Cobo Stable Weekly No.19 ｜After the Stablecoin Act, Where’s the Next Battleground?
Yield and privacy are emerging as the next frontiers for stablecoins. Solving these two pain points could unlock the industry’s next wave of growth.
Global payments are undergoing a revolution, and stablecoins are at the heart of this transformation. They're not just reshaping how money moves across borders—they're completely redefining what payments can be. Cobo stands at the cutting edge of this shift, building the full-stack infrastructure that powers next-gen stablecoin solutions: from secure wallet tech to risk control and compliance and yield-generating options that actually make your money work.
Go with Cobo, and you can zero in on building cool stuff and growing your user base, while surfing the stablecoin revolution without the infrastructure headaches.
Welcome to Issue #19 of Cobo Stable Weekly!
Since the GENIUS Act took effect, the market has reacted in unexpected ways:
USDT supply surged, while compliance-focused USDC saw short-term stagnation.
Despite the “stablecoin interest ban,” yield-focused stablecoins are booming:
USDe supply is skyrocketing.
Coinbase and PayPal are rebranding yields as “rewards,” with Coinbase even launching an embedded rewards SDK.
Institutional players like Anchorage and Ethena Labs are leveraging tokenized assets (e.g., BlackRock's BUIDL) to build compliant yield channels.
Privacy is the new frontier: ZKP and DID solutions aim to balance compliance with privacy, addressing a critical barrier for institutions entering the stablecoin space.
Market Overview and Growth Highlights
Stablecoin Total Market Cap Reaches $269.696b
The total stablecoin market capitalization has reached $269.696 billion, reflecting a week-over-week growth of $2.606b. In terms of market share, USDT continues to dominate with a 61.25% share, followed by USDC, which holds the second position with a market cap of $64.502 billion (23.92% share).
Blockchain Network Distribution
Top 3 Networks by Stablecoin Market Cap:
Ethereum: $135.786B
Tron: $82.995B
Solana: $11.431B
Top 3 Fastest-Growing Networks (Weekly):
Berachain：+96.57%（USDT dominance: 43.15%）
XRPL：+49.84%（RLUSD dominance: 49.11%）
Sei：+47.95%（USDC dominance:85.96%）
Data Source: DefiLlama
🎯Privacy Challenges in Stablecoin Payments Under U.S. Regulation
With the passage of the U.S. GENIUS Act, privacy has emerged as the next major focus for both regulators and the market.
As stablecoin market capitalization surpasses $270 billion and rapidly integrates into mainstream payment systems, the "full transparency" of public blockchains is becoming a significant concern. On-chain transactions, permanently visible to anyone, expose sensitive financial histories, supply chain data, and payroll structures. While this might be a minor inconvenience for retail users, for businesses and institutions, it poses a critical barrier. Competitors could easily track every transaction in real time, creating a major disincentive for adopting stablecoins in commercial payments and institutional settlements.
Paul Grewal, Coinbase’s Chief Legal Officer, recently highlighted that the success of laws like the GENIUS Act depends on parallel updates to the Bank Secrecy Act (BSA). The current system is not only inefficient but also relies on centralized storage of sensitive data, turning it into a “honey pot” for hackers. Furthermore, it offers limited effectiveness in combating money laundering and illicit activities.
Grewal argues that privacy and security are not zero-sum. Emerging technologies like zero-knowledge proofs (ZKP) and decentralized identities (DID) can enable compliance without exposing raw data. These tools allow institutions to verify compliance by revealing only verification results, not full transaction details, achieving a balance between data minimization and precise regulation.
He has called on the U.S. Treasury Department to lead a public-private collaboration to prioritize integrating ZKP into compliance processes. By focusing monitoring on key suspicious data points and enhancing detection with AI-driven models, regulators can protect privacy without compromising enforcement. This approach could remove the biggest roadblock to stablecoin adoption in institutional and commercial contexts, positioning the U.S. as a leader in the global institutionalization of digital assets.
🎯 Stablecoins Under the U.S. Interest Ban: The Rise of the “Rewards Economy”
Regulatory restrictions often spark unexpected innovations. The GENIUS Act, which prohibits stablecoin issuers from paying interest to users, was intended to curb high-risk behavior. Yet, it has inadvertently fueled an explosive growth in yield-focused stablecoins.
Take Ethena’s USDe, for example: since the Act’s passage, its supply has surged by billions of dollars. Unlike traditional models tied to government bonds, USDe's yield mechanism relies on exchange funding rates, skillfully sidestepping legal constraints.
Meanwhile, a regulatory loophole has allowed players like Coinbase and PayPal to reframe stablecoin returns as “rewards” rather than interest. Coinbase, acting as a USDC distributor, passes Circle’s yield back to users, while PayPal uses Paxos to isolate issuer risks and still offers a compelling 4.5% annual return. On the institutional side, Anchorage and Ethena Labs have linked stablecoin yields to tokenized assets like BlackRock’s BUIDL, creating compliant yield channels for large-scale players.
