This is a repost of the original article: “Cobo Stablecoin Weekly Report No.19: After the Stablecoin Act Comes Into Effect, Where’s the Next Battlefield?”

Market Overview & Key Growth Insights

The total stablecoin market cap stands at $269.696 billion, up $2.606 billion week-over-week. USDT continues to dominate with a 61.25% market share. USDC ranks second at $64.502 billion—23.92% of the market.

Stablecoin Market Cap by Blockchain Network (Top 3):

1. Ethereum: $135.786 billion
2. Tron: $82.995 billion
3. Solana: $11.431 billion

Top 3 Fastest Growing Networks This Week:

1. Berachain: +96.57% (USDT accounts for 43.15%)
2. XRPL: +49.84% (RLUSD accounts for 49.11%)
3. Sei: +47.95% (USDC accounts for 85.96%)

Data source: DefiLlama

U.S. Bank Secrecy Act & Privacy Requirements for Stablecoin Payments

With the U.S. Stablecoin Act now in effect, privacy is emerging as the next regulatory and market battleground.

As stablecoin market cap surges past $270 billion and swiftly enters mainstream payments, on-chain “full transparency” is surfacing new challenges. Every public blockchain transaction is permanently visible. For companies, this is akin to open-sourcing their financial history, supply chain details, and payroll structure—a non-starter for most businesses and institutions. It gives competitors real-time access to all payments. Unless addressed, this privacy issue will significantly constrain stablecoin adoption in B2B and institutional settlement.

When privacy concerns rise, stablecoin use in commercial payments and institutional settlement slows. Coinbase’s Chief Legal Officer, Paul Grewal, recently argued that laws like the GENIUS Act must be accompanied by upgrades to the Bank Secrecy Act. Today’s compliance model is slow and creates centralized data “honeypots” vulnerable to hacks—while offering limited anti-money laundering effectiveness.

Grewal stresses that privacy and security aren’t mutually exclusive. With zero-knowledge proofs (ZKP) and decentralized identity (DID), compliance can be verified without exposing raw data. Institutions see only validation results, not the data itself—balancing data minimization and regulatory precision. Grewal urges the Treasury Department to spearhead a public-private partnership, prioritize ZKP-ready compliance modules, focus monitoring on critical data points for suspicious transactions, and use AI risk models to raise screening efficiency. This approach strengthens privacy without sacrificing regulatory accuracy, clears the main obstacle to institutional stablecoin adoption, and positions the U.S. at the leading edge of digital asset regulation globally.

Stablecoin Economics under U.S. Interest Ban Regulations

Regulatory restrictions are driving innovation. The GENIUS Act blocks stablecoin issuers from paying user interest—intended to limit risk—but instead has fueled rapid growth of yield-bearing stablecoins. Since passage, supply for products like Ethena’s USDe has surged by billions. Their yields depend on exchange funding rates rather than Treasuries, sidestepping legal restrictions.

Taking advantage of regulatory gray zones, Coinbase and PayPal have reframed stablecoin “returns” as “rewards,” evading rules that only restrict issuers. As a USDC distributor, Coinbase returns Circle’s earnings to users. PayPal, using Paxos, insulates issuer risk and continues to offer a 4.5% annual yield. Anchorage and Ethena Labs even tie stablecoin yields to tokenized assets like BlackRock’s BUIDL, creating compliance-grade yield pipelines for institutions.

Paying out interest or rewards is now essential to attracting capital in both developed and emerging markets. Coinbase has even launched interest rewards as an embedded wallet API, lowering the integration barrier for developers. In high-inflation markets like Latin America, Slash’s USDSL offers 4.5% annual rewards—combined with USD’s inflation-resistance, this channels capital inflow fast. Stablecoins are leveraging advanced, compliant financial engineering to efficiently transmit underlying asset returns and redefine user and value dynamics.

