How Stablecoins Work
The foundation of the new digital finance
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Stablecoins have become the foundation of a new digital financial system.
With a market cap exceeding $200B in early 2025, stablecoins are no longer crypto fringe tools - they’re powering cross-border payments, tokenized finance, and global money movement. The CB Insights x Stablecon Stablecoin Market Map gives us a timely snapshot of how the ecosystem is evolving and who’s driving the infrastructure.
Let’s break it down: not just what’s happening, but how it works and why each part of the value chain matters.
How Stablecoins Work: The End-to-End Process
A stablecoin is more than just a digital token. It’s a system with multiple moving parts, from issuance to use in DeFi, e-commerce, or payments. Here's how the full stablecoin lifecycle flows:
Issuance – A company mints a stablecoin backed by real-world reserves (USD, Treasury bills, crypto).
Infrastructure – These stablecoins need custody, compliance, security, and interoperability layers to be stored, transferred, and audited safely.
Application Layer – Finally, users and businesses interact with stablecoins through wallets, exchanges, payment apps, and protocols.
Each layer has a specific function in ensuring trust, usability, and regulatory alignment.
Issuers – The Source of Trust
These are the companies minting and managing stablecoins. They’re responsible for:
Pegging the token to a fiat currency (typically USD).
Managing and disclosing reserves (e.g., fiat, treasuries, or crypto collateral).
Enabling minting/redemption when users bring in or cash out funds.
Key players:
Tether (USDT) – Still the largest by market cap, with reserves heavily allocated to U.S. Treasuries.
Circle (USDC) – A regulated U.S. issuer, with major banking and fintech integrations.
MakerDAO (DAI) – A decentralized, crypto-collateralized model.
PayPal (PYUSD) – A fintech giant entering the space with a compliant, U.S.-focused offering.
Paxos, Stably, Monerium, GMO Trust, Melco – Supporting both retail and institutional models globally.
Infrastructure – The Plumbing Behind the Token
Stablecoins can’t function without infrastructure that makes them secure, scalable, and compliant. This includes:
Custody & Wallets – Secure storage and transfer tools for retail and institutions.
Compliance Tools – KYC/AML, fraud detection, sanctions screening.
Oracles & Data Providers – Real-time pricing, reserve tracking, smart contract inputs.
Transfer & Settlement Tech – Bridges, payment networks, tokenized asset platforms.
Key players:
Fireblocks, Anchorage Digital, BitGo, Ledger – Institutional-grade custody and transfer rails.
Chainalysis, TRM Labs, Elliptic, Notabene – Onchain compliance and risk analytics.
Chainlink – Oracles connecting smart contracts to real-world data.
Zero Hash, ConsenSys, Stably, Coadjute, Sygnum – Broader custody, wallet, and blockchain tooling.
Without this middle layer, stablecoins are either insecure or unusable at scale.
Application Layer – Where Real Users Come In
This is where stablecoins meet the market—how people, apps, and institutions actually use them in the real world.
Use cases include:
Payments – Real-time settlement, especially cross-border.
DeFi & Trading – Stablecoin pairs for swaps, lending, and yield farming.
Fiat On/Off-Ramps – Converting local currency to stablecoins and back again.
Retail & Commerce – Micropayments, merchant settlements, tipping, loyalty programs.
Savings & Treasury – Safe, stable storage in volatile or underbanked economies.
Key players:
Visa, PayPal, Stripe – Integrating stablecoins for global payments and merchant services.
Robinhood, Uniswap, Aave, Compound – Trading and borrowing.
MoonPay, Transak, Banxa, Kado, Ramp Network – Fiat conversion infrastructure.
Worldcoin, Celo, Fordefi, Magic, Sardine – Wallets, ID, fraud, and UX innovation.
This is the layer that drives mainstream adoption - and revenue.
Real-World Impact: Where Stablecoins Are Solving Problems
Cross-border payments: LATAM merchants and freelancers are adopting USDC and USDT over traditional banking. Faster and 90% cheaper.
Treasury management: Tether alone holds ~$98.5B in U.S. Treasuries - more than some countries.
Retail payouts: Companies are paying global contractors in stablecoins to bypass FX fees and bank friction.
DeFi collateral: Stablecoins are the backbone of lending, liquidity pools, and synthetic assets.
Future Outlook: What’s Coming Next
Regulatory clarity will accelerate adoption. Markets like the U.S., EU, Singapore, and the UAE are moving fast to define frameworks.
Real-world asset integration will blur the line between tokenized securities and stablecoins.
Interoperability protocols will make stablecoins fluid across chains and payment apps.
CBDC co-existence: Central banks may use or compete with private stablecoins, but hybrid systems will likely emerge.
Featured Companies in CB Insights’ Stablecoin Market Map
Issuers:
Tether, Circle, MakerDAO, PayPal, Paxos, Stably, Monerium, GMO Trust, Melco, Aave Companies
Infrastructure:
Fireblocks, Anchorage Digital, BitGo, Chainalysis, TRM Labs, Notabene, Elliptic, Ledger, Zero Hash, ConsenSys, Chainlink, Sygnum, Coadjute
Application Layer:
Visa, Stripe, PayPal, Robinhood, Aave, Compound, Uniswap, Worldcoin, Celo, Fordefi, Kado, Sardine, Magic, MoonPay, Transak, Banxa, Ramp Network
Bottom line: Stablecoins aren’t just crypto tools. They’re programmable dollars—and they’re quickly becoming the most important financial rail you’ve never used.
Read the full CB Insights report
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Marta
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