores this more.
Finally, while the analysis reaffirms the importance of high yields on short-term sovereign debt for stablecoin issuers, it underscores an uncomfortable reality for most non-U.S. jurisdictions: their yields are too low. This is a critical yet often overlooked point in an industry steeped in U.S.-centric narratives. Moreover, some regions lack well-functioning, liquid money markets to enable seamless stablecoin operations comparable to that of the USD stablecoin.
Figure 7: Not Lucrative Enough
As of 10/9/25
Source: tradingeconomics.com
3. Long-Term: Emerging New Market Dynamics
3.1. Stablecoin 2.0 Era
Over the next few years, stablecoin issuers’ business models are likely to undergo profound changes, driven by three emerging trends summarized below (Figure 8).
Figure 8: Emerging Trends in Stablecoin Sector
Source: Presto Research
These shifts place immense pressure on incumbents’ models, which depend entirely on reserve yields for revenue. The clearest evidence comes from Circle: its SEC filings show that it funnels more than half its revenue to distribution partner Coinbase, which then redistributes it to USDC depositors as “rewards.”
In recent months, a new cohort of issuers has emerged, offering white-label solutions designed for yield-sharing and steadily eroding market share from Tether and Circle. The chart below depicts the rapid growth of these newcomers this year, many of whom split yields with intermediaries. Competition will only escalate as banks enter the market in the post-GENIUS Act era. Castle Island Ventures’ Nic Carter offers an incisive overview of this shifting competitive landscape.
Figure 9: Under-estimate Newcomers At Your Own Peril
Source: rwa.xyz
3.2. Case Study: Open Issuance
Bridge’s Open Issuance exemplifies the solutions demanded by this new breed of issuers. Launched on September 30, 2025, it delivers customizable white-label platforms for intermediaries to create and manage branded stablecoins tailored to their specifications. Beyond granting access to reserve yields, it allows customization of reserve compositions, issuance across preferred blockchains, and full control over minting and burning. Its integrated interoperability network enables seamless conversions between any two USD stablecoin variants or supported fiat currencies, reducing liquidity fragmentation. Phantom and MetaMask have already launched their branded stablecoins (CASH and mUSD, respectively) via Open Issuance.
These bespoke features are essential, as each business faces distinct requirements. For example, in a recent podcast, Bridge CEO Zach Abrams recounted how a startup neobank using the platform recovered a customer’s funds after the loss of multi-signature wallet access: Bridge simply wired the cash equivalent while the neobank remotely burned the stablecoin, a maneuver impossible with USDC or USDT.
Figure 10: New Kid on the Block
Source: bridge.xyz
4. Winners & Losers
Various commentators have offered views on likely winners and losers in the Stablecoin 2.0 era. Here, we highlight key insights from Zero Knowledge Group CEO Austin Campbell, paraphrasing and supplementing with our own where appropriate.
4.1. Losers
Incumbents (Tether & Circle): As intermediaries increasingly recognize they have no reason to cede reserve yields to incumbents given viable alternatives, their margins will likely erode over time, though Tether's may prove stickier due to its emerging-market exposure. Both Tether and Circle's launches of proprietary Layer 1 blockchains may partly stem from efforts to safeguard assets under custody within controlled ecosystems. Another potential counter may be integrating white-label solutions into their offerings. Either way, the margin collapse seems unavoidable.
Capital Control Regimes: Many nation-states enforce capital account restrictions. But their citizens can now readily circumvent these through USD stablecoins, provided they have internet access and tradable value. The era of governments confining populations to dysfunctional banking systems via capital controls is drawing to a close. Many Asian jurisdictions – except Japan, Hong Kong, and Singapore – fit this profile, at least according to MSCI, which periodically evaluates global jurisdictions' investability based on market accessibility and other factors (Figure 11).
Slow TradFi intermediaries: Stablecoin 2.0 offers opportunities for the few visionary and agile in this group. For the rest who do nothing – whether banks, broker-dealers, or payment/remittance firms – it poses an existential threat.
Figure 11: Capital Account Restrictions in Emerging Markets
Source: MSCI
4.2. Winners
White-Label Solution Providers: Competition will be fierce, so not all will prevail, but early outperformers can rapidly achieve escape velocity through network effects.
Asset Managers: As noted, reserve management forms a cornerstone of stablecoin operations. While some issuers may internalize it, many will outsource, opening doors for asset managers – especially those with expertise in money market products.
Nimble TradFi Banks: Banks are uniquely positioned to thrive in Stablecoin 2.0 by 1) supporting issuers with reserve management (e.g., repo trading) and fiat on-/off-ramps, or 2) issuing branded stablecoins themselves. Most will be slow and stumble, but a select few could upend the industry.
Consumers: Campbell articulates this most eloquently:
[currently] your bank offers you a terrible value proposition. When you deposit, they pay you nothing, they make a bunch of risky loans, and if it works, they pay themselves huge bonuses, and if it doesn’t work, they stick you with the losses if you were above the FDIC limit […]
Now you have an option to get away from that, so long as you have the internet. Put simply: well-regulated USD stablecoins will be one of the largest expansions of human rights in the past 50 years.
