Stablecoins are built to hold a steady price. A token pegged to $1 stays near $1, so holders do not gain from price moves. Yet the companies that issue these tokens report profits in the billions.
The reason is simple. Issuers hold the dollars that back each token and earn interest on them. This article uses data from five published sources to show where the money comes from, how Tether and Circle compare, and what could change the picture.
The scale helps explain the interest. Stripe reports that stablecoin retail-sized transactions passed $5.84 billion in August 2025 alone. Larger flows move through exchanges, payment firms and banks every day.
How the Float Model Works
The core idea is easy to follow. When a person buys 100 units of a dollar stablecoin from the issuer, the issuer takes in $100 in cash. That money goes into reserves, usually bank deposits or short-term government bonds.
The token then moves around the market. The dollar behind it stays in the reserve and earns interest.
The issuer keeps that interest, which Transak calls the float. The holder gets a token pegged to $1 and no yield.
Fourchain gives a simple example. If an issuer has $1 billion of stablecoins in circulation and earns 4% on the reserves, it could collect about $40 million a year. The chart below shows how that figure changes with the yield.
| Reserve size | Yield | Yearly interest |
|---|---|---|
| $1 billion | 2% | $20 million |
| $1 billion | 3% | $30 million |
| $1 billion | 4% | $40 million |
| $1 billion | 5% | $50 million |
Transak notes that when the Federal Reserve holds rates near 4% to 5%, a Treasury bill pays close to that. The issuer keeps all of it. A bank must pay interest, run branches and spend on marketing to win deposits, while an issuer creates a token on demand and pays holders nothing.
This is not a new trick. Money market funds, banks and PayPal have earned money on customer balances for decades. What changed is the scale and the margin.
The result is a deposit-like business with the cost structure of a software company, in Transak’s words. The firm does not need to compete for customers with high rates. It only needs people to hold its token.
Issuers must also keep reserves safe and easy to sell. Users can ask for their money back at any time. Stripe says issuers work to a short list of goals: safety, liquidity and yield.
The Main Revenue Streams for Issuers
Reserve interest is the largest line by far. Transak puts the float at roughly 95% to 99% of issuer revenue. Everything else is a small share today.
| Revenue source | What it is | Share of revenue |
|---|---|---|
| Float (reserve interest) | Yield on T-bills, repo and money market funds | Roughly 95% to 99% |
| Mint and redeem fees | Fees on large institutional conversions | Small, depends on scale |
| Institutional services | Treasury management, custody, partnerships, API access | Small but growing |
| Yield on other reserves | Returns on gold, Bitcoin, secured loans | Varies by issuer |
Minting and redeeming can bring in extra income. Some issuers charge a small fee. Others set a slightly higher price to mint and a slightly lower price to redeem.
Fourchain gives an example of the spread. A customer pays $1.001 to create a token and receives $0.999 on redemption. The $0.002 gap goes to the issuer.
Everyday users rarely deal with issuers directly. These fees mostly hit large institutions.
Transaction fees are another option, but many issuers skip them. Elliptic explains that free transfers help growth, and more circulation means more reserves earning interest. For large issuers, the yield outweighs what fees would bring in.
Elliptic describes a trade-off between fees now and market share later. Most large issuers choose share. A bigger supply means more reserves and more yield.
Issuers also sell services to banks and large firms. These include treasury management, custody and help with technical setup. Partnerships with exchanges, fintech apps and wallets can add revenue-sharing deals, and wider use lifts total reserves.
Some issuers also lend. The decentralised stablecoin DAI earns money when users lock collateral, borrow DAI and pay stability fees into the protocol treasury. Others place part of their reserves in gold, corporate debt or Bitcoin, which can raise returns and risk together.
Can holders earn money too? Not from the price, since stablecoins do not rise in value. Elliptic lists outside options such as lending protocols like Aave, platform rewards and liquidity pools.
PayPal says holders of PayPal USD can earn up to 4% in rewards on their settled balance, according to Elliptic. Elliptic also notes that these payouts are often small next to issuer profits.
Tether: The Largest Issuer by Supply
Tether is the clearest example of the model. Transak reports net profit of roughly $13 billion for 2024. About $7 billion of that came from Treasuries and repo that directly back USDT, and the rest came from gold, Bitcoin and other holdings.
