Stablecoins: Understanding the business, revenues and moats

@shubh_exists|Jul 03, 2026 (4d ago)7 views

Stablecoin issuers like Tether(USDT) and Circle(USDC) mint digital assets pegged to a dollar. You give them a dollar and they mint you a token you can use. You return a token, they give you back the dollar and burn the token.

The business is simple, they take that dollar and earn yield on that by parking it into US treasuries and other assets.

In short, it's essentially a money-market fund whose depositors get none of the interest. Which sets the real question which this article tries to answer: "How defensible is this revenue?"

The Moat

We usually rank stablecoins by market cap. This supply is the "revenue base". The moat is a different variable entirely: "How hard is it for that supply to leave?"

The prevailing answer in crypto is “distribution is the moat". It's true! but that is where everyone stops. It never tells you why one distributed stablecoin is a fortress and another is a house of cards. The revenue only lasts till the point the token holders do not decide to redeem it back.

So let me try to give you the metric.

"A stablecoin’s defensible revenue is not a function of how much supply it has, but of the topology of who controls the redemption decision behind that supply."

Topology of holders

Don’t picture a stablecoin’s supply as a number. Picture it as a map of decision makers.

Atomization: How many independent decision-makers control the supply. Literally a Herfindahl index over who owns the switch. One treasurer controlling a billion dollars is catastrophic atomization, no matter how “big” you are. A billion spread across fifty million wallets is enormous atomization.
Embeddedness: For each decision-maker, how important is that asset. Stablecoins like polyUSD have use cases for people who trade on prediction markets, encouraging people to hold it. Similarly, Circle's USDC is also in high demand becuase of Coinbase decides to keep 100% reserve income in USDC. So essentially, for each decision-maker, how costly is switching? is also a moat of stablecoins.

Beyond holders: the moats nobody counts

The strongest stablecoins don't win because lots of people hold them. They win because the entire crypto ecosystem is built around them. This is probably the strongest moat. It's just the standard unit used to measure prices. Every Trading Pair, Order Book, Price Chart, API, Trading Bot, Liquidation Engine etc is dependent on that coin.

Regulation

Last but not the least, the biggest competitive advantage for stablecoins is no longer technology. It's regulation. For example, the GENIUS Act, signed July 18, 2025, prohibits payment-stablecoin issuers from paying interest or yield.

This law highly favours already highly atomizatized stablecoins like USDC and USDT, as any new stablecoin (especially the compliant ones) would have a very hard time pulling holders from them to USDT. The yield war doesn’t end. It migrates — to the rewards layer (which is why 40+ banking groups want the ban extended to exchanges and the OCC has proposed exactly that) and to the securities-adjacent yield-token category.

For the first time, stablecoins have a moat that behaves like a banking license because it basically is one. The counter-move is already forming: the Open USD coalition — 140+ partners organized to commoditize Circle’s reserve yield — a bet that if no single issuer can out-yield the incumbents, an ecosystem can out-distribute them by pooling the float.

Summary

Stablecoins look like one of the simplest businesses in crypto: issue dollars, buy Treasuries, collect the spread.

The simplicity is deceptive.

The real business isn't earning yield. It's keeping liabilities from leaving. Distribution matters only because it shapes who can redeem, how coordinated those redeemers are, and how expensive switching becomes. Regulation has now added another layer by limiting how newcomers compete.

In other words, reserve yield explains how much a stablecoin earns today. Holder topology, ecosystem embeddedness, and regulation explain whether it will still be earning that revenue tomorrow.