This article will conduct a systematic study on the types of stablecoins, development trends, regulatory landscape, sovereign competition, and investment opportunities.

I. Introduction: The Systemic Role of Stablecoins is Reshaping Global Financial Logic

In the past five years, stablecoins have evolved from tools for cryptocurrency trading to core assets in on-chain finance, gradually embedding themselves into the global financial system. Against the backdrop of the Federal Reserve nearing the end of its interest rate hike cycle, the impact on dollar hegemony, and the quest for efficiency reforms in cross-border payment systems, the role of stablecoins as "on-chain dollars" is being widely accepted. From the passage of the "GENIUS ACT" in the U.S. in July 2025, to G7 countries recognizing stablecoins as "digital dollar alternatives," and emerging markets incorporating stablecoins into their foreign exchange policy considerations, a financial competition surrounding "anchored assets" has begun. Stablecoins are not only the liquidity engine in DeFi but also a key bridge between Web3 and the real economy. This article will conduct a systematic study on the types of stablecoins, development trends, regulatory landscape, sovereign competition, and investment opportunities.

II. Market Status: A Trillion-Dollar Market, Structural Differentiation, and Explosive Use Cases

Currently, the overall market size of stablecoins has surpassed $250 billion, exhibiting a highly concentrated structure, with Tether's USDT holding an absolute dominant position, with a market capitalization of $150.335 billion, accounting for as much as 61.27%, almost single-handedly supporting half of the entire sector. Following closely is Circle's USDC, with a market capitalization of $60.822 billion, accounting for 24.79%. Together, they occupy about 86.06% of the entire stablecoin market, forming a typical "dual oligopoly" monopoly structure. This structure has deeply embedded itself into the infrastructure of the crypto financial market, with USDT and USDC establishing strong usage networks and trust bases in different regions and ecosystems.

USDT is currently the most widely used stablecoin, with its advantages not only in market capitalization and circulation scale but also in its global layout and extensive real-world use cases. It is widely distributed across multiple mainstream blockchains such as TRON, Ethereum, BNB Chain, and Solana, with applications on the TRON chain being particularly active, accounting for more than half of the total issuance. The relatively low transaction fees on TRON have made USDT the preferred choice for OTC and CEX settlements in regions like Asia, Latin America, and the Middle East. Additionally, USDT plays an irreplaceable role in cross-border remittances, stable value storage, and DeFi liquidity provision in emerging markets. For example, in high-inflation countries like Venezuela, Turkey, and Nigeria, USDT has become a practical "alternative dollar" for the public, even serving as a settlement tool in the gray financial system. This role as an "on-chain dollar" has gradually transformed it from a trading tool into a base currency, taking on some functional roles of "stable assets."

More importantly, Tether's profit model reflects its strong financial capability and influence in the capital markets. In the first half of 2025, Tether achieved a net profit of over $5.7 billion, becoming one of the most profitable companies in the entire crypto industry. Most of its revenue comes from its substantial holdings of short-term U.S. Treasury bonds, which not only support its stablecoin reserves but also give it actual influence in the short-term interest rate market. Research shows that for every 1% share Tether holds in the U.S. Treasury market, it could impact short-term rates by 3.8 to 6.3 basis points, with its structural penetration into the U.S. Treasury market even surpassing that of some small to medium-sized sovereign nations. In this context, USDT is no longer just an on-chain utility token but is gradually evolving into a "stablecoin financial institution," with its systemic impact on global financial markets on the rise.

In contrast, USDC's development path is more focused on "compliance" and being institution-friendly. It enjoys higher trust and integration in the U.S. domestic market, financial services system, and Web3 enterprise payment sector. Circle continues to collaborate with regulatory agencies and promotes transparency audits, legal reserves, and stable interest rate distribution, attempting to establish a "standard paradigm" in the stablecoin field. However, this cautious development path has made USDC relatively conservative when facing high-speed trading markets in Asia. It primarily serves as a "trust stablecoin" in DeFi, favored by institutions merging TradFi and CeFi, but it still lags behind USDT in grassroots circulation and trading frequency.

