How Stablecoin Issuers Make Billions: The Revenue Model Behind USDT, USDC, and Competitors

Tether reported $13 billion in profit for 2024. Circle filed for an IPO revealing $1.7 billion in annual revenue. PayPal expanded its PYUSD stablecoin to 70 countries. Behind every major stablecoin issuer is the same core business model: collect dollars, buy Treasury bills, keep the interest. But the details of how stablecoin issuers make money, and how much they keep, vary dramatically across the industry.

With the total stablecoin supply exceeding $300 billion as of September 2026, the economics of stablecoin issuance have become one of the most consequential dynamics in digital finance. Understanding these revenue models matters for anyone evaluating stablecoin reserves, assessing issuer sustainability, or building on stablecoin infrastructure.

The Reserve Interest Machine

The primary revenue source for every fiat-backed stablecoin issuer is simple: interest earned on reserve assets. When a user deposits $1,000 to mint 1,000 USDT or USDC, the issuer takes that $1,000 and invests it in short-duration, low-risk instruments. The user gets a token that trades at $1. The issuer keeps the yield.

For most major issuers, the reserve portfolio is dominated by U.S. Treasury bills and overnight reverse repurchase agreements. These instruments offer the combination of safety, liquidity, and yield that regulators now require under frameworks like the GENIUS Act. With short-term Treasury yields hovering near 3.7% through mid-2026, a stablecoin with $100 billion in reserves generates roughly $3.7 billion per year in gross interest income before any operating costs.

The float analogy: Stablecoin issuers operate much like a payments company earning float on customer funds. The difference is scale: PayPal earns float on billions in transit for days. Tether earns float on over $180 billion parked indefinitely.

Tether: The Most Profitable Crypto Company

Tether (USDT) is the dominant stablecoin by supply, holding approximately 59% of the total stablecoin market with $183.4 billion in circulation as of September 2026. Its financial results have made it one of the most profitable companies in the digital asset industry.

Reserve Composition

According to Tether's Q3 2025 attestation performed by BDO Italy, total U.S. Treasury exposure reached $135 billion, with direct holdings exceeding $105 billion and indirect exposure through money market funds and repos accounting for the rest. By Q4 2025, that figure climbed to $141 billion in total government debt exposure. The remainder of reserves includes approximately $12.9 billion in gold, $9.9 billion in bitcoin, $14.6 billion in secured loans, and $3.9 billion in other investments.

Profit Trajectory

Tether reported $6.2 billion in profit for 2023, $13 billion for 2024, and over $10 billion through the first three quarters of 2025. Of the 2024 total, approximately $7 billion derived from Treasury and repo holdings, while roughly $5 billion came from unrealized gains on gold and bitcoin positions. The 2025 figures reflected a deliberate shift toward more liquid, lower-risk assets, which reduced unrealized appreciation gains but improved reserve quality.

To contextualize this profitability: Tether's 2024 earnings exceeded those of BlackRock ($5.5 billion) and rivaled Goldman Sachs ($12.7 billion), achieved with a reported headcount under 200 employees.

Why Tether Keeps More

Tether's margin advantage comes from its distribution model. Unlike Circle, which shares a large portion of reserve income with Coinbase, Tether operates primarily through direct exchange integrations and does not split reserve interest with distribution partners at comparable rates. This means Tether captures a significantly higher percentage of gross reserve yield as net profit.

Circle: Revenue Sharing and the IPO Reveal

Circle's S-1 filing in early 2025, ahead of its planned IPO, provided the first granular look at the economics of a major stablecoin issuer. USDC holds approximately 23% of the stablecoin market with $74.2 billion in circulation as of September 2026, and despite leading in annual on-chain transaction volume ($18.3 trillion in 2025 versus USDT's $13.3 trillion), Circle's profitability tells a very different story from Tether's.

The Coinbase Revenue Share

The most significant detail in Circle's financials is the distribution agreement with Coinbase. Under the terms renewed in August 2023, Coinbase receives 100% of the reserve income on USDC held on its platform and 50% of the reserve income generated elsewhere. In practice, Circle paid Coinbase $908 million in 2024 (roughly 54% of total revenue) and $1.4 billion in 2025 (approximately 51%). Circle CEO Jeremy Allaire confirmed the agreement was renewed under the same terms during Circle's Q2 2026 earnings call.

