9 min readIn crypto’s early years, traders had no stablecoin to shelter in during downturns. When Bitcoin and altcoin prices fell, everything moved together, with nothing on-chain to mirror the stability of the US dollar. What began as an experiment just over a decade ago has since grown into the backbone of crypto finance.
Tether (USDt) was first launched on October 6, 2014 and introduced the first widely adopted dollar-parity token. It filled a required gap in the crypto market and laid the foundation for what would become blockchain’s most widely used application.
In 2025, stablecoins sit at the heart of digital finance, processing volumes that run into the trillions of dollars annually. Unlike Bitcoin or Ethereum, whose values swing sharply, stablecoins are designed to hold steady against currencies like the US dollar or the euro.
Stablecoins offer themselves as a smoother crypto trading bridge between traditional banking and decentralized networks. Dante Disparte, Chief Strategy Officer and Head of Global Policy at Circle, put it simply during a podcast: “Stablecoins have become the killer app of blockchain.”
What is a stablecoin?
A stablecoin is a digital token on a blockchain whose value is designed to maintain parity with another asset, usually a fiat currency such as the US dollar. In 2014, after Tether (USDt) pioneered the first fiat-backed model, with tokens issued against reserves held off-chain. MakerDAO introduced DAI in 2017 as a decentralized stablecoin collateralized by Ethereum.
Over the years, several algorithmic stablecoins have also emerged. These maintain their dollar parity by automatically expanding or contracting supply through a paired token, as with UST and LUNA. However, this type of architecture carries significant risks, and many have failed to maintain their peg to the dollar. NuBits, for example, lost its peg twice before collapsing in 2018 after confidence failed to recover. TerraUSD (UST), launched by Terraform Labs and backed by its link to the LUNA token, met the same fate in 2022 when it broke away from the dollar.
Despite stablecoin blockchain differences, all stablecoin experiments share the same goal, which is to create a synthetic currency that holds steady value against the traditional fiat currency and functions like money on a blockchain. 
The scale of the stablecoin impact is evident as over the past year, USDT daily transfer volume (the total amount of coins transferred on-chain) on every network combined has ranged between $12 billion and $90 billion.
The emergence of Tether and Circle
Tether (USDt), launched in 2014, became the first stablecoin to achieve mass adoption. It enabled exchanges and traders to move dollar-like tokens at speed, avoiding the delays of traditional banking and soon established itself as the default trading pair across much of the crypto market. As of September 12, 2025, USDt is backed primarily by the U.S. Treasury bills, cash equivalents and other high-quality assets, according to Tether’s transparency webpage. Notably, nearly 5% of reserves are held in precious metals, with Tether maintaining a vault in Switzerland safeguarding around 80 tons of gold worth $8 billion, a stockpile that makes it one of the largest private gold holders globally, behind only central banks and sovereign nations.
The company has also launched Tether Gold (XAUT), a gold-backed stablecoin redeemable for physical metal stored in the same vault, underscoring Tether’s belief that gold is becoming a strategic hedge as U.S. debt concerns mount. Despite persistent questions over transparency, long reliant on quarterly attestations, Tether began working with a Big Four auditor in 2025 to deliver the full independent audit it had promised for years.
With a market capitalization of $172 billion as of 22 September 2025, USDT remains the largest and most liquid stablecoin by far.
Circle’s USD Coin (USDC) was announced on May 15, 2018 and launched that September through Centre, a consortium formed with Coinbase. From inception, USDC was positioned as a more transparent and regulated alternative to Tether. USDC is backed by cash and short-term U.S. Treasury securities, with reserves held at regulated U.S. financial institutions and managed in part by BlackRock through the Circle Reserve Fund. USDC is widely available on major cryptocurrency exchanges, including Binance, Kraken and MEXC.
Circle provides monthly attestations from independent accounting firms and daily reserve reporting, reinforcing its reputation for openness. Strong regulatory relationships in the U.S., Europe, and Singapore have further positioned USDC as one of the most compliant stablecoins available. As of September 2025, USDC carries a market capitalization of $74 billion.
Stablecoins everywhere
Stablecoins are slowly being integrated into nearly every corner of crypto finance. With Tether dominating global crypto trading, especially in Asia and emerging markets where access to dollars is restricted.
Circle’s USDC has grown thanks to its focus on compliance and partnerships. Regulatory developments such as the proposed GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act) in the United States have highlighted how lawmakers now see stablecoins as part of the financial system, requiring clear rules on reserves and reporting.
The GENIUS Act is a U.S. law passed in July 2025 intended to provide a clear regulatory framework for stablecoins. The law sets new standards for reserve requirements, issuer oversight and consumer protection, among others.
Key provisions of the GENIUS Act:
Stablecoins must be backed 1:1 by cash or short-term U.S. Treasuries.
Issuers must provide regular public disclosures of reserves and redemption policies.
Reserves must be held in segregated custody at regulated institutions.
Issuers are classified as financial institutions under AML/CFT laws and cannot pay yield directly to holders.
New entrants are reshaping the stablecoin market, from WLFI and Ethena to Stripe’s Tempo blockchain, Circle’s Arc network and startups like Plasma. Alongside leaders such as Tether and Circle, newer competitors, including DAI, World Liberty Financial USD, First Digital USD and PayPal USD are gaining traction.
While new challengers introduce innovations like payment-focused blockchains, decentralized governance and yield features, emerging stablecoins are broadening the market by expanding into remittances, e-commerce, and institutional settlement.
Stablecoins have become not only a lucrative business but also a strategic pillar of dollar hegemony. Issuers generate billions annually from the interest on reserves, much of which are invested in short-term U.S. Treasuries.
As of September 12, 2025, the total market capitalization of stablecoins stands at $300 billion, with daily trading volumes exceeding $160 billion. The Treasury Borrowing Advisory Committee (TBAC), which advises the U.S. Treasury on debt management, estimates the market could expand to over $2 trillion by 2030. At that scale, stablecoin issuers would rank alongside sovereign buyers such as China or the U.K. in their holdings of Treasury securities.
A surge in stablecoin demand could reshape Treasury issuance patterns, lowering yields on U.S. Treasury securities while anchoring blockchain growth to U.S. debt markets.
This shift would not only secure a durable new source of demand for U.S. debt but also extend the global reach of the dollar. By putting dollar liquidity on-chain and into emerging markets, stablecoins deepen reliance on the greenback globally while cementing their role as a strategic pillar of U.S. financial hegemony.
By contrast, euro-denominated stablecoins remain far smaller in scale, limiting the euro’s on-chain influence compared to the dollar. The largest, Circle’s EURC, holds a market capitalization of roughly $260 million, well ahead of Tether’s euro stablecoin at about $45 million, still small in size next to dollar-backed tokens.
Conclusion
Stablecoins today embody programmable, borderless digital dollars operating around the clock. As of September 2025, stablecoins sit at the core of digital finance, powering payments, DeFi and cross-border transfers at scale. What began in 2014 with Tether’s dollar-parity token and later Circle’s more transparent USDC has matured from experimental tools into critical market infrastructure.
Regulatory clarity, led by measures like the U.S. GENIUS Act, combined with rising institutional involvement, has pushed stablecoins beyond their early niche.
By extending U.S. dollar liquidity into emerging markets and digital economies, stablecoins not only serve traders and payment firms but also reinforce dollar hegemony itself. From once-fragile experiments to the blockchain’s most adopted application, stablecoins have emerged as the true killer app of blockchain technology.
