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Crypto for Advisors: Stablecoins Explained
Today’s Crypto for Advisor newsletter is coming to you from Consensus Toronto. The energy is high as digital asset policy makers, leaders and influencers gather to talk about bitcoin, blockchain, regulation, AI and so much more!
Attending Consensus? Visit the CoinDesk booth, #2513. If you are interested in contributing to this newsletter, Kim Klemballa will be at the booth today, May 15, from 3-5 pm EST. You can also reply to this email directly.
In today’s Crypto for Advisors, Harvey Li from Tokenization Insights explains stablecoins, where they came from and their growth.
Then, Trevor Koverko from Sapien answers questions about the status of stablecoin regulations and adoption with regulations in Europe in Ask an Expert.
Thank you to our sponsor of this week’s newsletter, Grayscale. For financial advisors near Chicago, Grayscale is hosting an exclusive event, Crypto Connect, on Thursday, May 22. Learn more.
Stablecoins — Past, Present and Future
When major financial institutions — from Citi and Standard Chartered to Brevan Howard, McKinsey and BCG — rally around a once-niche innovation, it’s a good idea to take note, especially when the innovation is stablecoins, a tokenized representation of money on-chain.
What email was to the internet, stablecoin is to blockchain — instant and cost-effective value transfer at a global scale running 24/7. Stablecoin is blockchain’s first killer use case.
A Brief History
First introduced by Tether in 2015 and hailed as the first stablecoin, USDT offered early crypto users a way to hold and transfer a stable, dollar-denominated value on-chain. Until then, their only alternative was bitcoin.
Tether’s dollar-backed stablecoin made its debut on Bitfinex before rapidly spreading to major exchanges like Binance and OKX. It quickly became the default trading pair across the digital asset ecosystem.
As adoption grew, so did its utility. No longer just a trading tool, stablecoin emerged as the primary cash-equivalent for trading, cash management, and payments.
Below is the trajectory of stablecoin’s market size since inception, a reflection of its evolution from a crypto niche to a core pillar of digital finance.
Usage at Scale
The reason stablecoins have been a hot topic in finance is their rapid adoption and growth. According to Visa, stablecoin on-chain transaction volume exceeded $5.5 trillion in 2024. By comparison, Visa’s volume was $13.2 trillion while Mastercard transacted $9.7 trillion during the same period.
Why such proliferation? Because stable dollar-denominated cash is the lifeblood for the entire digital assets ecosystem. Here are 3 major use cases for stablecoin.
Major Use Cases
1. Digital Assets Trading
Given its origins, it’s no surprise that trading was stablecoin’s first major use case. What began as a niche tool for value preservation in 2015 is now the beating heart of digital asset trading. Today, stablecoins underpin over $30 trillion in annual trading volume across centralized exchanges, powering the vast majority of spot and derivatives activity.
But stablecoin’s impact doesn’t end with centralized exchanges — It is also the liquidity backbone of decentralized finance (DeFi). Onchain traders need the same reliable cash equivalent for moving in and out of positions. A glance at leading decentralized platforms, such as Uniswap, PancakeSwap, and Hyperliquid, shows that top trading pairs are consistently denominated by stablecoins.
Monthly decentralized exchange volumes routinely hit $100-200 billion, according to The Block, further cementing stablecoin’s role as the foundational layer of the modern digital assets market.
2. Real World Assets
Real-world assets (RWAs) are tokenized versions of traditional instruments such as bonds and equities. Once a fringe idea, RWAs are now among the fastest-growing asset classes in crypto.
Leading this wave is the tokenized U.S. Treasury market, now boasting over $6 billion AUM. Launched in early 2023, these on-chain Treasuries opened the door for crypto-native capital to access the low-risk, short-duration US T-Bills yield.
The adoption saw a staggering 6,000% growth according to RWA.xyz: from just $100 million in early 2023 to over $6 billion AUM today.
Asset management heavyweights such as BlackRock, Franklin Templeton, and Fidelity (pending SEC approval) are all creating on-chain treasury products for digital capital markets.