Hong Kong’s Stablecoin Regulations: Transparency & End-to-End Oversight

Hong Kong’s Stablecoin Ordinance is officially in force, sparking industry debate over mandatory KYC, foreign stablecoin policy, and DeFi compatibility. The rules are not a “total ban” but target stablecoins issued in Hong Kong or pegged to HKD—especially RMB-linked tokenized assets. USDT/USDC and other foreign stablecoins traded in secondary markets are not directly affected. Hong Kong’s strategy is to control the source: issue high-threshold regulation for high-value use cases like RMB tokenization and offshore RMB stablecoins, building “quasi-sovereign settlement tools” and a regulatory edge distinct from U.S. market-driven and EU-unified approaches.

The focus is on transparency and full-lifecycle regulatory oversight. From issuance through custody, clearing, and distribution, strict standards apply. License requirements are high, and downstream players (custody, distribution, clearing) are subject to compliance too. Banks, payment firms, and on-chain infrastructure providers are all covered, shifting distribution from open to permissioned access. Infrastructure vendors with strong MPC wallet, on-chain compliance, and risk control capabilities will become key partners for banks and tech giants.

Stringent regulation brings new challenges: issuers must take ultimate compliance responsibility for downstream players (custodians, distributors, clearers). Anyone entering this ecosystem must meet both technical and institutional compliance standards, pushing specialization in the sector and creating big opportunities for infrastructure providers. Solutions such as multisig, MPC, HSM, and MPC wallets become trust anchors, balancing asset sovereignty and legal accountability, turning wallets from mere back-end tools into compliance security gateways.

Market Adoption

JPMorgan: DeFi & Asset Tokenization Growth “Still Disappointing”

Key Takeaways

• DeFi total value locked (TVL) has not yet regained its 2021 peak; users are mostly retail or crypto-native businesses; traditional institutions remain largely absent.
• Tokenized assets globally total just $25 billion—called “trivial” by analysts; more than 60 tokenized bonds have been issued, but secondary trading is nearly zero.
• Top barriers for institutions: lack of harmonized cross-border regulation, unclear legal basis for on-chain investments, and missing security/guarantees for smart contract execution.

Why It Matters

• This report exposes the gap between DeFi/tokenization hype and real-world usage. Despite upgraded infrastructure and emergence of KYC-compliant vaults and permissioned lending pools, traditional finance remains cautious. The report notes fintech is pushing traditional systems toward faster, cheaper settlement and payment, diminishing blockchain’s necessity—and points to the need for more compelling institution-grade crypto use cases.

Remitly Adopts Stablecoin Tech for Cross-Border Payments, Launches Multi-Currency Digital Wallet

Key Takeaways

• Remitly to launch the multi-currency “Remitly Wallet” in September, supporting both fiat and stablecoins—targeting users in high inflation/volatile currency countries.
• Company to partner with Stripe’s Bridge, offering stablecoin payout in 170+ countries and expanding its fiat payment network footprint.
• Remitly has already integrated USDC and other dollar stablecoins into internal treasury, enabling 24/7 capital movement, reducing prefunding, and boosting capital efficiency.

Why It Matters

• This signals mainstream cross-border payment firms moving to large-scale stablecoin adoption. By bringing stablecoins into core operations, Remitly not only offers inflation-resilient value to high-inflation markets but also solves liquidity woes in legacy remittance networks. Such innovation will speed up real-world use of stablecoins, offering hundreds of millions of underserved users lower-cost, more efficient financial access—especially in infrastructure-poor markets.

Tether CEO: 40% of Blockchain Fees Driven by USDT Transfers

Key Takeaways

• Tether CEO Paolo Ardoino reports that 40% of all blockchain transaction fees are for USDT transfers—across 9 major chains.
• Hundreds of millions in emerging markets use USDT daily to hedge depreciation/inflation, making USDT one of the most used blockchain apps globally.
• In crypto parlance, “transactions” usually mean trading, swapping, or arbitrage on exchange internal systems—incurring no separate on-chain fee. When an on-chain USDT transfer fee is paid, it typically signifies funds moving between wallets/addresses—a sign of real-world use, not just speculation.