Although the dual oligopoly of USDT and USDC is unlikely to be broken in the short term, emerging stablecoin projects have risen strongly in recent years, becoming new variables worth noting in the market structure. The most representative of these is USDe, launched by Ethena, which is a "synthetic stablecoin" supported by hedging ETH perpetual contract positions and yield protocols. Since its launch in early 2024, USDe's market capitalization has skyrocketed from $146 million to $4.889 billion, an increase of over 334 times, making it one of the fastest-growing stablecoin projects in the past two years. Its growth is partly due to the popularity of the "DeFi fixed income" narrative and also proves the market's real demand for non-custodial, contract-driven stable assets. Additionally, USD1 and USD0 have also gained capital favor in different narrative tracks and are gradually entering specific stablecoin use case demands. However, in terms of market capitalization and user base, these emerging stablecoins have yet to form the capability to shake the mainstream structure, and their development still needs to be further solidified in risk control, market adaptation, and liquidity building.

Overall, the current stablecoin market has entered a stage of extremely high concentration, with a clear dominant structure. USDT, through its extreme scale, strong on-chain circulation capability, and penetration into macro-financial instruments, has become one of the most systemically important assets in the crypto economy; while USDC represents the direction of compliance and transparency in stablecoin development, possessing stronger institutional trust value. Emerging stablecoins provide experimental and diversified options, injecting vitality into the market. As global crypto regulatory policies gradually take shape, the stablecoin market will face both the challenges of compliance reshuffling and enjoy the dividends brought by the wave of financial disintermediation. Whether USDT can maintain its dominant position, whether USDC can expand its influence, and whether emerging stablecoins can break through will remain core points of interest in the market evolution over the coming years.

III. Regulatory Competition: Stablecoins as a New Variable for Financial Stability

The rapid development of stablecoins is pushing an asset class that originally belonged to the "crypto fringe tools" to the center of macro-financial policy and regulatory discussions. As their size continues to grow and their uses become increasingly widespread, stablecoins are no longer merely a technical innovation or decentralized experiment, but a key variable that could impact monetary policy, capital flows, and even systemic financial risks in reality. Global regulatory agencies are undergoing a subtle and profound power restructuring game in the face of this trend: on one hand, they are trying to establish rules and boundaries for this new asset class to maintain the stability of the traditional financial system; on the other hand, they must also acknowledge that stablecoins are filling the gaps in the existing financial system, particularly playing an increasingly important role in cross-border payments, dollar alternatives, and financial inclusion.

Currently, the regulatory paths for stablecoins among major economies have not converged but rather exhibit significant strategic differentiation. Taking the United States as an example, its regulatory agencies have been embroiled in long-standing policy disputes over stablecoins. On one hand, multiple departments, including the U.S. Treasury, the Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC), have offered different interpretations of the nature of stablecoins, with no consensus on core issues such as "whether stablecoins are securities," "whether they belong to payment systems," and "whether they should be issued by banks." On the other hand, the dollar-dominated international financial order makes it difficult for the U.S. to ignore the potential impact of stablecoins on its monetary policy transmission mechanism and international financial standing. The hundreds of billions of dollars in short-term U.S. Treasury bonds held by Tether have already had measurable effects on money market rates, making stablecoins no longer a "crypto topic" that can be set aside, but rather an actual financial variable. Recently, the U.S. Congress has been gradually promoting the "Payment Stablecoin Act" (Clarity for Payment Stablecoins Act) and strengthening the regulatory framework of "issuer licensing, reserve auditing, and bank custody," attempting to provide clear expectations for the market, but this process is bound to be slow due to political and technical competition.