Elliptic reports $5.7 billion in net profit for the first half of 2025. For the full year, Transak says Tether reported more than $10 billion. At the end of 2025, more than $186 billion in USDT was in circulation.
| Tether measure | Reported figure | Period |
|---|---|---|
| Net profit | About $13 billion | Full year 2024 |
| Net profit | $5.7 billion | First half of 2025 |
| Net profit | More than $10 billion | Full year 2025 |
| US Treasury holdings | $97.6 billion | Mid-2024 |
| Direct US Treasury exposure | $122 billion | End of 2025 |
| USDT in circulation | More than $186 billion | End of 2025 |
| Gold holdings | $17.4 billion | End of 2025 |
| Bitcoin holdings | $8.4 billion | End of 2025 |
The Treasury book is large. Stripe says Tether held $97.6 billion in US Treasurys by mid-2024, which placed it among the largest holders of US government debt. By the end of 2025, Transak puts its direct exposure at $122 billion.
Transak says the float also funds Tether’s growth into other areas. Tether led a strategic round with IDG Capital into payments infrastructure built on these rails. The profit gives it room to invest well beyond the token itself.
Transak also points to staff size. A few hundred employees produced profit that rivals large Wall Street firms. Tether has no loan book, no branch network and no deposit insurance premium.
Tether also holds assets beyond Treasuries. Fourchain says it holds Bitcoin and gold and can lend to borrowers who post collateral. This mix gives it more income sources, along with more price risk.
The peg has been tested. Stripe notes that USDT briefly traded at 94 cents on some exchanges in 2022. Institutions redeemed tokens at face value, and the price moved back toward $1 as traders closed the gap.
Liquidity is a strength. Stripe says USDT became one of the deepest pools in crypto trading because exchanges added it early. Fourchain adds that Tether is larger by supply but has looser disclosure than Circle.
Circle: Same Engine, Smaller Share of the Take
Circle issues USDC and runs the same reserve-interest model. Transak says Circle reported total revenue and reserve income of $2.7 billion for 2025, up 64%. Reserve interest made up most of it.
Yet Circle keeps less of that income. Its S-1 filing showed that Circle and Coinbase split residual USDC reserve revenue 50/50. Coinbase takes 100% of the income on USDC held on its own platform.
The payouts are large. Transak reports that in Q1 2025, Coinbase earned roughly $300 million in distribution from Circle. That was more than Circle’s total net revenue of $230 million for the quarter.
This deal explains why Circle’s net margin looks thin next to its revenue. Distribution is a cost of reaching users, and Coinbase brings a large base of USDC holders.
Fourchain says Circle positions USDC as a regulated digital dollar for payments, trading and transfers. It is also designed to hold a value close to $1. That focus on rules and reporting can appeal to banks and large firms.
The two firms also manage reserves differently. Fourchain says Circle focuses on cash, cash equivalents and short-term US government securities. It does not run major Bitcoin or gold strategies.
Circle holds more regulatory licenses and publishes more detailed reserve data, according to Fourchain. Stripe says USDC built its liquidity by leaning into banking partnerships. Circle also became the most prominent publicly traded issuer after its 2025 IPO, per Transak.
| Feature | Tether (USDT) | Circle (USDC) |
|---|---|---|
| Circulation, end of 2025 | More than $186 billion | Second largest |
| Main reserve assets | Treasuries, repo, gold, Bitcoin | Cash, equivalents, short-term US government securities |
| Revenue sharing | Not reported in the sources | About 50/50 split of residual reserve revenue with Coinbase |
| Disclosure | Looser, per Fourchain | More detailed reserve data |
| Ownership | Private company | Public company after 2025 IPO |
Interest Rates: The Biggest Risk to the Model
Issuer profit moves with interest rates. Because revenue is almost all Treasury yield, a Federal Reserve rate cut reduces the top line right away. Stripe makes the same point: a drop in Treasury rates can quickly cut earnings.
Transak links the record profits to the period of 2023 and 2024, when rates sat above 5%. It argues that the headline profits reflect a high-rate period, not a permanent feature of the business.
| Yield on $122 billion | Yearly interest | Change from 5% |
|---|---|---|
| 5% | $6.10 billion | None |
| 4% | $4.88 billion | Down $1.22 billion |
| 3% | $3.66 billion | Down $2.44 billion |
| 2% | $2.44 billion | Down $3.66 billion |
The table is an illustration, not a forecast. It applies a flat yield to Tether’s $122 billion Treasury exposure and ignores its other income. Each quarter-point of yield equals about $305 million a year, in line with Transak’s view that a quarter-point cut takes hundreds of millions off annual interest.
Circle faces more exposure for its size. Reserve interest is nearly its whole revenue line, and half of the residual yield already goes to Coinbase. Transak says Circle is pushing into payment network fees that do not depend on the Fed.
Tether has taken another path. It holds gold and Bitcoin to spread its income. Stripe adds that issuers keep short maturities to avoid selling assets at a loss, which limits how much extra yield they can chase.
Cash buffers and very short-term Treasurys improve liquidity, according to Stripe, but they also cap returns. That is the cost of staying ready for redemptions. An issuer that reaches for more yield takes on more risk.