Unlike traditional Treasuries, these digital versions offer 24/7 instant mint/redemptions, and seamless composability with other DeFi yield opportunities. Investors can subscribe and redeem around the clock, with stablecoin liquidity delivered in real time. Circle’s facility with BlackRock’s BUIDL and PayPal’s integration with Ondo’s OUSG are just two prominent examples.
3. Payment
A major emerging use case for stablecoins is cross-border payment, especially in corridors underserved by traditional financial infrastructure.
In much of the world, international payments remain slow, expensive, and error-prone due to dependency on correspondent banking. By contrast, stablecoins offer merchants and consumers an alternative with its instant, low-cost, always-on transfers. According to research from a16z, stablecoin payments are 99.99% cheaper and 99.99% faster than traditional wire transfers and they settle 24/7.
The shift is gaining momentum in the West, too. Stripe’s $1 billion acquisition of Bridge and subsequent introduction of Stablecoin Financial Account signal the start of mainstream global adoption. Meanwhile, PayPal’s rollout of yield on PYUSD balances highlights stablecoin’s rise as a legitimate retail payment vertical.
What was once a crypto-native solution is fast becoming a global financial utility.
— Harvey Li, founder, Tokenization Insight
Ask an Expert
Q. In light of the recent news from Europe regarding stablecoins and Tether, can you explain how stablecoin investment is valuable to an individual?
A. In the inherently volatile and highly risky world of cryptocurrencies, stablecoins provide individuals with a capital-efficient way to gain exposure to digital assets. Pegged to fiat currencies like the euro or commodities like gold, these digital assets provide stability and a hedge against crypto’s volatility. Crypto individuals can park their funds safely in stablecoins during times of uncertainty without having to exit the market and deal with TradFi.
This is why stablecoins dominate crypto. Their combined market cap has surpassed $245bln, a massive 15x growth over the last five years.
Q. Given current market trends in Europe, are stablecoins more or less susceptible to market fluctuations?
A. While stablecoins are inherently less volatile than typical crypto assets, they remain sensitive to regulatory developments and issuer credibility. When it comes to Europe, specifically, stablecoins have become less susceptible to market fluctuations due to stringent regulatory measures.
This includes the implementation of the Markets in Crypto-Assets (MiCA) regulation, which provides a clear legal framework that requires stablecoin issuers to maintain adequate reserves and comply with strict governance standards. Such rules reduce the risk of de-pegging and enhance overall stability. However, this leads to market consolidation, a lack of competition, and reduced innovation at the same time.
Q. Is Europe becoming a new stablecoin hub as it becomes more receptive to crypto?
A. Europe has been signalling a friendly approach to crypto through MiCA, the first comprehensive crypto framework globally that introduces licensing requirements for digital asset service providers and AML protocols. The aim is to create a structured and harmonized regulatory environment for the crypto market, protect customers, and ensure financial stability.
Through its evolving MiCA regulations, Europe could certainly enhance institutional confidence and attract more stablecoin issuers. However, that would require overcoming licensing (a lengthy and costly process) issues, effective implementation at national levels, and adapting to the fast-progressing crypto space.
Europe is currently not a global leader in stablecoin adoption, but with clearer rules coming into place and its openness to compliant entities, it is well-positioned to emerge as a key hub for compliant stablecoin innovation.
— Trevor Koverko, co-founder, Sapien
Keep Reading
- New Hampshire became the first U.S. State to pass a Strategic Bitcoin Reserve Bill into law.
- SEC Chair Paul Atkins says his priority is to «develop rational regulatory framework for crypto.»
- Will Missouri become the first state to exempt capital gains on bitcoin profits among other investments?
The crypto rally took a long-overdue pause on Thursday as traders took some profits following weeks of relentless advance that lifted bitcoin BTC close to record prices.
The consolidation occurred amid a slew of U.S. economic data releases. April retail sales missed expectations, producer prices rose less than forecast, jobless claims stayed on track, while the NY Empire State Manufacturing Index and Philadelphia Fed Manufacturing Survey showed softening business activity—signals that did little to rattle traditional markets. The S&P 500 added 0.4%, while the Nasdaq finished flat.