In the European Union, the situation is somewhat different. The EU has taken the lead in launching a comprehensive regulatory framework for crypto assets, MiCA (Markets in Crypto-Assets Regulation), which specifically establishes two regulatory categories for stablecoins: "Electronic Money Tokens (EMT)" and "Asset-Referenced Tokens (ART)," setting relatively strict requirements for transparency, reserves, capital, and issuance limits. Although MiCA is widely regarded as one of the "strictest" crypto asset laws globally, its introduction also sends a clear signal: regulatory agencies are no longer trying to suppress crypto but intend to incorporate it into a system for institutional constraints. For stablecoin issuers, entering the European market will require obtaining local licenses and complying with central bank-level regulatory requirements, undoubtedly raising the market entry threshold and potentially prompting large stablecoin issuers to transition towards compliance.

Meanwhile, the regulatory landscape in Asia exhibits a coexistence of pragmatism and competition. For instance, regions like Singapore, Japan, and Hong Kong have relatively flexible regulatory frameworks for stablecoins, emphasizing a balance between risk management, user protection, and financial innovation. The Hong Kong Monetary Authority recently expressed clear support for the development of fiat-backed stablecoins and even proposed the possibility of promoting a "local Hong Kong dollar stablecoin," demonstrating an open attitude at the policy level towards the prospects of "regional on-chain currencies." Gulf countries in the Middle East, such as the UAE and Saudi Arabia, are also actively introducing stablecoin clearing mechanisms and promoting the coexistence of central bank digital currencies (CBDCs) and stablecoins, aiming to build the next generation of cross-border payment networks. It is evident that amid the regulatory uncertainties in the U.S. and EU, an increasing number of emerging markets are attempting to leverage stablecoins to compete for the discourse power in the formulation of fintech rules.

The core of the regulatory competition surrounding stablecoins also reflects a more fundamental issue: the irreconcilable contradictions between monetary sovereignty, financial stability, and technological innovation. Over the past few decades, the rights to issue currency and payment clearing systems have been primarily held by central banks and commercial banking systems, while stablecoins, as a form of "privately-led digital currency," have rapidly embedded themselves into global payments, trading, financing, and storage within just a few years, bypassing traditional currency generation paths. This disintermediation characteristic challenges the core logic of the traditional financial order and poses an invisible threat to the central bank's role as the "lender of last resort." Especially in the event of a systemic crisis or black swan event, if stablecoin users collectively run on their holdings without official backing, it would inevitably pose significant liquidity risks to the entire on-chain financial ecosystem and stablecoin issuing institutions, potentially spilling over into the TradFi market and triggering broader risk externalities.

For this reason, we see that central banks and regulatory agencies around the world have yet to reach a unified consensus on "how to define stablecoins." They are neither traditional electronic money nor fully qualified bank liabilities. They resemble a "third type of currency" that hovers between traditional finance and crypto networks, and cannot yet be fully integrated into existing legal frameworks. The regulatory competition surrounding this gray area will continue in the coming years. Meanwhile, some central banks are also attempting to proactively promote CBDCs to compete with stablecoins for dominance in the payment and storage value sectors. For example, China's digital yuan, the European Central Bank's digital euro, and India's e-Rupee have all entered practical testing and small-scale circulation phases. Behind this trend, a strategic competitive relationship is beginning to emerge between the official currency system and the on-chain stablecoin system.

Ultimately, stablecoins are no longer just "ancillary tools" in the crypto world; they are becoming a bridge connecting on-chain and off-chain, tradition and innovation. They may serve as solutions for financial inclusion, amplifiers of systemic risk, and catalysts for the restructuring of global financial power. In this process, regulatory policies will play a crucial role: they may accelerate the transformation of stablecoins towards compliance, enhancing their functional attributes as a "new type of digital dollar"; or they may suppress their vitality and innovation through excessive restrictions, forcing capital and technology to flow to more policy-friendly regions. Therefore, the future of stablecoins depends not only on technological iteration and market choices but also on the outcomes of the global regulatory ecosystem's competition. Stablecoins are not an isolated track but a deep competition regarding the next generation of currency forms and the reconstruction of global financial rules.

