The stablecoin biz is developing fast
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Stablecoin legislation is already having a big impact and neither chamber has even had a floor vote on it yet.
The big picture: Stablecoin projects are coming fast and furious, fueled by expectations of a liquidity wave once the world's biggest economy gives its official nod.
- Standard Chartered experts project stablecoins to become a multitrillion-dollar category by 2028 if legislation passes that sanctions the sector.
- Context: That's comparable to the entire industry's market cap today.
New entrants will find that stablecoins are a good business as long as interest rates aren't zero. Backed by reserves, usually U.S. Treasuries, they're a great business if rates are high.
- But that's a lot of sensitivity to forces outside your control, as Coin Metrics points out in its review of Circle's S-1.
- It also helps if your token is really popular, and it turns out that competing for market share is expensive.
New trends are emerging. Some might not be as profitable, and others may not even be permitted out of the gate.
- Yield-bearing stablecoins could help attract market share. But they could also chip into an issuer's profits, even when rates are strong. Circle has gotten ahead of the trend by acquiring a coin designed for yield, USYC.
- Other products are coming at a steady clip. We've mentioned the $5 billion synthetic dollar, USDE, before, but another such delta-neutral stablecoin with yield built in got seed funding this week, NUSD. (Stablecoin legislation looks likely to forbid those kinds of tokens here — for now.)
Zoom out: There's also more to the stablecoin industry than just issuing the tokens. Startups are forming to build out the use case beyond market liquidity, including companies that use stablecoins for remittances, payroll, cross-border transactions and treasury management.
What's next: More stablecoin launches by companies with recognizable names, following where PayPal led.
- FalconX, one of the custody firms from the prior item, projects perhaps 50 new entrants to the stablecoin market this year (and the company is in a good position to do better than guess).
The bottom line: I'm not a big sports guy, but this one is like what bettors do when they see the All-Pro quarterback limping out of the tunnel.
- No one knows what's gonna happen, but everyone bets like they do.