Why It Matters

• These figures show USDT’s dominance on-chain, eclipsing most other blockchain apps. Paolo predicts future blockchain competition will focus on gas fee and USDT transaction cost optimization, reflecting stablecoins’ evolution from trading instruments to genuine solutions for real-world finance, especially in unstable economies. It also validates blockchain’s growing impact on financial inclusion worldwide.

Macro Trends Mizuho: Coinbase Q2 Earnings Reveal Circle USDC Margins Shrinking

Key Takeaways

• Mizuho estimates Circle earned $625 million interest in Q2 from USDC reserves, $332.5 million of which went to Coinbase.
• With Binance and other partners joining as distributors, Circle’s net yield faces rising pressure from persistently high distribution costs.
• After the GENIUS Act passed, JPMorgan and Bank of America plan to launch their own stablecoins, increasing USD stablecoin competition.

Why It Matters

• Despite a strong IPO, Mizuho keeps Circle’s rating at “underperform” with an $85 target, arguing the market underestimates USDC’s risk. As Circle expands its distribution network, its former profit-sharing advantage with Coinbase erodes, threatening future margins. With rate cuts and traditional bank entrants looming, USDC’s competitive edge is under siege—shaking up the entire stablecoin sector.

U.S. Treasury Taps Record Short-Term Debt; Stablecoins Are New Buyers

Key Takeaways

• Treasury to auction $100 billion in 4-week T-bills—a record, $5 billion up from last round; 8- and 17-week bill sizes hold steady.
• Short T-bill yields over 4% are luring investors. Q2 saw $16.7 billion flow into short-term T-bill ETFs, doubling year-over-year.
• The Treasury Borrowing Advisory Committee notes stablecoin issuance is fueling new demand for T-bills. GENIUS Act requires stablecoin issuers to hold T-bills and similarly safe assets.

Why It Matters

• The administration’s preference for short funding, per Secretary Bessent, is driven by high long-term debt costs. Stablecoin demand is now a key structural bid for T-bills, thanks to rules requiring safe asset holdings. At the same time, global central banks are rotating from dollars to gold—Bank of America sees gold potentially breaking $4,000, signaling deepening doubts about U.S. debt sustainability.

GENIUS Act Spurs Yield Stablecoin Surge

Key Takeaways

• Since July 18’s GENIUS Act signing, Ethena’s USDe supply has jumped 70% to $9.49 billion, now ranking third among stablecoins by market cap.
• Sky’s USDS grew 23% to $4.81 billion. Both stablecoins deliver yields via staking.
• USDe’s annual staking yield is 10.86%, USDS’s is 4.75%. With June U.S. inflation at 2.7%, real yields reach 8.16% and 2.05%, respectively.

Why It Matters

• The GENIUS Act blocks stablecoin issuers from directly offering yield, but spurs stakable stablecoin growth. Investors now chase protocol-level yields, dodging regulatory walls. Stablecoin market cap has risen from $205 billion to $268 billion this year, with analysts predicting a $300 billion year-end. Despite tighter rules, demand for high-yield dollar alternatives stays robust, driving new DeFi innovation and adoption.

Product Spotlight Ex-Apple Engineer Launches Payy: A Privacy-First Crypto Visa Card

Key Takeaways

• Payy Visa Card uses zero-knowledge proofs and an in-house blockchain for private stablecoin payments—transaction amounts stay off-chain.
• Developed over 3 years by Polybase Labs, founded by ex-Apple iOS engineer Sid Gandhi, Payy ensures both privacy and compliance.
• Designed for everyday users—it’s simple and intuitive, allowing self-custody, storage, and spending of stablecoins with no blockchain expertise required.

