The Almighty Digital Dollar
Exploring the Rise of Stablecoins, Tether's Dominance, and the Next Era of Tokenized Cash
The stablecoin market has entered a new era of rapid expansion, increasingly defined by competition, innovation, and institutional adoption. As of Q1 2025, the total circulating stablecoin supply has reached $234 billion, up significantly year-over-year — and a closer look at the data reveals just how much of this growth continues to be driven by Tether (USDT).
Tether: Still the Kingmaker
Tether remains the undisputed leader in the space, commanding 62% of the total stablecoin supply. With over $144 billion in circulation, USDT’s role in crypto markets has expanded far beyond its initial purpose of serving as a volatility hedge for traders. Tether has evolved into a global financial powerhouse — in 2024, the company reported an astonishing $13 billion in net profit, placing it among the most profitable entities worldwide. It was also the 7th largest purchaser of U.S. Treasuries, sitting alongside sovereign nations and major investment firms.
This dominant position has sparked a wave of challengers, many of whom are offering yield-bearing stablecoins that resemble tokenized money market accounts. These alternatives aim to capitalize on rising interest rates and demand for yield-bearing digital cash, positioning themselves as more than just transaction rails — but as real financial instruments competing with traditional deposits.
USDC and the Rise of the Yield-Bearing Class
While USDC remains the second-largest player with $60 billion in circulation (26% market share), it has struggled to maintain the growth trajectory it enjoyed earlier in the decade. Still, Circle’s enterprise-friendly model, regulatory transparency, and potential support from upcoming U.S. legislation may give it renewed momentum.
Meanwhile, newer entrants like Ethena’s USDe, Sky Dollar, and BlackRock’s BUIDL are part of a broader wave of programmable, interest-accruing stablecoins. Although collectively these projects account for just 12% of the market, the percentage growth of these "Other" stablecoins has outpaced both USDT and USDC since late 2023, as shown in the chart.
This signals a paradigm shift: the stablecoin market is no longer just about stability — it's about utility, yield, and composability.
The Regulatory Inflection Point
One of the key catalysts for this expansion appears to be post-election policy expectations. Following the U.S. election in late 2024, stablecoin issuance notably accelerated. This is likely tied to the current administration’s more favorable stance on digital asset innovation, including a proposed stablecoin bill that could provide long-awaited clarity.
The bill is expected to outline:
- Permissible activities for stablecoin issuers
- Reserve requirements, including acceptable assets backing stablecoins
- Custody standards for protecting user funds
- A framework for yield distribution and disclosure obligations
If passed, this legislation could serve as a greenlight for further institutional adoption, bringing stablecoins closer to being treated as mainstream financial infrastructure.
Looking Ahead
As the digital dollar takes shape, Tether's dominance is likely to be tested — not necessarily by one new issuer, but by the collective growth of modular, interoperable, yield-generating alternatives. For investors, the stablecoin space is no longer just about choosing between USDT and USDC — it’s becoming a layered ecosystem with differentiated risk/return profiles and emerging regulatory frameworks.
At Canary Capital, we continue to monitor this landscape closely, as stablecoins increasingly represent not just liquidity tools, but indicators of broader capital rotation, institutional sentiment, and real-world asset tokenization trends.
