From crypto world trading tools to the continuation of U.S. monetary policy, how far is the encryption industry from the mainstream financial market?

Once just a tool for cryptocurrency traders to store profits, it has now become the trading layer for emerging economies, a settlement tool within the fintech stack, and a strategic currency extension of the United States' monetary policy.

Written by: Castle Labs

Compiled by: AididiaoJP, Foresight News

In the past 12 months, stablecoins have gradually moved from a marginal role in the crypto space to a broader presence in the financial markets. The data itself speaks volumes: the supply of stablecoins has more than doubled, and the usage by traditional payment networks and institutional participants has surged, indicating a growing interest in these assets. However, more fundamentally, there is a structural shift; what was once merely a tool for crypto traders to store profits has now become a trading layer for emerging economies, a settlement tool in the fintech stack, and a strategic monetary extension of U.S. monetary policy.

This report compares the usage of stablecoins from mid-2024 to mid-2025, tracking the growth in adoption, changes across regions, and the current status of stablecoins as a product and concept.

Global Trends: From Liquidity Tools to Functional Infrastructure

Market capitalization and usage growth

The market value of stablecoins is expected to rebound from around 160 billion USD in mid-2024 to over 260 billion USD by July 2025, an increase of more than 60%, which will push the total circulating supply of stablecoins beyond the peak reached in 2022, setting a new record for liquidity.

On-chain transaction volume tells a more significant story. In 2024, the settlement volume of stablecoins surpassed the combined total of Visa and Mastercard, reaching $27.6 trillion. Monthly transaction volumes doubled year-on-year, growing from $1.9 trillion in February 2024 to $4.1 trillion in February 2025. By December 2024, it peaked at $5.1 trillion, indicating that these funds are no longer confined to the encryption-native space; in certain ecosystems, stablecoins account for more than half of all transaction value.

user base expansion

The number of active wallets is expected to grow from approximately 20 million in mid-2024 to around 40 million by mid-2025. The total number of addresses holding stablecoin balances has surpassed 120 million. This growth is not only quantitative but also reflects diversity. An increasing number of small businesses, freelancers, and remittance users are transferring funds via stablecoins, often without directly participating in the broader encryption market.

Institutional Integration

In 2024, stablecoins have become not only financial tools for crypto companies but are also gradually being adopted by fintech companies, asset management firms, and some enterprises. The reason is simple: they offer a fast, programmable, dollar-denominated asset that can be transferred across platforms at any time without relying on traditional banking channels. For companies operating across multiple countries or time zones, this means improved liquidity management, faster internal transfers, and reduced settlement delays.

Due to interest rates remaining high for most of 2024, it is also more attractive to deposit idle cash into stablecoins like USDC. Many stablecoins are backed by short-term government bonds, and although users cannot directly earn returns, their reserve structure assures users that the underlying assets are high-quality and yield-bearing. For companies seeking reliable dollar digital alternatives, stablecoins have become a viable option.

This year, stablecoins are more deeply integrated into the fintech framework. Visa has expanded USDC settlement to Ethereum and Solana. Stripe and PayPal have introduced stablecoin payments into consumer channels. Even banks are starting to test local stablecoins, such as Standard Chartered's HKD coin, to explore faster cross-border settlements.

Tether achieved a profit of $13 billion in 2024, more than double that of BlackRocks, highlighting the financial significance of the reserve model. This not only proves that stablecoin issuers support infrastructure but also indicates that they operate extremely profitable businesses. This profitability also translates into sustainability, enhancing user trust and accelerating adoption across the financial sector.

Evolution of Stablecoin Types

Fiat-supported stablecoins dominate the market.

The market share of fiat-backed stablecoins (fully supported by cash or short-term government bond reserves) has grown from about 85% in 2024 to over 90% currently. The supply of Tether (USDT) has increased from approximately $83 billion to around $150 billion. USDC has recovered from its low in 2023 (about $59 billion) and regained favor among institutions.

