Stablecoin Issuers Tether and Circle Face Rising Competition as Yield Demand Grows

Stablecoin giants Tether and Circle are capitalizing on high-interest rates by retaining yields from U.S. Treasuries backing their tokens, a practice criticized as "printing money" by Wormhole co-founder Dan Reecer. Tether reported $4.9 billion in net profit for Q2 2024, fueling a $500 billion valuation in recent funding talks. Meanwhile, holders of USDT and USDC earn nothing—a disparity Reecer calls unsustainable.

Emerging platforms like M^0 and Agora are challenging the status quo by building infrastructure that distributes yield to end-users or applications. "If I’m holding USDC, I’m losing money that Circle is making," Reecer asserted at Mercado Bitcoin’s DAC 2025 event, highlighting the opportunity cost of non-yielding stablecoins.

Regulatory constraints likely prevent incumbents from sharing treasury gains, creating an opening for decentralized alternatives. As rates stay elevated, the pressure mounts for stablecoin models that align issuer incentives with user rewards—or risk capital flight to more equitable solutions.