Paying returns to stablecoin holders has become a critical tool for attracting capital, especially in both mature and emerging markets. Coinbase has even API-ized its “interest rewards” through an embedded wallet SDK, making it easier for developers to integrate annual yield features. In high-inflation regions like Latin America, Slash has introduced USDSL, offering a 4.5% annual reward combined with the stability of dollar assets, rapidly drawing in capital.
Through innovative and compliant financial engineering, stablecoins are efficiently transmitting returns from underlying assets while reshaping user relationships and the value distribution landscape. This new “rewards economy” is redefining how stablecoins compete and grow in a heavily regulated environment.
🎯Hong Kong Stablecoin Regulation: Transparency and Full-Lifecycle Oversight
The newly enacted Hong Kong Stablecoin Regulation has sparked widespread debate around mandatory KYC, policies for foreign stablecoins, and DeFi compatibility. However, the core of this regulation is not about “blanket bans” but rather the control of stablecoins issued in Hong Kong or denominated in HKD, with a particular focus on tokenized RMB assets. Stablecoins like USDT and USDC circulating on secondary markets are not directly affected. Its goal is to regulate issuance sources and develop tokenized RMB assets as “quasi-sovereign settlement tools,” creating a competitive edge against U.S. and EU models.
The regulation emphasizes transparency and full-lifecycle compliance from issuance to distribution. Licensing is highly stringent, and all participants—including custodians, distributors, and clearing agents—must meet strict standards. The ecosystem shifts from “open access” to permissioned entry, making MPC wallets, compliance tools, and risk management critical for banks and tech firms.
Issuers now bear full responsibility for downstream compliance, driving industry professionalization. Infrastructure providers offering MPC, multi-sig, and HSM solutions will play a key role, transforming wallets into gateways for secure, compliant systems.
Hong Kong’s regulation signals a new era of regulated and institutionalized stablecoin innovation.
Regulation & Compliance
🏛️President Trump’s latest executive order blocks regulators from using “reputational risk” to unfairly target banks serving crypto companies. This ends "Operation Choke Point 2.0" and ensures equal banking access for the crypto industry. With agencies like the Fed and FDIC onboard, this move strengthens crypto's legitimacy and paves the way for deeper integration with traditional finance.
🏛️Paxos Fined $48.5M by NYDFS Over Binance BUSD Partnership. Paxos Trust will pay a $26.5M fine and invest $22M to enhance compliance after the NYDFS found due diligence failures during its 2018 Binance BUSD partnership. The regulator criticized Paxos for relying on Binance's unverified claims about U.S. user restrictions, leading to a 2023 order halting BUSD minting. This enforcement underscores tightening oversight on stablecoin issuers, warning against partnerships with high-risk exchanges as the GENIUS Act ushers in stricter industry regulations.
New Launches
👀Former Apple engineer Sid Gandhi has launched Payy, a privacy-first crypto Visa card by Polybase Labs. Using zero-knowledge proofs (ZKPs) and a custom blockchain, Payy hides stablecoin transaction amounts on-chain while staying regulatory compliant. Designed for simplicity, it enables self-custody and seamless crypto payments without requiring blockchain expertise. Payy bridges privacy and usability, positioning itself as a mainstream alternative for spending stablecoins.
👀MetaMask and Stripe are reportedly collaborating on mmUSD, a new USD stablecoin poised to become a "cornerstone asset" within the MetaMask ecosystem, according to a prematurely leaked Aave governance proposal. Fully integrated into MetaMask's services, mmUSD could revolutionize wallet transactions, trading, and earning. With MetaMask's crypto dominance and Stripe's payment expertise, this partnership could fast-track stablecoin adoption across Web3 and traditional payment industries.
👀Coinbase has launched the Embedded Wallets SDK, enabling developers to integrate seamless self-custody wallets into their apps via the Coinbase Developer Platform. With features like crypto on-ramps, token swaps, and USDC yields of 4.1% APY, the SDK eliminates seed phrases and browser extensions, allowing instant login through email, SMS, or OAuth. This streamlines Web3 onboarding while maintaining enterprise-grade security, advancing Coinbase's vision of making its wallet a "super app" and accelerating crypto adoption.
👀San Francisco-based digital bank Slash has launched USDSL, a USD stablecoin issued via Stripe's Bridge platform, enabling global businesses to access dollar payments without a U.S. bank account. By reducing settlement times and FX fees, USDSL addresses inefficiencies in cross-border payments. Following the GENIUS Act’s regulatory clarity, this launch highlights fintech's rapid adoption of stablecoins, merging traditional finance with crypto to deliver practical, cost-effective payment solutions.