IV. Trend Outlook: Decentralized, Multi-Currency, and Protocol-Native Stablecoins

The stablecoin market is transitioning from the first phase dominated by "centralized dollar stablecoins" to the second phase characterized by the coexistence of "decentralized, multi-currency, and protocol-native" stablecoins. This evolution is not merely an expansion in the number of currencies but a comprehensive reconstruction of the stablecoin logic paradigm, underlying governance structures, and monetary sovereignty models. The development of the new generation of stablecoins not only reflects the technological and capital innovation capabilities within crypto finance but also mirrors the proactive transformation of the on-chain currency system in addressing the deficiencies of the traditional financial system, expanding application boundaries, and engaging in regulatory competition.

Firstly, decentralized stablecoins are experiencing a resurgence. In the early models like DAI, over-collateralization and on-chain liquidation mechanisms were seen as ideal models for resisting censorship and building trustlessness, but due to low capital efficiency and severe price volatility, they once lost their dominant position. However, since 2024, influenced by the rising regulatory risks and increased settlement dependencies of centralized stablecoins like USDT and USDC, decentralized currencies such as DAI, sUSD, LUSD, and RAI have begun to regain favor among developers and DeFi protocols, becoming important "alternative currencies" to counter regulatory suppression and payment censorship.

Notably, the new generation of projects no longer solely rely on pure over-collateralization or algorithmic stability models but instead integrate various asset combinations, risk hedging, and on-chain interest rate adjustment mechanisms. For example, Ethena's USDe stablecoin combines spot dollars with a delta-neutral strategy for shorting perpetual contracts, introducing on-chain derivatives as a source of yield support for the stability mechanism, thus creating a new path for "yield-driven stablecoins." Its accompanying on-chain interest rate indicator, DOR (DeFi Option Rate), attempts to establish a native "yield curve" on-chain, setting a more realistic time value for funds in stablecoins. These explorations signify that stablecoins are not just asset tools but also serve as anchoring centers for interest rates, exchange rates, and liquidity in on-chain financial markets.

Secondly, the trend of multi-currency anchoring is accelerating. Although dollar stablecoins remain the market's mainstay, the global trend of de-dollarization is becoming increasingly evident, prompting the crypto market to develop local or commodity stablecoins anchored to currencies such as the euro (EUR), Japanese yen (JPY), Chinese yuan (CNY), Hong Kong dollar (HKD), and even gold. These diversified stablecoins not only facilitate localized payment scenarios but may also become important tools for residents in emerging markets to hedge against currency depreciation and inflation. For instance, Stasis's EURS, Monerium's EURe, and various Hong Kong dollar stablecoin experiments are gradually expanding the ecosystem of non-dollar stablecoins. In markets across Asia, Africa, and Latin America, especially in countries with strict capital controls, stablecoins have become important "intermediary currencies" for the gray economy, crypto remittances, and e-commerce trade, creating actual demand for multi-currency stablecoins.

At the same time, central banks are gradually advancing compliance models that coexist with local currency-backed stablecoins. Regions like Singapore, New Zealand, and Hong Kong are exploring compliance paths for bank/trust-issued stablecoins through regulatory sandboxes. In the future, a possible model could be: centralized dollar stablecoins serving global liquidity and trading needs, while compliant local currency stablecoins facilitate "on-chain settlements" for domestic residents, together constructing a "dual-track" on-chain currency system.

At the forefront is the development of protocol-native stablecoins, which signifies that stablecoins have been deeply embedded within the on-chain economy itself. Unlike independent currencies like DAI or USDC, protocol-native stablecoins are those that are intrinsically issued within a public chain or DeFi protocol, collateralized by assets within their system (such as staked tokens, gas tokens, RWA, etc.), and fully serve the protocol. Typical examples include: Curve's crvUSD, Aave's GHO, MakerDAO's sDAI, Oasis's USK, and potential re-staking stablecoins from the EigenLayer ecosystem. These currencies often combine liquidity staking, re-collateralization mechanisms, protocol governance rights, and income distribution models, making the issuance of stablecoins a core component of protocol liquidity, governance rights, and revenue flow.