Competition adds pressure. Transak says yield-bearing stablecoins and tokenized money market products now pass reserve interest to holders. That attacks the exact margin issuers depend on.
Rules, Competition and Market Growth
Regulation shapes the model. Transak says the US GENIUS Act requires 1:1 reserves in cash, short-dated Treasuries, repo or money market funds. Issuers must disclose monthly, keep reserves separate and avoid reusing them.
The act also bans interest paid to holders. Section 4(a)(11) bars issuers from paying any yield tied to holding the coin. Transak concludes that the float stays with the issuer.
Europe has its own rules. Stripe says the EU’s MiCA regime also limits interest to retail holders and defines which assets can back a coin. Rules on reserve quality, capital and reporting continue to develop.
The market is expected to grow. Elliptic cites a 2025 Citibank forecast that stablecoins could reach $1.9 trillion by 2030, up from about $300 billion at the time of writing. Banks, fintech firms and payment companies are all moving in.
Reputation can act as a limit on revenue. A loss of confidence shrinks reserves, and smaller reserves earn less interest. Trust and income are tied together.
Competition is tight. Stripe says some major stablecoins are interchangeable, so switching costs are low. If an issuer raises fees, hides details or has an outage, circulation can move to a rival fast.
| Model | How it holds the peg | Example or result |
|---|---|---|
| Fiat-backed | Cash and short-term assets match every token | USDT regained $1 after a dip to 94 cents in 2022 |
| Crypto-collateralised | Users lock more than $1 of crypto per token | DAI, run by MakerDAO |
| Algorithmic | Incentives and a second token, no reserves | TerraUSD failed in 2022 |
Stripe explains that crypto-backed issuers use over-collateralisation to absorb volatility. The system keeps each dollar of DAI backed by more than a dollar of assets.
The model matters for risk. Stripe notes that the 2022 TerraUSD crash showed how fast a peg can fail when support rests on market confidence alone. Reserve-backed issuers earn their income because they hold real assets.
Why Payment Costs Draw Issuers and Banks In
Interest is only part of the story. The World Economic Forum argues that stablecoins can make settlement work more like cash. When one party sends a stablecoin, the other has it and the sender does not, so there is nothing to reconcile.
Today’s cross-border system is slower and costlier. Capgemini estimates that as much as $4 trillion sits in settlement and liquidity accounts to fund cross-border payments. Providers prefund money in many countries so transfers feel instant.
Costs are higher in smaller markets. In the World Bank’s latest data, sending $200 to sub-Saharan Africa costs an average of 8.46%, against a global average of 6.36%. In 2021, the G20 set a goal of 1% for retail payments by the end of 2027.
The Financial Stability Board reported last October that costs remain sticky and the target is unlikely to be met. The Bank for International Settlements counts a 25% drop in active correspondent banking relationships from 2011 to 2020. In emerging markets and small island states, the drop reached as much as 41%.
| Measure | Figure |
|---|---|
| Cash tied up in cross-border settlement | As much as $4 trillion |
| Cost of sending $200 to sub-Saharan Africa | 8.46% |
| Global average remittance cost | 6.36% |
| G20 target for retail payments | 1% by end of 2027 |
| Fall in correspondent banking links, 2011 to 2020 | 25% overall, up to 41% in some regions |
Better payment systems have helped before. In Kenya, access to M-PESA lifted an estimated 194,000 households, about 2% of Kenyan households, out of poverty. In Brazil, Pix made instant payments free for individuals and reached more than 140 million people within two and a half years, the IMF found.
The forum also points out that delay can pay. Institutions holding funds during settlement can earn on the float, while others bear the cost of prefunding. Faster settlement may cut costs overall, but it removes income from parts of the system.
For businesses, Transak advises building the case for stablecoins on settlement speed and cost, not on borrowed yield. Stripe says businesses can already accept stablecoin payments that settle as fiat in their balance.
What the Numbers Show
Stablecoin issuers make money mostly from interest on reserves. Transak puts the float at roughly 95% to 99% of revenue, and fees and services are small by comparison. Tether reported about $13 billion in 2024 profit, and Circle reported $2.7 billion in 2025 revenue and reserve income.
The model has limits. Profit follows interest rates, Circle shares about half of its residual reserve income with Coinbase, and rules like the GENIUS Act fix how reserves are held. The next test is whether issuers can grow beyond reserve interest as rates change.
Sources
- How do stablecoin issuers earn money? The economics, risks and systems behind stablecoins (Stripe)
- How Do Stablecoin Issuers Make Money? The Economics of USDT and USDC (Transak)
- How Do Stablecoins Make Money? (Fourchain)
- How do stablecoins make money? (Elliptic)
- How stablecoins restore the best properties of cash (World Economic Forum)
