Stablecoin: Innovation, Infrastructure, and Global Regulatory Landscape

Author: Jsquare Research Team

Stablecoins are evolving from tools for cryptocurrency speculation into a new category of digital financial infrastructure. By August 2025, the total market value of stablecoins will exceed $271.4 billion, but more important than the scale is the diversification of their composition, revenue mechanisms, and application scenarios.

We believe the market is undergoing a decisive shift: from purely liquidity-seeking dollar tokens to composable, yield-bearing settlement assets that directly connect to real-world cash flows and enterprise systems. This article will delve into the evolution of stablecoin types and the regulatory dynamics in different regions around the world.

stablecoin market size

Stablecoins have broken the limitations of the crypto sandbox. The growth in supply is mainly driven by emerging institutional tokens such as USDT, USDC, and PayPal USD (PYUSD). Today, the annual settlement volume of stablecoins on-chain has surpassed that of Visa and Mastercard combined—reaching $27.6 trillion in 2024 alone. Initially created as convenient tokens pegged to the dollar, they have now evolved into a mature, yield-bearing cash layer across the entire blockchain. Regulators, payment networks, and financial officers are gradually treating stablecoins with the same standards as bank currencies. Circle successfully completed its IPO in June 2025, raising $624 million and achieving a valuation of $6.9 billion, highlighting the market’s confidence in regulated stablecoin issuers.

As of August 2025, the total supply of circulating stablecoins is $269.5 billion. USDT dominates with $154.4 billion (57.3%), followed closely by USDC with $65.8 billion (24.4%). Other significant stablecoins include USDe ($10.5 billion), DAI ($4.1 billion), and USDS ($4.8 billion), while emerging or smaller stablecoins like FDUSD, PYUSD, and USDX each hold less than 1% of the market share. This concentration reflects the dominance of traditional issuers and indicates that emerging stablecoins are facing pressure to differentiate themselves through compliance and strategic integration of financial infrastructure.

Source:

Stablecoins are transforming into yield engines.

As the monetary market interest rates exceed 4% in 2024, issuers have begun to tokenize U.S. Treasury bonds and pass on the coupon income to holders. Currently, the market value of tokenized Treasury bonds has surpassed $5.8 billion, maintaining a quarterly growth rate of over 20% despite significant interest rate fluctuations. Broader RWA (Real World Assets) tokens—including short-term credit, accounts receivable, and even real estate shares—have pushed the total market value of on-chain RWAs to $35 billion, with analysts expecting it to exceed $50 billion by the end of the year.

The difference in 2024 lies not only in the growth of scale but also in the direct linkage of on-chain yields with real-world assets (RWAs). A year ago, holding stablecoins was merely a means of capital preservation; today, an annual percentage yield (APY) of 4-10% can be obtained through the following structure:

• sUSDe (Ethena): Generates returns through Delta-neutral derivatives and basis trading, with a market capitalization of $3.49 billion.
• USDM (Mountain): Tokenized short-term government bonds through a Bermuda-regulated wrapper, with a market capitalization of $47.8 million.
• USDY (Ondo): Tokenized short-term government bonds with a market capitalization of $636 million.
• Plume Yield Tokens: Cross-chain distributed money market fund (MMF) yields, with a market value of $235 million.

(Data source: CoinGecko, June 17, 2025)

We believe this field deserves special attention. Currently, there are over $5.8 billion in tokenized government bonds in circulation, and the scale of interest-bearing stablecoins is compounding at a rate of over 25% per quarter. These assets blur the lines between stablecoins, money market funds, and tokenized fixed-income products.

By the second quarter of 2026, interest-bearing stablecoins will account for more than 15% of the total supply of stablecoins (currently about 3.5%). They are no longer purely DeFi-native products, but underlying assets that prioritize compliance and support composability, deeply integrated into the RWA ecosystem.

The flow of smart capital: Three major trends shaping the next generation of stablecoin leaders

1. Enterprise-level Integration

PYUSD is far from a marketing gimmick - this stablecoin, with a market value of $952 million, has been deeply integrated into the Venmo wallet and supports merchant rewards features. JPMorgan’s digital token (JPM Coin) has achieved an average daily transaction settlement exceeding $1 billion within the treasury system. As stablecoins accelerate their integration into ERP systems, payroll distribution, and digital banking architecture, we expect the scale of this field to grow tenfold.