Protocol-native stablecoins have several characteristics: stronger composability, higher native liquidity, embedded governance mechanisms, and a high degree of binding to protocol growth. Such designs provide protocols with autonomous monetary systems, freeing them from reliance on external stablecoins like USDC, and helping to create a more stable, decentralized, and censorship-resistant financial ecosystem. Additionally, stablecoins may also become tools for the protocol's "monetary policy," for example, by controlling collateral parameters, yield rates, and redemption mechanisms to adjust liquidity, thereby influencing the deflation/inflation cycles of the economic system within the protocol, achieving a true "on-chain sovereign currency experiment."

In the long run, stablecoins will evolve in three directions simultaneously: (1) centralized stablecoins will strengthen regulatory compliance and serve the global payment market; (2) decentralized stablecoins will enhance censorship resistance and DeFi integration, becoming the base currency on-chain; (3) protocol-native stablecoins will serve as autonomous monetary units within vertical financial ecosystems, supporting the growth and stability of specific on-chain systems. These three are not mutually exclusive but may coexist in the long term, forming a dynamic structure of mutual penetration, collaboration, and competition.

Ultimately, the future of stablecoins will not be determined solely by a specific anchoring method but will depend on three major factors: whether they can be integrated into new financial systems, whether they possess global settlement capabilities, and whether they can maintain transparency and resilience under regulatory pressure. This is not just a currency competition in the crypto world but a battle for reshaping the financial architecture of the global digital age. In this battle, stablecoins are both strategic resources and the cornerstone of a new order.

V. Investment and Risk: Who Will Win the Next Phase of the Stablecoin War?

Stablecoins have gradually evolved from an initial crypto safe haven to the infrastructure of on-chain financial systems, with their importance in market capitalization, use cases, financial embedding, and even national policy rapidly increasing. However, as their influence continues to grow, a "stablecoin war" is quietly unfolding. In the future, who will dominate this market will not merely be a competition of technology, capital, and market share, but a systemic competition involving multiple dimensions and layers. From an investor's perspective, we need to consider: who can emerge victorious in the next phase of stablecoins? Who might expose risks and exit early amid seemingly prosperous growth?

Currently, the stablecoin investment landscape can be divided into four main categories: (1) traditional centralized stablecoin issuers, such as Tether and Circle; (2) emerging compliant stablecoin issuance platforms, such as Paxos, First Digital, and Monerium; (3) DeFi protocol-driven stablecoins, such as MakerDAO, Ethena, and Curve; (4) chain-native or L2 ecosystem stablecoins, such as Aave GHO, zkSync nUSD, and potential stablecoins from EigenLayer.

In the traditional track, Tether (USDT) is undoubtedly the current leader. With strong market liquidity, a retail user base in Southeast Asia and Latin America, and high adaptability to gray financial scenarios, USDT's market capitalization continues to rise, even growing against the trend during the Federal Reserve's interest rate hike cycle. However, its investment value is limited by low transparency in information disclosure, strong reliance on the banking system, and a legal framework that operates in a gray area. From an investment perspective, Tether is a "cash cow" type of enterprise, but its growth ceiling is evident, facing long-term systemic risks from compliance and sudden regulatory policy changes.

In contrast, Circle, behind USDC, is taking the "regular army route," closely collaborating with U.S. regulatory agencies and attempting to establish a multi-chain issuance mechanism (USDC has been natively issued on over ten chains). If it can enhance the circulation of tokenized assets through public offerings and introduce RWA revenue sharing, it will have a stronger compliance moat. However, USDC lacks the advantage of gray channels in overseas markets, and its usage in DeFi is gradually being suppressed by USDT and DAI. Whether it can break through the compliance layer to enter "real use" scenarios remains to be seen.

