TLDR
- Tether and Circle profit from U.S. Treasuries while users get no yield.
- Platforms like M^0 and Agora aim to share stablecoin profits with users.
- Tether reports a $4.9B profit, raising concerns over profit distribution.
- New stablecoin models explore yield-sharing for applications and users.
Stablecoin issuers like Tether and Circle are making huge profits from high-interest rates, but the holders of their tokens see none of that benefit. As these companies pocket the yield generated by U.S. Treasuries backing their stablecoins, a growing demand for more equitable solutions has emerged. New platforms like M^0 and Agora aim to address this gap by ensuring yield is passed directly to users or applications.
Tether and Circle’s Growing Profits
Stablecoin issuers such as Tether and Circle have been capitalizing on the current high-interest rate environment. By holding large amounts of U.S. Treasuries, these companies generate significant yield, yet the stablecoin holders do not share in those profits.
For instance, Tether reported a $4.9 billion net profit for the second quarter of 2025, increasing its valuation to $500 billion. This business model has raised concerns about the lack of benefit passed down to the people actually holding the tokens.
Dan Reecer, co-founder of Wormhole, highlighted this issue at Mercado Bitcoin’s DAC 2025 event. He explained that stablecoin holders are missing out on yield from U.S. Treasuries backing tokens like USDC. He pointed out that Tether and Circle are effectively “printing money” by capturing the profits without distributing them to the token holders.
The Demand for Yield Distribution
As interest rates remain high, there is growing pressure from the market for users to benefit from the yields generated by stablecoins. According to Reecer, it’s only a matter of time before stablecoin holders begin to expect a share of these profits, or look for alternatives that offer better returns. This growing demand for yield-sharing solutions has spurred the development of new platforms like M^0 and Agora.
These platforms allow stablecoin infrastructure to be designed in a way that routes yield to end users or applications, rather than keeping it with the issuer. This model addresses the issue of yield inequality by ensuring that users can benefit from the profits generated by their holdings. In contrast to traditional stablecoin models, where the yield is retained by issuers, M^0 and Agora aim to provide a more equitable system for token holders.
Potential Risks of Yield-Sharing Models
Despite the appeal of yield-bearing stablecoins, experts caution that this shift could bring regulatory concerns. Tether’s spokesperson emphasized that the stablecoin’s role is to function as a digital dollar and not as an investment product. He further explained that sharing yield with users would fundamentally change the risk profile of the token and could attract negative regulatory attention.
The spokesperson also noted that for many users, particularly in emerging markets, the primary benefit of stablecoins like USDT is protection against inflation and capital controls. In these regions, stablecoins serve as a hedge against severe local currency devaluation, which can often exceed 50% to 90% annually. As a result, Tether views its role differently from platforms offering yield-bearing stablecoins.
Real-World Use Cases and Financial Innovation
While some companies are experimenting with yield-bearing stablecoins, the broader stablecoin market is also evolving towards real-world applications. These include use cases like cross-border payments and foreign exchange services. Tokenized money market funds are an example of financial innovation within the stablecoin ecosystem, being used as collateral on exchanges.
Stephen Richardson of Fireblocks pointed out that tokenized money could solve several ongoing issues, such as slow payment systems and costly remittance services. As the stablecoin market continues to mature, new financial products and services will likely emerge to address these needs.
In the end, while Tether and Circle have enjoyed significant profits from their current business model, the landscape is shifting. Platforms like M^0 and Agora are helping to shape a future where stablecoin holders may finally see the yield from their holdings, increasing competition and potentially leading to greater benefits for users.