Financial Performance

For 2024, Circle reported $1.7 billion in total revenue and $157 million in net income, a 42% decline from the prior year despite a 15% increase in revenue. First quarter 2025 revenue was $578.6 million with net income of $64.8 million. The S-1 disclosed that a 1% decrease in interest rates would reduce reserve income by approximately $441 million, underscoring Circle's sensitivity to rate movements.

Issuer Financial Comparison

The divergence in profitability between the two largest issuers reflects fundamentally different business models, not just different market shares.

Fee Revenue: Minting and Redemption

While reserve interest dominates issuer revenue, minting and redemption fees provide supplementary income. These fees serve both as a revenue source and as a mechanism to manage large inflows and outflows of capital.

Tether Fee Structure

Tether charges a redemption fee of the greater of $1,000 or 0.1% of the redemption amount, with a minimum redemption threshold of $100,000. A $150 verification fee (paid in USDT) is also required. Direct redemptions are available only to verified institutional customers; retail users convert through secondary markets on exchanges.

Circle Fee Structure

Circle historically offered free minting and redemption for standard transactions through its Circle Mint product. In late 2024, Circle introduced a tiered redemption fee structure: the first $40 million in daily redemptions incurs no fee, $40 million to $100 million is charged at 2 basis points, and amounts above $100 million incur a 5 basis point fee. Instant redemptions carry additional fees starting at 0.03% per transaction for amounts above $2 million per day, scaling up to 0.1% above $15 million.

Beginning March 2026, Circle further updated its fee model to include a monthly net flow adjustment, where customers with sustained net redemption activity above defined thresholds may face incremental fees, while net minters may qualify for credits.

Interest Rate Sensitivity

Because reserve interest is the dominant revenue source, stablecoin issuer profitability is directly tied to the federal funds rate and short-term Treasury bill yields. This creates a business model that thrives in high-rate environments and faces compression during easing cycles.

Short-term Treasury yields peaked above 5.3% in late 2023 and have gradually declined as the Federal Reserve began cutting rates in September 2024. As of mid-2026, 1-month Treasury bill rates sit near 3.7%. Every 100 basis point decline in short-term rates reduces Tether's annual gross interest income by approximately $1.8 billion at current supply levels. Circle's S-1 disclosed that a 1% rate cut would reduce its reserve income by $441 million.

The zero-rate scenario: In a prolonged near-zero rate environment (like 2020-2021), fiat-backed stablecoins generate almost no reserve interest. Issuers would rely entirely on fees and ancillary services, fundamentally changing the economics. The impact of Treasury yield changes on stablecoin economics remains one of the most important variables in the industry.

Emerging Competitors and Their Models

The profitability of stablecoin issuance has attracted new entrants, each with variations on the core reserve-interest model.

PayPal (PYUSD)

PYUSD, issued by Paxos and integrated into PayPal's payments ecosystem, peaked at a $4.08 billion market cap in early 2026 before settling near $2.7 billion. At current supply and rates, the stablecoin generates an estimated $176 million per year in reserve interest. PayPal's strategic advantage is distribution: PYUSD is available in over 70 markets and integrated directly into merchant checkout flows. Paxos converted to OCC federal oversight in December 2025, making PYUSD the largest dollar-backed stablecoin issued by a federally regulated entity.

Ripple (RLUSD)

RLUSD launched on Ethereum and the XRP Ledger in late 2024, targeting cross-border payment corridors where Ripple already has institutional relationships. The reserve model follows the standard Treasury-backed approach, but Ripple's distribution advantage lies in its existing correspondent banking network.

White-Label Stablecoins

A growing trend in 2025 and 2026 is platform-native stablecoins, where exchanges and fintech companies issue their own branded dollar tokens through infrastructure partners. This model allows platforms to capture reserve yield that would otherwise flow to third-party issuers. The economics are straightforward: instead of holding USDC and watching Circle (and Coinbase) earn the interest, a platform mints its own stablecoin and keeps the yield directly.

Revenue Sharing: Who Gets the Yield

One of the defining tensions in stablecoin economics is the question of who benefits from reserve interest: the issuer, the distribution partner, or the token holder.

