Stablecoin Issuers Tether and Circle Lose Billions to Yield-Bearing Treasury Tokens
Tether's USDT and Circle's USDC are facing significant pressure as investors increasingly turn to yield-bearing Treasury tokens, leading to billions of dollars being pulled from their stablecoins. Despite remaining pegged at around $1, the largest stablecoin issuers are struggling with a business-model problem.
The total stablecoin supply has dropped from its mid-May peak of approximately $322.1 billion to around $310 billion in recent DefiLlama snapshots. This decline is not due to any issues with their pegs, as USDT and USDC continue to trade at par and redemptions remain orderly.
The GENIUS Act, signed into law on July 18, 2025, prohibited payment stablecoin issuers from paying holders interest or yield solely for holding the token. This gap was previously ignored but is now explicit, with users opting for blockchain-based Treasury funds that offer yields instead of non-yielding stablecoins.
The institutional side of the market is becoming increasingly sensitive to the yield it gives up, with RWA.xyz's tokenized US Treasury products exceeding $10 billion and Citi's 2026 tokenization work estimating a broader market size around $17 billion. This shift in user behavior poses a significant threat to Tether and Circle's business models.
While stablecoins are still useful for settlement purposes, the idle-cash business is no longer theirs by default. The companies can still win the payments business due to their liquidity and deep integrations, but they must adapt to the changing competitive landscape.