Why It Matters

• Payy solves a core crypto-payments problem: privacy and user-friendliness. While legacy on-chain payments expose user records, Payy delivers privacy without sacrificing compliance—making self-custody stablecoins viable for daily spending, and offering a credible alternative to traditional banks.

MetaMask & Stripe Rumored to Launch USD Stablecoin mmUSD

Key Takeaways

• A leaked Aave proposal indicated MetaMask is working with Stripe to launch mmUSD, backed by M^0.
• mmUSD would be a “core asset” within MetaMask’s wallet, trading, buy/sell, and yield services.
• The proposal was quickly pulled, but Aave Chan’s Marc Zeller confirmed its authenticity and said timing was “premature.”

Why It Matters

• With PayPal and Robinhood entering stablecoins, MetaMask’s Stripe partnership could accelerate stablecoin adoption across Web3 and traditional payments, leveraging their combined reach.

Coinbase Releases Embedded Wallet Toolkit for Web3 Developers

Key Takeaways

• Coinbase’s developer platform now includes an Embedded Wallets SDK for seamless self-custody wallet integration.
• SDK features include crypto onramps, token swaps, and 4.1% APY on USDC—designed to eliminate compromise between UX and custody risk.
• Users can log in via email, SMS, or OAuth—no browser extension or seed phrase needed—which streamlines onboarding for non-crypto natives.

Why It Matters

• This move furthers Coinbase’s Web3 infrastructure agenda: easing developer hurdles and boosting mass adoption. The tool runs on Coinbase DEX’s stack, delivering enterprise security and solving a key crypto pain point—complex onboarding—supporting the company’s wallet-to-super-app vision and its bridge role from crypto to mainstream tech.

U.S. Neobank Slash Launches Stripe Bridge Stablecoin for Non-U.S. Business USD Payments

Key Takeaways

• Slash, a San Francisco digital bank, launches USDSL, a USD stablecoin issued via Stripe Bridge.
• USDSL lets businesses settle USD payments worldwide with no U.S. bank account needed—reducing FX and settlement costs.
• This comes as the GENIUS Act codifies stablecoin industry rules for U.S. issuers.

Why It Matters

• Clearer regulation is accelerating fintech entry into stablecoins. Slash’s use of Stripe Bridge shows fintech-crypto convergence, promising lower cross-border payment barriers. As the rules become clearer, stablecoin applications in B2B payments are now moving from theory to practice.

World Liberty Rolls Out USD1 Stablecoin Loyalty Program

Key Takeaways

• DeFi project World Liberty Financial, backed by the Trump family, has launched a USD1 points program (airline-miles style) in partnership with Gate and other exchanges.
• Users can earn points for trading, holding, staking USD1, using approved DeFi protocols, or interacting with WLFI’s app.
• Launched in April, USD1 claims full backing by T-bills, cash deposits, and equivalents, with BitGo Trust as issuer.

Why It Matters

• With Trump and his sons as ambassadors, the project raises potential conflict-of-interest questions. The loyalty-wrapped stablecoin approach is a bold effort to drive user stickiness amid rising competition and demonstrates closer crypto-government engagement.

JPMorgan Debuts Kinexys Blockchain Intraday Repo Platform

Key Takeaways

• JPMorgan, HQLA-X, and Ownera launch a cross-ledger repo solution, enabling repo dealers to swap cash and securities via Kinexys blockchain accounts.
• The tool manages the full repo trade lifecycle—including execution, collateral, and settlement—down to minute-level precision.
• Initial phase handles up to $1 billion in trades per day, and can be scaled to support more venues, collateral types, and digital cash forms.

Why It Matters

• JPMorgan leads the way in bank blockchain innovation. Kinexys (formerly Onyx) now anchors its digital asset plans, targeting support for deposit tokens, stablecoins, and CBDCs—reducing market fragmentation. With initiatives like JPMD and a Coinbase partnership, Wall Street is moving from pilots to real digital asset infrastructure at scale.

