Summary The stablecoin market is expected to grow significantly over the coming years, potentially rising from roughly $300 billion today to more than $3 trillion by 2030. It is one of the few sectors in the crypto market that have both strong narrative and proven product-market fit. However, the challenge for investors is that there aren’t many straightforward ways to participate. Circle is the only major issuer that’s publicly traded. Tether, which dominates the market, is still a private company. And while large firms like PayPal are introducing their own stablecoins, these efforts are still tiny relative to their overall businesses and don’t offer meaningful exposure. While these projects could serve as a proxy for investors who want to benefit from USDT’s growth, they also entail significant risk as a token projects instead of regulated stock. No Major Competitors in the Regulated Stablecoin Market 2025 is a pivotal year for stablecoins. The GENIUS Act formally established the regulatory status for stablecoins in the United States, and this is also reinforced by the Anti-CBDC Surveillance State Act, which explicitly favors privately issued stablecoins and restricts federal agencies, including the Federal Reserve, from creating or promoting a U.S. CBDC. It is now very clear that digital money in the U.S. will be driven by privately issued stablecoins rather than a government-issued alternative. USDC ( USDC ) is expected to benefit the most from these regulatory tailwinds. It is the largest regulated stablecoin in both the U.S. and worldwide; it is backed by liquid transparent reserves with established institutional trust. Several newly launched regulated stablecoins backed by tech or financial giants, including PayPal’s PYUSD ( PYUSD-USD ), BlackRock’s BUIDL, and the Trump-linked USD1, are often mentioned as potential competitors, but their current scale is far too small to challenge USDC's dominant position in the foreseeable future. USDC's liquidity depth, integration with both enterprises and on-chain DeFi protocols, and established distribution networks created a scale-driven moat. These existing advantages position USDC to capture an outsized share of incremental demand as stablecoin adoption is set to accelerate in the coming years. Despite having strong backers, newer stablecoins such as PayPal's PYUSD, Trump-linked USD1 are all too small to compete with existing players. Source: BloFin Dune Dashboard Circle’s Revenue Outlook: Supply Growth Can Offset Falling Rates Circle ( CRCL ) currently has an overly concentrated revenue source and can be heavily impacted by interest rate fluctuation. This is the risk frequently being mentioned about its revenue model. Most of the company’s income comes from the interest earned on the reserves backing USDC, which are primarily short-term U.S. Treasuries. With the market expecting rate cuts ahead, this source of income will come under pressure. Supporters, however, argue that rising USDC circulation should more than make up for the hit from lower yields. This argument hinges on the assumption that USDC supply will expand significantly, and the scale effect of a larger reserve base can absorb compression in yields. Management guidance and industry estimates suggest a 40–60% annual growth in USDC supply, with some projecting triple-digit growth in favorable regulatory scenarios. Under these assumptions, Circle’s revenue is expected to increase considerably even in a declining interest rate environment. Potential New Revenue Source from Arc Blockchain We believe one of the most important potential revenue drivers for Circle ( CRCL ) is the Arc blockchain, which is built specifically for stablecoin-focused financial activity. To understand why Arc matters, we need to first understand USDC’s leading role in the on-chain economy. While USDT ( USDT-USD ) remains the largest stablecoin by market capitalization, USDC leads by a wide margin in actual on-chain usage. One way to understand this is through the concept of velocity. When measuring money, velocity refers to how frequently a unit of currency changes hands. Applied to stablecoins, it measures how often each token is used in transactions rather than sitting idle. High velocity suggests more frequent economic action. From the chart below, we can see USDC consistently has higher velocity than USDT, which means USDC is used more actively for on-chain economic activities such as payments, trading, and DeFi. To illustrate this in a concrete example. On Aave ( AAVE-USD ), the largest lending protocol, USDC accounts for the majority of both deposits and borrowing, whereas USDT plays a much smaller role. Source: BloFin Dune Dashboard Source: BloFin Dune Dashboard Every on-chain transaction requires users to pay gas fees to the underlying blockchain. For USDC, most of its activity currently takes place on Ethereum ( ETH-USD ) and Solana ( SOL-USD ), which means users must purchase and then pay ETH or SOL to cover gas fees whenever they move or interact with USDC. One of Arc’s key design choices is that USDC itself can be used to pay gas fees on the network. If Arc succeeds in pulling a meaningful share of USDC-related activity onto its own chain, the gas fees that are currently captured by Ethereum or Solana could instead flow back to Circle. In other words, Arc gives Circle a path to reclaim part of the economic value generated by USDC transactions that today accrues to other blockchains. Source: Circle Arc Conclusion Most of the arguments in favor of Circle focus on two points: strong regulatory tailwinds and the idea that market growth can offset the impact of declining interest income. We agree these are credible pillars of the bullish case. In this article, we also highlight a less-discussed angle: the potential revenue Circle could generate from operating a dedicated, USDC-centric Layer 1 blockchain. Arc could play a role similar to what Base has become for Coinbase ( COIN ). Base has quickly grown into a leading Ethereum Layer 2 and is now contributing a meaningful share of Coinbase’s broader revenue mix. If Arc gains traction, it could evolve into a significant Layer 1 network that captures a portion of the value currently flowing to blockchains like Ethereum and Solana through USDC-related activity. That said, we acknowledge there are clear limitations to this analysis. Arc is still in testnet, and it is too early to judge how much economic activity it can realistically attract back from established chains. Disclaimer: The information provided herein does not constitute investment advice, financial advice, trading advice, or any other sort of advice, and should not be treated as such. All content set out below is for informational purposes only. Original Post
