Random end of year shower musings on the state of the stablecoin economy and its participants

2025 made one thing clear: stablecoins are here to stay and stablecoin rails are the foundation of how one builds a financial services company in the next decade.

As the year ends, I’ve been thinking through where we are, what we learned in 2025, and what comes next. These are my loosely connected observations on the state of the stablecoin economy heading into 2026.

Let’s get some things out of the way first:

• special thanks to Claude and Deni for the edits and feedback
• Squads is a financial technology company, not a bank or a digital asset custodian
• none of this is financial advice
• charts and images were generated by Nano Banana in the style of Tom Sachs (whose aesthetics I like very much).

The Numbers

The stablecoin market crossed $300 billion in 2025, up from $205 billion at the start of the year. Nearly $100 billion in new supply in under twelve months. For perspective: supply increased by $70 billion across all of 2024, and actually decreased in 2023.

The projections reflect institutional conviction. J.P. Morgan sees $500-750 billion in stablecoin market cap in the coming years. Citi’s base case is $1.9 trillion by 2030. Standard Chartered has called for $2 trillion by 2028. Stablecoin issuers are now among the top ten holders of U.S. government debt globally.

This isn’t primarily a crypto story anymore. It’s a money story. And the infrastructure, services and product layers that capture this growth will be one of the most valuable things built this decade.

What Synapse Taught Us

Part of what’s driving this shift is a growing recognition that stablecoin rails offer fundamentally different trust assumptions. It’s not just that building on stablecoins is cheaper and faster, though it is. It’s that you’re trusting math and code rather than centralized entities making “trust me bro” promises about where your money is.

To understand why that matters, look at what happened to Synapse.

Synapse Financial Technologies was the model BaaS company. Backed by tier 1 investors, it connected over 100 fintech partners to FDIC insured banks, serving roughly 10 million end users. The pitch was elegant: fintechs get banking capabilities without becoming banks; banks get distribution without building apps; consumers get modern experiences with traditional protections.

In April 2024, Synapse filed for Chapter 11 bankruptcy. More than 100,000 people lost access to their money. The court appointed trustee found a shortfall of $65-96 million between what customers were owed and what the banks actually held. At a December 2024 hearing, the trustee (a former FDIC chair) compared the situation to her father losing his savings when Yugoslavia collapsed.

The root cause was ledgering failures and reconciliation breakdown at the middleware layer. Synapse maintained records of who owned what between fintechs and banks. When that system failed, there was no ground truth. The banks pointed fingers at each other. The fintechs had no direct relationship with customer funds. Regular people watched their savings vanish into bureaucratic uncertainty.

Crypto has had its own catastrophic failures: FTX, Celsius, Terra/Luna. But those came from centralized, custodial entities making risky bets with depositor assets. They failed for the same reason Synapse failed: opaque systems where no one could see what was actually happening until it was too late.

The lesson from both traditional fintech failures and crypto failures is the same: when you can’t see where the money is, you can’t know if it’s safe.

Self Custody and The Insurance Question

Self custodial stablecoin accounts change the risk model in ways that make FDIC insurance less necessary for many use cases.

Traditional banking operates on fractional reserve. When you deposit money, the bank lends out most of it, keeping only a fraction on hand. Your “balance” is an IOU. If enough people ask for their money at once, or if the bank’s loans go bad, the money isn’t there. FDIC insurance protects against this failure mode. It’s insurance against the bank mismanaging your capital.

Self custodial stablecoin accounts work differently. The assets are in a smart contract. At any moment, anyone can verify that the funds are there. Not as an IOU, not as a claim against fractional reserve, but as actual assets under the user’s control. There’s no counterparty risk from a bank’s lending decisions.

But here’s what this argument usually leaves out: stablecoins themselves carry issuer risk. A smart contract full of USDC doesn’t help you if Circle faces a regulatory crisis or a bank run on their reserves. A USDT position is a bet on Tether’s reserve management. Self custody eliminates intermediary risk but doesn’t eliminate issuer risk.