👀Trump-Linked World Liberty Launches USD1 Stablecoin Loyalty Program. World Liberty Financial, tied to the Trump family, has launched the USD1 points program, offering rewards for trading, holding, or staking its USD1 stablecoin. Backed by short-term U.S. Treasuries and issued by BitGo Trust, USD1 aims for transparency and security. With Donald Trump and his sons as advocates, this loyalty initiative blends stablecoins with user incentives, showcasing the growing intersection of crypto, rewards programs, and high-profile political figures.
👀JPMorgan Launches On-Chain Intraday Repo Solution on Kinexys Blockchain. JPMorgan, alongside HQLA-X and Ownera, has introduced a blockchain-based intraday repo solution on the Kinexys network. It enables precise, minute-by-minute repo trade settlements via blockchain deposit accounts, with phase one already processing up to $1 billion daily. Supporting digital assets like deposit tokens, stablecoins, and CBDCs, Kinexys reduces market fragmentation while expanding across venues and collateral types. This marks JPMorgan’s push from blockchain pilots to institutional-grade infrastructure, solidifying its leadership in digital asset innovation.
Capital Moves
💰Tether has acquired a minority stake in MiCA-licensed Spanish crypto exchange Bit2Me, leading a €30M ($32.7M) funding round to support its EU and Latin American expansion. Bit2Me, serving 1.2M users, is the first Spanish-language exchange with approval to operate across all 27 EU states under MiCA. This move strengthens Tether's position in Europe amidst tightening regulations and creates a compliant channel for USDT, following delistings by other exchanges. It highlights Tether's strategy of using its $4.9B Q2 profits to expand globally across diverse regulatory markets.
💰Ripple has announced the $200M acquisition of stablecoin payments platform Rail, expected to close in Q4 2025. Rail, projected to handle over 10% of global stablecoin payments in 2025, will enable Ripple to offer enterprise-grade stablecoin solutions, supporting assets like RLUSD and XRP. This follows Ripple's $1.25B acquisition of brokerage Hidden Road and its push for MiCA licenses in the EU. With RLUSD already approved in Dubai, Ripple is rapidly evolving from a cross-border payments provider into a full-scale financial services platform, intensifying its position in the institutional stablecoin market.
Big Picture
🔮Mizuho warns that Circle's USDC profit margins are shrinking, with $332.5M of its $625M Q2 interest income going to Coinbase. Growing distribution costs from new partners like Binance and rising competition from banks launching stablecoins under the GENIUS Act are tightening profitability. Analysts highlight risks from lower interest rates and Circle's disrupted profit-sharing model, maintaining an "underperform" rating with an $85 price target. This signals mounting challenges for USDC in an increasingly competitive stablecoin market.
🔮The U.S. Treasury's $100 billion short-term debt sale is drawing new demand from stablecoin issuers, driven by the GENIUS Act's requirement to back tokens with secure assets like Treasury bills. With yields exceeding 4%, short-term Treasuries are increasingly attractive, supported by $16.7 billion inflows into ETFs in Q2. This stablecoin-driven demand adds a structural boost to the Treasury market, even as global central banks reduce dollar holdings in favor of gold, signaling broader concerns about U.S. debt sustainability.
🔮Yield-generating stablecoins are booming post-GENIUS Act, with Ethena's USDe supply up 70% to $9.49B and Sky's USDS rising 23% to $4.81B. Offering staking yields of 10.86% and 4.75%, respectively, these assets circumvent the Act's ban on direct issuer-offered yields by leveraging protocol-based returns. The stablecoin market has surged from $205B to $268B this year, reflecting strong demand for high-yield dollar alternatives and fueling DeFi innovation despite regulatory hurdles. Analysts project the market could reach $300B by year-end.
Market Adoption
🌱Remitly's upcoming "Remitly Wallet" will integrate fiat and stablecoins, targeting users in inflation-prone regions while leveraging Stripe's Bridge for stablecoin payments in 170+ countries. By adopting USDC and similar assets, Remitly enhances 24/7 liquidity, reduces pre-funding, and improves capital efficiency. This marks a pivotal step in mainstreaming stablecoins, addressing remittance inefficiencies, and expanding access to low-cost financial services in underbanked markets.
🌱JPMorgan’s latest report reveals underwhelming growth in DeFi and tokenization, with TVL far from 2021 highs and tokenized assets at just $25 billion. Institutional adoption remains slow, hindered by regulatory gaps, legal uncertainties, and security concerns. While fintech drives faster, cheaper solutions within traditional finance, blockchain must deliver stronger institutional-grade use cases to stay relevant. Without this, the disconnect between crypto hype and real-world adoption will persist.
🌱Tether CEO Paolo Ardoino revealed that 40% of blockchain fees across nine major chains stem from USDT transfers, emphasizing its role as a key blockchain application. This reflects "actual use" over speculation, as transfers often support real-world financial needs like hedging against inflation in emerging markets. USDT's dominance highlights stablecoins' evolution into essential financial tools and underscores blockchain's growing impact on financial inclusion. Future competition may hinge on Gas fee efficiency and stablecoin payment systems.
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