The adoption of stablecoins like PayPal's PYUSD and Paxos' USDP has been relatively mild, but real growth is concentrated in leading products. Users' preference for fully supported and transparently reserved assets has become a common expectation, although this also brings trade-offs in terms of centralized custody and regulatory risks.

encryption collateral and the decline of algorithmic stablecoins

Cryptocurrency-backed stablecoins (such as DAI) have seen a slight increase in absolute numbers (approximately $5 billion), but their market share has declined. Protocols like Aave (GHO) and Curve Finance (crvUSD) have added hundreds of millions in circulation, but crypto-supported stablecoins have not truly broken through, nor have they collapsed.

On the other hand, algorithmic models have almost disappeared. After the Terra crash, the design of non-overcollateralized assets lost trust, and many projects, including Frax Finance, shifted to a fully fiat-backed model in 2023. Since then, no new algorithmic stablecoins have received significant attention.

Today, fiat-backed stablecoins dominate in terms of use and consensus. Crypto-backed stablecoins represent a small but practical niche market. The algorithmic methods that were once considered mainstream have largely exited the market.

The rise of yield-bearing stablecoins

An emerging category to watch in 2025 is yield-bearing stablecoins, which are assets that not only preserve value but also appreciate. Unlike traditional fiat-supported or over-collateralized models, these tokens explicitly integrate the yields from real-world or on-chain strategies into their structure. Two typical examples are Ethena's USDe and Resolv's USR.

Ethena Labs' USDe adopts a Delta neutral strategy, maintaining its peg by pairing staked ETH collateral with perpetual short positions, while generating synthetic yield. This yield is passed to holders through additional token sUSDe. This model has received early attention due to its composability, transparent yield mechanism, and the ability to generate income without relying on centralized reserves. As of mid-2025, the supply of USDe remains well below that of major stablecoins, but it is one of the few projects that has achieved significant adoption and maintained stability in the post-Terra experiment.

In contrast, Resolv Labs links returns to real-world interest-bearing assets, creating a structure that is closer to tokenized government bonds but exists in the form of stablecoins. USR aims to maintain its peg while providing users with stable returns through collaboration with off-chain credit and structured products. This is a more institutional approach, focusing primarily on DeFi protocols and early lending platforms.

These models are still in the experimental stage, with adoption rates far lower than fiat-backed stablecoins. However, they represent a clear trend: users not only need stability but also hope to earn passive income. The challenge remains to maintain transparency, anchor stability, and ensure regulatory clarity. If any of these is shaken, confidence will quickly fade.

Currently, yield-bearing stablecoins have carved out a niche. They have not replaced USDT or USDC, but have expanded the design space, offering a more capital-efficient option for users willing to accept different risk preferences. Whether they can scale without inheriting the vulnerabilities of previous algorithmic stablecoins remains to be seen. However, for now, they are regarded more favorably than any attempts made after the collapse of UST.

Regional Behavior Change

Emerging Markets: Latin America, Africa

Motivation: Stability and Obtaining Dollar Exposure

In countries facing inflation and currency fluctuations, stablecoins are increasingly becoming an alternative to digital dollars. Argentina, Venezuela, and Nigeria are examples. In 2024, as the local currency depreciates, the demand for USDT surges. By 2025, holding digital dollars has become a normal behavior for individuals and merchants.

In Africa, the shortage of foreign exchange affects more than 70% of countries, and stablecoins have now become a bridge connecting local economies with global capital. Nigerian exchanges typically quote in USDT. When banks cannot provide US dollars, businesses use stablecoins to pay overseas suppliers.

Remittance and Payment

The migration of remittance paths to stablecoins is significant. In 2024, cross-border transfers based on cryptocurrency in Latin America will grow by over 40%. By 2025, applications like Binance P2P and Airtm will have become the main remittance tools for the entire community.

The average cost of sending $200 to the Sub-Saharan Africa region through stablecoins is about 60% lower than traditional remittance channels. This is not a marginal improvement, but a transformative impact and a reflection of product-market fit.

Preferred platform and tokens

Tron has become the dominant public chain for stablecoin activities in emerging markets due to its low fees, and most niche and P2P markets use USDT on Tron. While BSC and Solana have also gained market share, Tron remains the default choice in many regions.

USDC is gradually penetrating traditional financial payment channels, especially when regulatory scrutiny or institutional relationships become a concern. However, for ordinary users, USDT still holds an absolute advantage.