The difference is that issuer risk is monitorable. You can see reserve attestations. You can watch onchain flows. You can diversify across issuers. Traditional bank risk is hidden inside institutional black boxes until catastrophic.

This doesn’t mean self custody is for everyone. Large institutions may still want regulatory frameworks and insurance products. But for many use cases, self custody with monitorable issuer risk is a better model than opaque institutional trust with insurance backstops.

Global Reach and the Last Mile

Stablecoins give you something traditional fintech can’t: genuine global reach from day one.

A wallet works everywhere. A smart contract doesn’t care what jurisdiction its users are in. Stablecoin to stablecoin transactions are borderless by default. For businesses paying remote contractors, managing treasury across entities, or settling with vendors who accept stablecoins, the infrastructure just works, globally, immediately.

Compare this to the traditional playbook for international expansion. You need local banking partners, local licenses (often different licenses for different activities), local compliance teams, local legal entities. Each country is essentially a new startup. This is why most neobanks either stay domestic or spend years expanding to a handful of markets. Revolut has been at it for nearly a decade and still doesn’t have full coverage.

The bottleneck for stablecoin infrastructure is the last mile: connecting to fiat. Onramps and offramps still require local licenses and local partners. You can’t escape this entirely.

But there’s a massive difference between “we need to solve fiat connectivity in this market” and “we need to rebuild our entire banking stack in this market.” The last mile is modular. You can partner with local orchestration providers for fiat conversion without rebuilding core infrastructure from scratch. You can reach most of the world on stablecoin rails, then plug in fiat partners incrementally where you need them.

Traditional fintech can’t launch at all without the full stack in each market. Stablecoin native companies start global and solve last mile problems as they go. That’s a fundamentally different expansion equation.

The Purpose Built Chain Debate

Several well funded teams are building new blockchains specifically for stablecoin payments. The thesis is that existing chains are optimized for trading, not payments, and purpose built infrastructure can offer better throughput, lower latency, and payment specific compliance tooling.

This is a reasonable thesis held by smart people. Stripe and Paradigm are building Tempo. Circle has Arc.

But there’s a counterargument worth considering.

Building a new Layer 1 from scratch means rebuilding trust from zero. Blockchains are trust machines, and trust accrues through operation. It comes from years without catastrophic failures, from billions secured without exploit, from a deep ecosystem of developers who understand edge cases, from battle tested code that has survived attacks. This is the Lindy effect applied to infrastructure.

Established chains have this accumulated trust. Solana has processed trillions in transaction value. It has the tooling, wallets, bridges, and integrations. Ethereum has even longer operational history. The question is whether the delta between what these chains offer today and what payments specifically need is larger than the trust delta a new chain must close.

There’s also a neutrality consideration. A chain controlled by a major payments company, regardless of how “neutral” the positioning, has that company’s interests embedded in its architecture. Building on genuinely neutral public infrastructure offers different guarantees.

Agentic Finance

When people talk about agentic finance today, they tend to imagine agents that are running your financial life: making investment decisions, managing your portfolio, optimizing your entire financial existence on your behalf.

That’s not the opportunity. At least not yet.

The real opportunity is mundane. It’s agents handling the routine financial operations that currently require manual work: monitoring invoices, matching them against purchase orders, initiating payments, handling expense reimbursements, executing recurring transactions. Not replacing human judgment on important decisions, but automating the tedious stuff that eats up time and creates operational drag.

The question is: how does the agent actually move money?

Traditional rails are built for humans. They assume a person with credentials is initiating transactions. Giving an agent bank login credentials is both a security nightmare and a compliance violation. The agent could hallucinate, be manipulated, or make mistakes at machine speed.

This is where stablecoin rails and smart contracts become genuinely important. The agent doesn’t get credentials. It gets a constrained set of permissions encoded in a smart contract. Move up to X dollars per transaction, only to pre-approved addresses, only during specific hours or for specified purposes. The constraints are enforced by code. The agent literally cannot exceed its authority because the authority is the architecture.

