Stablecoin Issuers Tether and Circle Face Yield Competition as New Platforms Emerge

Stablecoin giants Tether and Circle are capitalizing on high-interest rates by retaining yields from U.S. Treasury reserves backing their tokens, a practice criticized as "printing money" by Wormhole co-founder Dan Reecer. Tether reported $4.9 billion in Q2 profits, with its valuation reportedly reaching $500 billion in a recent funding round.

Reecer argues users will increasingly demand yield-sharing as platforms like M^0 and Agora emerge, routing Treasury returns to applications or end-users rather than issuers. "If I’m holding USDC, I’m losing money that Circle is making," he stated at Mercado Bitcoin’s DAC 2025 event, highlighting the opportunity cost of non-yielding stablecoins.

Regulatory constraints likely prevent direct yield distribution by incumbents, creating space for decentralized alternatives. The sector faces inflection as yield expectations grow alongside persistent high rates.