Stablecoin Issuers Rely Heavily on Fed Interest Rates for Revenue

The stablecoin business model has been generating significant revenue for issuers, primarily through the yield on underlying assets. According to recent data, Circle's reserve income reached $668 million in the second quarter of 2026, a 5% year-over-year increase.

This growth can be attributed to the expansion of USDC in circulation to $73.3 billion, a 19% year-over-year increase. Tether, on the other hand, recorded a net operating profit of $1.5 billion in the same period, a nearly 50% increase from the previous quarter.

The reserve-yield revenue model introduces a structural dependency of issuers on Fed monetary policy, with profitability dependent on an interest rate spread that issuers do not control. In a near-zero rate environment, reserve income approaches zero and the business model collapses.