The trust assumptions that blockchains provide, verifiable, bounded, transparent, are exactly what you need when software is moving money autonomously. Traditional systems require you to trust that the agent won’t misbehave. Smart contract systems make misbehavior architecturally impossible within the defined constraints.

This doesn’t eliminate all problems. What happens when an agent makes a mistake within its constrained permissions? Who’s liable when an agent approves a fraudulent invoice that technically met all the encoded criteria? These questions need answers.

But the starting point, bounded permissions enforced by architecture, is native to blockchain systems and awkward to retrofit onto traditional rails. Agentic finance will happen. The infrastructure that makes it safe is stablecoin native.

The Security Reckoning

The stablecoin gold rush is attracting teams with wildly different approaches to security. This will end badly for some of them (and unfortunately their customers).

A pattern is emerging: move fast, acquire users, figure out the hard stuff later. Teams use loose definitions of “self custody” that obscure actual trust models. They rush integrations without proper security and vendor review. They take shortcuts on key management. They treat operational security as a cost center.

Some of this is understandable. The market is moving fast. Competitive pressure is intense. Taking an extra X months to do security right means competitors might capture the market.

This tradeoff makes sense in most industries. Not in financial infrastructure.

Building a bank, or anything bank like, means building trust over decades, not quarters. It means managing risk conservatively even when aggressive approaches might grow faster. It means creating systems that survive edge cases no one has imagined yet.

The teams that win in 2026 and beyond are the ones with genuine domain expertise and security first mindset.

The Privacy Problem

My contrarian take is that privacy in crypto has mostly been a tick-the-box concern for now. For trading, DeFi, and speculation, the lack of meaningful privacy hasn’t been a dealbreaker. Most of the ecosystem has operated just fine with pseudonymous addresses and public transaction histories.

That changes as stablecoin infrastructure brings real businesses and productive economic activity onchain.

When actual companies run treasury operations on stablecoin rails, privacy becomes paramount. Competitive intelligence leakage is a real problem: your vendors, your customers, your cash flows, all visible to anyone who cares to look. No serious business wants their financial operations exposed to competitors, and no CFO will move meaningful treasury activity onto rails where every transaction is publicly analyzable.

This is a problem we need to solve today, before it becomes the bottleneck for adoption.

The good news is that the privacy model for stablecoins does not require the full cypherpunk vision to come to life. We don’t need total anonymity. We need selective disclosure, which is a fundamentally different goal.

Selective disclosure means: prove what needs to be proven without revealing everything else. Prove you have sufficient funds without showing your balance. Prove a transaction is compliant without exposing counterparty details. Prove your identity meets requirements without handing over documents. The owner of funds can see everything, the system can verify whatever compliance requires, and everyone else sees only what’s deliberately disclosed.

We have the tech to solve this. I have spoken to many incredible teams that are building incredible privacy infrastructure.

The problem is that this technology is early. These are massive codebases, hard to audit, hard to formally verify, and not battle-tested. They require entirely different trust and security assumptions than the infrastructure we’ve already built. The crypto ecosystem has spent years hardening core protocols, accumulating the kind of operational trust that only comes from surviving attacks and edge cases. Bolting on new, unproven privacy layers risks undermining that foundation.

The real challenge is figuring out how to add privacy without significant compromises on security. That might mean enshrining privacy features more deeply into L1s, or finding approaches that don’t require trusting novel cryptographic systems at scale.

Looking Ahead

The stablecoin growth story of 2025 has mostly been about taking what already exists in fintech and running it on better infrastructure. Payments, yield, spending, cards. Mercury but global. Revolut but onchain. That’s fine. It’s faster, cheaper, and you can ship to markets that traditional fintech can’t reach without years of work.

But stablecoin rails unlock something bigger than just doing the same things more efficiently. You get programmable money. You get access to internet capital markets where genuinely new financial primitives are being built every day. You get the ability to let agents manage funds with real guarantees, not just trust that they won’t misbehave.

This is our chance to rethink what financial services should actually look like.

I’m not seeing enough teams go after this yet. The opportunity is sitting right there, and most of the industry is still running the 2015 fintech playbook on new rails. I’d like to see that change in 2026.

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