Regulation & Compliance Paxos Fined $48.5M by NYDFS for Binance BUSD Partnership

Key Takeaways

• Paxos Trust to pay $26.5 million to NY State DFS and invest $22 million to upgrade compliance.
• Regulators found Paxos lacked adequate due diligence with Binance as a BUSD partner in 2018 and had anti-money laundering gaps.
• Paxos took Binance’s “fully restricted U.S. users” claim at face value, without verification; in 2023, NYDFS ordered Paxos to halt BUSD issuance.

Why It Matters

• This action shows tougher scrutiny of stablecoin issuer partnerships—especially with offshore exchanges. Even though Paxos says issues were fixed two years ago, the episode is a stark warning to issuers to vet partners and maintain robust compliance. With the GENIUS Act in play and stablecoin markets expanding, regulatory risk rises, especially for issuers tied to suspect exchanges.

Trump Executive Order to End Banks’ “Unfair Practice” Toward Crypto

Key Takeaways

• President Trump signed an executive order banning federal regulators from penalizing banks serving crypto companies on “reputational risk” grounds.
• The order ends “Operation Choke Point 2.0,” preventing banks from denying crypto companies access for political or subjective risk reasons.
• The Fed, OCC, and FDIC vow not to consider “reputational risk” in client reviews; House Financial Services Chair Hill and Senator Lummis back the move.

Why It Matters

• This move forces banks to focus on genuine legal/financial risk—not vague reputational factors—when serving crypto. It cements crypto’s legal standing and equal banking rights, fueling deeper integration of digital assets and legacy finance as the regulatory framework evolves.

Capital Activity

Tether Acquires Bit2Me MiCA Exchange Stake, Leads $32.7M Funding

Key Takeaways

• Tether buys a minority stake in Spanish MiCA-licensed exchange Bit2Me and leads a $32.7 million (€30 million) round; deal to close in coming weeks.
• Bit2Me is the first Spanish-language exchange with EU MiCA authorization and can serve all 27 EU states; its new capital will fund expansion in Europe and Latin America (starting with Argentina).
• The deal leverages Tether’s record $4.9 billion quarterly profit for regulatory-compliant market entry as many European exchanges reduce or remove USDT listings.

Why It Matters

• Tether’s investment is a strategic bid to rebuild its European presence under MiCA rules, as exchanges limit USDT. By backing licensed firms, Tether secures compliant distribution channels and uses its mammoth profits for expansion in multiple regulatory regimes.

Ripple to Acquire Stablecoin Payments Platform Rail for $200 Million

Key Takeaways

• Ripple will acquire stablecoin payment platform Rail for $200 million, closing in Q4 2025.
• Rail expects to process 10%+ of all global stablecoin payments in 2025, a $3.6 billion market.
• Rail will let Ripple offer institutions a stablecoin payment suite supporting RLUSD, XRP, and more—customers can deposit/withdraw without directly holding crypto.

Why It Matters

• This follows Ripple’s $1.25B acquisition of broker Hidden Road in April, signaling rapid expansion into institutional stablecoins. With MiCA approval in the EU and RLUSD licensed in Dubai, Ripple is scaling stablecoin operations worldwide, moving from cross-border payment specialist to all-in-one finance platform and intensifying competition in institution-grade stablecoin services.

Disclaimer:

1. This article was originally published as [Cobo], original title: “Cobo Stablecoin Weekly Report No.19: After the Stablecoin Act Comes Into Effect, Where’s the Next Battlefield?”, copyright © [Cobo]. For reposting concerns, please contact the Gate Learn team; we will follow our standard procedures.
2. Disclaimer: All opinions expressed are those of the author and do not constitute investment advice.
3. This article’s translations into other languages are by the Gate Learn team. No translated version may be copied, distributed, or plagiarized without explicit citation of Gate.