What is truly worth noting is the new forces of DeFi-driven stablecoins. Represented by Ethena's USDe, they have shifted away from traditional stablecoins' reliance on fiat reserves, moving towards on-chain yield models and algorithmic financial architectures. The popularity of USDe is not coincidental; it represents a new stable paradigm of "yield support + algorithmic anchoring + derivative arbitrage." These projects possess high scalability and composability, and once validated by the market, they are likely to build a complete financial ecosystem centered around stablecoins, focusing on yield trading, liquidity mining, and re-staking.

However, they also carry three major risks:

Yield-driven stablecoins may have hidden Ponzi structure risks. If the yield side (such as shorting ETH perpetual contracts) encounters extreme market conditions or liquidity breaks, it may lead to price decoupling or liquidation runs, creating the risk of an "algorithmic stablecoin 2.0 collapse."

The complexity of mechanisms increases system opacity. Such new models often require users to have high trust in their automated liquidation and rebalancing mechanisms, but extreme market conditions leading to on-chain congestion, oracle failures, or insufficient DEX depth could become blind spots for the stability mechanism.

High regulatory uncertainty. These stablecoins often bypass traditional fiat custody systems, making it easy for regulatory agencies to classify them as "securities" or "unauthorized currency issuance," leading to crackdowns or interface freezes (such as delisting from centralized exchanges or banning bridging protocols).

In terms of protocol-native stablecoins, such as crvUSD, GHO, and sDAI, they are in the "ecosystem coupling-driven" stage, where investment opportunities lie in capturing protocol growth dividends through "binding governance tokens." For example, users holding CRV or AAVE can influence key parameters such as the use cases, liquidity incentives, and fee distribution of their native stablecoins through voting. The issuance of stablecoins is no longer just a circulation tool but a core anchor point for protocol governance rights and financial yield rights. This model provides investors with a clearer path for value capture and may shift the valuation focus of native tokens from "pure transaction fees" to "on-chain currency dividends."

However, the limitations of protocol-native coins lie in their scale growth, which is heavily dependent on the market position, risk management capabilities, and community activity of the parent protocol itself. In extreme cases, there may be a risk loop of "protocol decline—stablecoin liquidity exhaustion."

In the long run, who can win the stablecoin war depends on five core capabilities:

A robust anchoring mechanism (whether traditional fiat reserves, on-chain asset hedging, or composite structures) is the technical foundation for the long-term survival of stablecoins;

User penetration capability, meaning whether it can be widely applied in real scenarios such as exchanges, payments, lending, cross-chain, and settlements, avoiding becoming a "circulating currency";

Policy compliance capability and regulatory connection pathways, especially in financial strongholds like Europe, North America, Southeast Asia, and the Middle East, which determine its growth ceiling;

The collaborative relationship with the on-chain ecosystem, particularly the degree of nesting with DeFi protocols and native liquidity support;

Sustainable value capture logic, whether it can provide holders with long-term confidence through governance, yield distribution, and token economic structures.

Stablecoins are not "decentralized dollars" but bridge assets in the process of reshaping the global monetary architecture. They must stand at the crossroads of regulation, liquidity, and trust while navigating the treacherous waters of market volatility and technological evolution. In the future, the stablecoin war will not produce a single winner but rather multiple breakthroughs across different models, ecosystems, and user scenarios in a multipolar landscape. What truly deserves investors' attention are those bridge-type projects that can navigate regulatory storms, build on-chain monetary systems, and ultimately connect the real economy with virtual finance—these will be the "sovereign assets" of the crypto world.

VI. Conclusion: Stablecoins as the "Sovereign Anchor" of On-Chain Finance

Stablecoins are not speculative assets but the core operating mechanism of the entire on-chain economy. They are the dollar blood of DeFi systems, the energy of Web3 payments, and the safety belt for emerging countries to hedge against currency depreciation. In the next five years, stablecoins will no longer be "auxiliary roles" in the crypto market but will become key components of the new order of digital capitalism. This moment marks the starting point for systematically laying out the stablecoin track, not the endpoint.

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