WHAT ARE STABLECOINS?
Stablecoins are a type of cryptocurrency designed to keep a steady price, most often tied to the U.S. dollar. That means one stablecoin equals about $1 in value. Unlike volatile coins such as Bitcoin or Ethereum, stablecoins are meant to provide reliability and serve as a bridge between traditional money and blockchain-based finance.
The stablecoin market has already grown to more than $250 billion and could expand into the trillions over the next decade. With that kind of scale, it’s worth asking: If holders don’t earn interest, how do issuers turn stablecoins into profitable businesses?
THE ROLE OF STABLECOINS
Stablecoins have quickly become a backbone of digital finance. They serve several key functions:
Payments & Transfers – They allow fast, low-cost transfers of value across borders without needing banks or wire networks.
Trading & Liquidity – Traders use stablecoins as a safe harbor between trades, moving in and out of volatile cryptocurrencies without returning to cash.
DeFi Ecosystem – Stablecoins act as collateral for loans, liquidity in decentralized exchanges, and fuel for yield-generating strategies.
Global Access – In countries with unstable currencies, stablecoins provide a dollar-like alternative for savings and transactions.
In many ways, stablecoins are the “digital cash” of the crypto economy, making them essential to both users and institutions.
HOW STABLECOINS GENERATE REVENUE
1. Interest on Reserves
For every stablecoin issued, the company holds reserves — usually dollars or highly liquid assets like U.S. Treasuries. Instead of leaving these reserves idle, issuers invest them in safe, short-term securities that earn interest. That interest has become the largest source of revenue for issuers.
2. Transaction and Network Fees
When you move stablecoins across a blockchain, there are often small network fees. Issuers also charge for creating (minting) or redeeming (cashing out) coins. These add up, especially at scale.
3. DeFi Lending and Partnerships
Stablecoins are the lifeblood of decentralized finance. Issuers benefit when their coins are widely adopted, because higher circulation means larger reserves — and more income from interest.
4. Arbitrage and Market Making
When stablecoin prices drift slightly above or below $1, traders step in to profit from the difference. Issuers and affiliated partners may also earn through this activity while keeping the coin’s price stable.
WHY HOLDERS DON’T EARN THE INTEREST
Even though issuers make billions from reserves, holders don’t receive a share. The main reason is regulation: if stablecoin holders were paid interest, these tokens might be classified as securities or bank deposits, which would bring far stricter rules.
For now, issuers keep the earnings while providing users the benefit of stability, liquidity, and accessibility.
WILL STABLECOINS EVER PAY DIVIDENDS?
This is a big question in the industry. Some argue that if regulation evolves, certain stablecoins could eventually share yields with holders — essentially becoming a “crypto savings account.”
However, most experts believe that mainstream stablecoins will avoid this model, since paying dividends would change their legal classification and limit adoption. Instead, yield-bearing options may come from separate tokenized products built on top of stablecoins, rather than from the stablecoins themselves.
RISKS AND REGULATION
Stablecoins are under increasing scrutiny worldwide. Regulators are requiring issuers to prove they hold enough reserves and to disclose what those reserves include. The collapse of TerraUSD in 2022 — which erased tens of billions of dollars — highlighted the dangers of poorly designed stablecoins.
Going forward, the safest and most widely adopted stablecoins will likely be those backed 1-to-1 with high-quality reserves and overseen by clear regulatory frameworks.
HOW SHOULD INVESTORS VIEW STABLECOINS?
Unlike Bitcoin or stocks, stablecoins are not growth investments. They are tools — useful for liquidity, payments, and access to crypto markets. Investors might hold them to:
- Park funds temporarily between trades.
- Access global transfers more quickly than banks allow.
- Use them as collateral in certain investment strategies.
But stablecoins aren’t designed to build wealth on their own. They’re more like “digital cash” than long-term investments.
THE BOTTOM LINE
Stablecoins are quietly becoming one of the most important innovations in digital finance. Issuers profit through interest, fees, and partnerships, while users benefit from stability and accessibility.
As regulation increases, stablecoins will potentially become even more integrated into global finance — not as speculative assets, but as infrastructure. For investors and everyday users alike, understanding how stablecoins work today can help you make smarter decisions about how to use them tomorrow.
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Disclosures
TruWealth Advisors, LLC is an SEC registered investment adviser located in Louisiana. Registration does not imply a certain level of skill or training. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or financial advice. Digital assets are highly speculative and involve a high degree or risk, including but not limited to risk of loss, market volatility, and regulatory uncertainty. You should consult your own tax, legal and financial professionals before engaging in any transaction. Past performance does not guarantee future results. Additional information about TruWealth Advisors, including our registration status, fees, and services is available on the SEC’s website at https://adviserinfo.sec.gov/firm/summary/306876.