2. Full Chain Interoperability

Blockchain fragmentation has hindered industry development, but protocols like LayerZero, Axelar, and CCIP are solving this problem through cross-chain functionality. The next generation of mainstream stablecoins will achieve the native cross-chain feature of “one minting, universal across the entire network.”

3. Regulatory Certification Builds a Moat

“MAS certification” and “MiCA approval” have become key differentiating factors in the stablecoin market, particularly creating actual distribution advantages in B2B and corporate capital flows. Tokens from compliant issuers will gain a trust premium in the secondary market.

4. Improvement of Infrastructure Maturity

In the CeFi sector, Stripe’s acquisition of Bridge Network for $1.1 billion signifies the traditional payment giant’s determination to establish a stablecoin channel. In the DeFi ecosystem, liquidity hubs like Curve, stablecoin exchange pools, and collateral lending platforms significantly enhance fund efficiency. As the ecosystem matures, stablecoins are deeply embedding into various levels of the financial system, becoming a more reliable and comprehensive infrastructure.

The regulatory arbitrage window is closing.

As of 2023, the issuance of stablecoins remains in a regulatory gray area. This window is now closing rapidly, and the latest regulatory landscape is as follows:

1. United States (GENIUS Act) — On July 18, 2025, the “Corporate Guaranteed Note and Regulatory Issuance Act” (GENIUS Act) officially came into effect, marking the beginning of a new era in the regulation of USD stablecoins. This act, together with the 2025 “Digital Asset Market Clarity Act” (CLARITY Act), explicitly classifies compliant payment stablecoins as non-securities, aiming to provide regulatory certainty, enhance consumer protection, and keep the United States competitive in the global digital asset market. Key points of the act include:

1. 100% Reserve Requirement: Stablecoins must be fully backed by cash and short-term U.S. Treasury securities on a 1:1 basis. Reserve assets must not include high-risk assets (cryptocurrencies or credit assets are prohibited), and rehypothecation is not allowed except for specific liquidity needs.
2. Transparency and Certification Mechanism: The issuer must publish an audited reserve report every month; the CEO/CFO must personally certify the accuracy of the report.
3. Bankruptcy protection clause: Stablecoin reserves are independently custodied; holders’ redemption rights take precedence over other creditors (similar to bank deposit protection mechanisms)
4. Earnings Ban: Prohibit algorithmic stablecoins (such as UST) and certain reserve models; only fully collateralized “payment stablecoins” are recognized; prohibit paying interest to holders (to avoid being classified as securities).

The GENIUS Act is expected to enhance consumer confidence and promote wider adoption of stablecoins through strict reserve and transparency requirements. A clear regulatory framework will also attract more institutional participation, solidifying the United States’ global leadership position in the regulation of digital assets.

GENIUS Act Policy Link

2. European Union (MiCA Regulation) — The European Union’s Markets in Crypto-Assets Regulation (MiCA) implements the following provisions:

1. Licensing and regulatory requirements: Only licensed electronic money institutions or credit institutions can issue fiat-backed stablecoins (EMTs); the European Banking Authority (EBA) is responsible for regulating “significant” stablecoins; issuers of euro/USD stablecoins must hold an electronic money license or banking qualifications.
2. Full reserve requirement: Reserves must be anchored at a 1:1 ratio to the circulating supply; over 60% of reserves must be held in EU banks (mainly stablecoins); only low-risk assets (government bonds/bank deposits) are allowed.
3. Usage Limitations: When the daily trading volume of non-Euro stablecoins exceeds 1 million transactions or 200 million euros; the issuer will be forced to stop expanding the usage scale.
4. Algorithmic Stablecoin Ban: Completely prohibit algorithmic stablecoins without substantial reserves; only redeemable prudently backed tokens are recognized.

By July 2025, the European Banking Authority had received license applications from over 50 stablecoin issuers, including mainstream institutions like Circle (the issuer of USDC) that are adjusting their operations to comply with MiCA standards.

MiCA regulation link:

3. UK Regulatory Framework —— The UK views stablecoins as regulated payment instruments, with key provisions including:

1. Reserve requirement: Only fiat currency can be fully collateralized with stablecoins; reserve assets must be high liquidity assets such as bank deposits/short-term government bonds.
2. Yield prohibition: Prohibit the payment of interest to holders; the income from reserve assets belongs to the issuer (for operating costs)
3. Licensing System: Issuers must obtain FCA authorization (new electronic currency/payment institution license); must meet prudential standards for financial institutions: capital adequacy requirements; liquidity management mechanisms; T+1 rigid redemption commitment.
4. Innovation-oriented: Encourage banks and licensed institutions to issue payment-type stablecoins; focus on developing application scenarios such as cross-border remittances/micropayments.