Regulatory Attitude

The government remains cautious. Brazil has introduced regulations for digital assets and is exploring central bank digital currency (CBDC). South Africa is developing guidelines for stablecoins. Most other emerging markets are still on the sidelines. While they acknowledge its utility, there are also concerns about dollarization and capital flight. Currently, basic usage is tolerated, especially in the absence of alternatives.

Asia: Regional differences are significant

Southeast Asia and South Asia

In Southeast Asia, the use of stablecoins is more related to access channels rather than inflation. In countries like the Philippines and Vietnam, remittances are the main driving force. Overseas workers send USDT or USDC back home using applications like Coins.ph or BloomX. In India, traders and freelancers use stablecoins to transfer funds between platforms to reduce slippage.

Vietnam has performed outstandingly in retail encryption adoption. Singapore, on the other hand, has taken a more institutionalized approach by granting stablecoin licenses and encouraging regulated issuance.

East Asia and Financial Centers

Hong Kong and Singapore are positioning themselves as regulated stablecoin financial centers. The Monetary Authority of Singapore (MAS) will implement clear guidelines (reserve support, redemption terms) by the end of 2024. By 2025, USDC and regional stablecoin issuers are applying for licenses in Singapore.

Japan allows banks to issue stablecoins based on the legal framework established in 2023. Currently, there are several yen-pegged stablecoins, but they remain niche. In South Korea, due to strict regulations, the use of stablecoins is still concentrated in the trading sector.

The Chinese mainland authorities still prohibit activities related to encryption currencies, but USDT is widely used through over-the-counter channels. Reports indicate that a large amount of funds are escaping capital and engaging in trade activities via Tether on the Tron network. This is a persistent but unofficial norm.

Developed Markets: Integration Rather Than Replacement

usage pattern

In the United States and Europe, stablecoins are rarely used for everyday consumption, but are embedded in the backend of financial technology stacks, corporate finance, and cross-border Settlement.

The company uses stablecoins to transfer funds between subsidiaries. Freelancers accept USDC as international work compensation. After the bank collapse events in 2023, crypto companies now rely on stablecoins instead of ACH or SWIFT for fiat transactions.

Franklin Templeton's on-chain money market fund settles in USDC. Mastercard and MoneyGram have launched stablecoin-based services. These integrations indicate the complementary expansion of stablecoins in fintech, rather than complete replacement.

Regulatory Trends

The EU's MiCA framework will take effect in mid-2024. By mid-2025, non-euro stablecoins will face daily limit regulations, and issuers will need to apply for licenses. The UK has also passed legislation recognizing stablecoins as digital Settlement assets.

The "GENIUS Act" has just been passed in the United States, but its effects have yet to materialize. Previous law enforcement actions (such as the decline of BUSD) and market behaviors (concentrated on USDC/USDT) indicate that regulators are indirectly shaping this field, and this situation is changing. Stablecoins now account for over 1% of the M2 money supply, and Federal Reserve officials have begun to publicly acknowledge this.

Conclusion: From Parallel Assets to Embedded Hierarchies

From July 2024 to July 2025, stablecoins will transition from being primarily used as native encryption tools to an independent parallel financial system. In emerging markets, they become a solution to bypass currency crashes and expensive banking services; in developed markets, they are integrated into regulated and compliant workflows.

The market structure reflects this evolution. Fiat-backed stablecoins dominate, accounting for over 90% of the market share. What was once considered the core of "decentralization"—algorithmic and non-collateralized models—has mostly disappeared. Today, the use of stablecoins is driven more by practicality and trust rather than ideology.

The regulatory environment has not fully caught up yet, but it is progressing. Institutions, banks, fintech companies, and payment giants are gradually adopting it. At this stage, the issue of stablecoins is no longer whether they will be regulated, but how they will be regulated and integrated by existing organizations, as well as how much value they will hold and where that value will flow.

Stablecoins are unlikely to completely replace fiat currency, but they are already filling the gap in areas where traditional currencies fail (such as non-working hours, cross-border scenarios, or economies with weak infrastructure).

The future development will depend on continuous practicality, clear rules, and whether it can expand profits without compromising stability or transparency. However, looking back over the past year, the trends have become very clear. Stablecoins have found their role, and this role is more important than most people expected.