Issuer-to-Distributor Sharing

Circle's agreement with Coinbase is the most prominent example. By sharing over half of reserve income with its primary distribution partner, Circle effectively buys market share at the cost of margin. This model creates a sustainable flywheel: Coinbase promotes USDC, users mint USDC through Coinbase, and both parties earn from the resulting reserves. But it also means Circle's net margin is a fraction of Tether's despite operating in the same business.

Yield-Bearing Stablecoins

A parallel development is the rise of yield-bearing stablecoins that pass reserve interest directly to holders. Protocols like MakerDAO's sDAI (via the Dai Savings Rate) and Mountain Protocol's USDM distribute a portion of reserve yield to token holders. This model compresses issuer margins but attracts capital through competitive returns, creating a different equilibrium in the stablecoin yield landscape.

The GENIUS Act and Yield Prohibition

The GENIUS Act (P.L. 119-27), signed into law in July 2025, introduced the first comprehensive federal regulatory framework for payment stablecoins in the United States. Section 4(a)(11) of the statute prohibits payment stablecoin issuers from paying holders any form of interest or yield in connection with holding the stablecoin.

The OCC's proposed rulemaking, published in the Federal Register on March 2, 2026, goes further by extending this prohibition to affiliates and third parties. The proposed rules create a rebuttable presumption that arrangements where an issuer pays an affiliate who then routes yield to holders violate the prohibition. Merchant discounts for stablecoin payments and commercial profit-sharing arrangements remain permissible.

The 60-day comment period closed on May 1, 2026, and final rules have not yet been issued. The yield prohibition debate pits the banking industry (which argues that yield-bearing stablecoins would drain bank deposits) against crypto-native firms (which view the restriction as protecting an entrenched incumbent). The outcome will significantly shape which stablecoin revenue models are viable under U.S. law.

Regulatory arbitrage risk: The GENIUS Act's yield prohibition applies to U.S.-regulated payment stablecoins. Issuers domiciled in jurisdictions without such restrictions, or those structured as non-payment stablecoins, may continue offering yield. This asymmetry could push capital toward offshore or synthetic alternatives, an outcome regulators have acknowledged but not yet addressed.

Revenue Per Dollar Issued

Comparing issuer economics on a per-dollar basis reveals the true efficiency of each model. At mid-2026 Treasury yields near 3.7%, a fiat-backed issuer earns approximately 3.7 cents per dollar per year in gross reserve interest. What each issuer actually retains depends on distribution costs, operating expenses, and reserve allocation strategy.

Tether's per-dollar margin is roughly 3-4x Circle's because it avoids large distribution revenue-sharing agreements. Circle compensates with transaction volume leadership and regulatory positioning, but on a pure-margin basis, Tether's model is significantly more capital efficient.

What This Means for Stablecoins on L2s

The economics of stablecoin issuance have direct implications for Layer 2 networks and the stablecoins deployed on them. When evaluating a stablecoin's sustainability, the underlying issuer's revenue model determines whether that token will continue to be maintained, remain well-reserved, and stay compliant.

On Spark, the USDB stablecoin follows the fiat-backed reserve model through its issuer Brale. Understanding that reserve interest is the primary revenue engine for fiat-backed issuers explains why reserve quality and transparency are non-negotiable: the issuer's ability to earn yield on safe assets is what funds ongoing operations, compliance, and reserve attestations.

For users exploring stablecoins on Bitcoin infrastructure, wallets like General Bread offer a Spark-powered experience for holding and transferring USDB. For developers building on stablecoin rails, the Spark SDK documentation covers integration with both Bitcoin and stablecoin transfers on the network.

The Road Ahead

Stablecoin issuer economics are entering a period of structural change. Rising competition is compressing margins through distribution revenue-sharing and yield pass-through. Regulation under the GENIUS Act is constraining which revenue models are permissible in the U.S. And interest rate movements continue to set the ceiling on how much any issuer can earn.

The issuers best positioned are those with diversified revenue (not solely dependent on rates), efficient distribution (not giving away half of gross income), and regulatory clarity (operating within a framework that allows long-term planning). As the market pushes toward a projected trillion-dollar supply, the revenue model behind each stablecoin will matter as much as the token's peg mechanics.

This article is for educational purposes only. It does not constitute financial or investment advice. Bitcoin and Layer 2 protocols involve technical and financial risk. Always do your own research and understand the tradeoffs before using any protocol.