FCA regulatory guidance link:**:

4. Singapore (MAS Regulatory Framework) — The Monetary Authority of Singapore (MAS) has launched a tiered regulatory scheme:

1. Flexible Licensing System: Issuers of stablecoins with a circulation of less than 5 million Singapore dollars may opt to operate with a Digital Payment Token License; those exceeding this threshold are required to apply for a Major Payment Institution License and comply with specific stablecoin regulations.
2. High-quality assets 1:1 peg: Reserve assets are limited to cash, cash equivalents, or AAA-rated short-term sovereign bonds; government securities maturing within 3 months from the issuing country of the pegged currency are accepted as reserves.
3. Redemption guarantee mechanism: Users enjoy a 1:1 rigid redemption right (to be completed within 5 working days); unreasonable redemption fees are prohibited.

The newly added stablecoin issuance service license in March 2025 allows companies to focus on stablecoin operations, exempting them from compliance burdens related to digital payment tokens. The MAS clearly requires that stablecoin issuers must be banks or non-bank financial institutions registered in Singapore starting from Q2 2025.

MAS policy details

5. Hong Kong (Proposed Regulatory Framework) —— The Hong Kong “Stablecoin Ordinance” will come into effect on August 1, 2025, with key contents including:

1. Full reserve requirement: The market value of reserve assets must be ≥ face value of circulating stablecoins; limited to Hong Kong dollar cash, bank deposits, and Hong Kong and US government notes/bonds.
2. HKMA Mandatory Licensing: All stablecoins issued/promoted in Hong Kong (including foreign currency-pegged ones) must be licensed; Ant Group has announced that it will apply for a license.
3. Institutional-level standards: Reserve assets must be independently custodied by licensed custodians; regular submission of operational audit reports; establishment of a strict AML/CFT risk control system.

Standard Chartered Bank, Animoca Brands and Hong Kong Telecommunications (HKT) have established a joint venture to issue a Hong Kong dollar stablecoin for cross-border payments. This regulation aims to connect with the digital yuan pilot and strengthen Hong Kong’s status as an international financial center.

HKMA regulatory guidelines

6. UAE Regulatory Framework —— The Central Bank of the UAE (CBUAE) established a regulatory system for stablecoins with the “Payment Token Service Regulations” effective June 2025, categorizing stablecoins as “payment tokens.” The compliant stablecoin AE Coin, which is pegged to the dirham, serves as a representative case. The framework emphasizes reserve backing and transparency. Core provisions:

1. Local Stablecoin Issuance: Only licensed entities registered in the UAE are allowed to issue dirham-pegged stablecoins; full reserves must be maintained and subject to regular audits.
2. Foreign stablecoin restrictions: Only allowed for use in virtual asset trading; prohibited for local payments to maintain dirham sovereignty.
3. Anti-Money Laundering Compliance: Issuers and custodians must implement strict KYC; establish a transaction monitoring system to meet AML/CFT requirements.
4. Digital Dirham (CBDC) Initiative: Central Bank Digital Currency may reshape the payment ecosystem; state-led digital payment systems are prioritized for development.

The framework enhances confidence in local stablecoins like AE Coin through strict reserve requirements, but the restriction on foreign stablecoins may hinder the overall development of the crypto market.

*Full text of CBUAE regulations

7. Japan’s Stablecoin Policy —— The amendment to Japan’s Payment Services Act (PSA) in 2025 established a globally leading regulatory framework for stablecoins, officially recognizing stablecoins as payment instruments starting from May 2025. Key points of innovation:

1. Flexible reserve requirements: The reserve asset ratio for trust-type stablecoins is relaxed to 50%; holding low-risk assets such as short-term government bonds from Japan and the US is permitted.
2. New type of Chinese intermediary license: Establish a category for “electronic payment tools/cryptocurrency asset service intermediaries”; exempt the capital requirements for asset custody intermediaries.
3. Bankruptcy protection mechanism: learn from the lessons of the 2022 FTX Japan incident; require exchanges to retain assets within Japan.
4. Enhanced Transparency: Issuers are required to complete registration with the financial authority; on-chain transaction data must meet AML/CFT review.

This policy is expected to promote the proliferation of trust-based stablecoins, and the new intermediary model can reduce transaction costs, while the domestic asset retention requirements significantly enhance user fund security.

Details of Japan’s stablecoin policy

8. South Korea’s Stablecoin Policy

In 2025, South Korea is actively promoting stablecoin policies, focusing on legalizing the Korean won-pegged stablecoin and incorporating it into the regulatory framework to enhance economic autonomy and compete in the global digital financial market. Under the leadership of President Lee Jae-myung, the ruling Democratic Party is advancing the “Basic Law on Digital Assets” and related legislation to establish a legal framework for private enterprises to issue stablecoins, aiming to reduce reliance on US dollar stablecoins like USDT and USDC. Key policy points:

1. Legalization of the Korean Won stablecoin: Legislation lifts the ban on the Korean Won stablecoin; allows private enterprises to issue under strict regulation; aims to promote domestic digital transactions and reduce capital outflow.
2. Capital requirement: The issuer must maintain a minimum capital of 500 million to 1 billion Korean Won (approximately 360,000 to 720,000 USD); to prevent operators with insufficient funds from disrupting the market.
3. Reserves and Transparency: 100% reserve requirement (1:1 peg); regular public audits of reserves; alignment with the US GENIUS Act and EU MiCA standards.
4. Regulatory System: Dual supervision by the Financial Services Commission (FSC) and the Bank of Korea (BOK); strengthening the coordination mechanism for foreign exchange risk management.
5. Support for the digital asset ecosystem: Supporting legislation includes securities token offerings (STO) and crypto ETF provisions; the goal is to establish South Korea as a digital financial hub in Asia.

The policy is expected to complete legislation by the end of 2025, which may make South Korea the first country in Asia to establish a complete regulatory system for stablecoins.

Details of South Korea’s stablecoin policy

GENIUS Act - US Stablecoin Standards

The GENIUS Act is of special importance due to its potential to become a global regulatory standard. Key impacts:

1. Institutional Credibility

• Granting stablecoins the status of settlement assets through Federal Reserve (Fed) regulation
• To obtain a credit rating similar to bank deposits or Treasury bills (T-bills)

• Enterprise-level programmable currency

• Promote the application of corporate financial scenarios:

• Treasury Fund Management
• Real-time Forex Conversion (FX conversion)
• ERP system integration payment

• High-risk stablecoin suppression

• Distinguish regulated tokens (such as PayPal USD, Circle USDC)
• May force offshore/algorithmic stablecoins (such as USDT, crvUSD) to exit U.S. exchanges

• Uncertainty in profit distribution

• It is unclear whether the issuer is allowed to distribute the T-bill yield to the holders.
• This will become a key factor influencing institutional adoption.

Stablecoin: Digital Eurodollars

Stablecoins are quietly re-emerging as a transformative force akin to the Eurodollars of the 1970s—they are becoming an offshore, interest-bearing, dollar-denominated settlement system that is not controlled by sovereign currency authorities. However, unlike Eurodollars, stablecoins possess programmability, composability, and global interoperability.

This combination of technological innovation and clear regulation makes stablecoins a form of “light sovereignty” and a programmable cash infrastructure similar to the US dollar. With the right regulatory design, stablecoins could become the most scalable form of financial globalization since SWIFT.

The evolution of application scenarios

Stablecoins were initially optimized for crypto-native functionalities: market-neutral trading, collateral staking, and cross-exchange arbitrage. This phase is coming to an end. The new era will focus on real-world applications:

• Emerging Market Savings and Payments: In high-inflation economies, dollar stablecoins are becoming a digital alternative to bank deposits. Obtaining dollars through stablecoins is often more reliable than relying on local banking systems.
• Cross-border remittances: Workers in the Philippines, Nigeria, and Mexico have begun using stablecoins to bypass traditional high-fee, slow-settlement remittance channels.
• Tokenized cash equivalents: In developed markets, regulated stablecoins such as USDC and sUSDe will resemble tokenized money market funds, offering annual yields of 4-8% while maintaining intraday liquidity and programmable interfaces for fintech platforms.

The appearance of future stablecoins

The stablecoins of the future are not just crypto assets; they are also programmable, interest-bearing cash equivalents that support API interactions and can operate across blockchains and jurisdictions. Their functionality is similar to tokenized money market funds, with a design that seeks to minimize trust and enable instant transfers. With the improvement of regulatory frameworks and the acceleration of corporate adoption, we believe stablecoins will evolve from digital representations of the dollar into a globally interoperable cash infrastructure, potentially challenging SWIFT’s position as the global settlement layer for internet-native currencies.