Bitcoin pulled back to $101,000 early in the U.S. session before rebounding above $103,000 later, modestly down over the past 24 hours.
Altcoins fared worse with the broad-market CoinDesk 20 Index declining 3% during the same period. Native tokens of Aptos APT, Avalanche AVAX and Uniswap UNI tumbled 6%-7%.
Crypto investors shouldn’t sweat today’s pullback, analysts told CoinDesk.
«The current pullback appears to be a correction within a broader medium-term uptrend,» said Ruslan Lienkha, chief of markets at YouHodler.
The upward momentum in equity markets moderated after the China-U.S. tariff delay, and short-term traders began locking in profits, he said. «This shift in sentiment has spilled over into riskier assets, including BTC.»
«Anything below 5% [price move] can often be considered just market noise,» said Kirill Kretov, trading automation expert at CoinPanel. «Some of this movement likely comes from profit-taking, as traders secure gains after the recent rally. With liquidity so thin, even modest sell-offs can quickly translate into noticeable corrections.»
Backing away from short-term movements, the broader price action seems healthy with no clear signs of an imminent top.
Vetle Lunde, senior analyst at K33 Research, said BTC just exited one of its longest periods of below-neutral funding rates, a signal of defensive positioning
«This resembles the risk-averse patterns from October 2023 and 2024 and is far from resembling price action near past local market peaks,» wrote Lunde, who was optimistic that the lack of froth with BTC above $100,000 BTC paves the way for potential fresh record highs.
According to Steno Research, crypto tailwinds stem from a stealth expansion in private credit—especially in the U.S. and Europe. In past bull runs, crypto thrived on base money expansion: massive injections of reserves by central banks that fueled asset inflation across the board. This time, however, the balance sheets of the Fed and European Central Bank have continued shrinking through quantitative tightening.
“Many have pointed to China’s liquidity injections as the primary driver of the rally,” Samuel Shiffman wrote in a Thursday report. “But that misses the mark. The real support is coming from Western bank credit growth—a quieter, less visible engine behind this move.”
He said that forward-looking indicators project global financial conditions improving into the summer months, driven primarily by the U.S. dollar weakening. This has historically lead to higher BTC prices.
«We’ve likely got room through June and into early July before the picture begins to change,» Shiffman said. «But once we approach the back half of July, the setup gets trickier. Our leading indicators suggest that the peak in financial easing might not last past August.»
Banks need to be part of crypto for stablecoins to succeed—that was the message from Jose Fernandez da Ponte, PayPal’s senior vice president of digital currencies, during a panel discussion at Consensus 2025 in Toronto.
«It might sound counterintuitive, but you do want the banks in this space,» Fernandez da Ponte said, adding that their infrastructure—from custody to providing fiat rails—will be essential if stablecoins are to scale beyond crypto-native circles. «You want that connectivity and that fabric to work.»
His remarks came amid efforts to bring regulatory clarity for digital assets in the U.S., with lawmakers inching closer to pass stablecoin legislation that could redefine the market and allow banks to enter the space.
Read more: U.S. Senate’s Stablecoin Push Still Alive as Bill May Return to Floor: Sources
«This is going to be a big unlock,» said Anthony Soohoo, chairman and CEO of MoneyGram, a cross-border money transfer service. «There’s always hesitation: Can I trust this? [The stablecoin legislation] is going to answer a lot of those questions.»
Both executives said they expect a wave of new issuers to enter the market once regulation is in place, followed by a period of consolidation. “It’s not going to be 300 stablecoins, and it’s not going to be just two,” Fernandez da Ponte said.
Currently, Tether’s USDT USDT and Circle’s USDC USDC dominate the market, representing nearly 90% of the $230 billion asset class. PayPal’s PYUSD PYUSD, launched in 2023, lags far behind with $900 million supply. Fernandez da Ponte pushed back on market cap as the primary metric for success. «We look at velocity, active wallets, number of transactions,” he said. “Those are what drive real usage.»
In countries with high inflation and volatile currencies, consumers are seeking out dollar-backed stablecoins as stores of value and tools for cross-border payments. Soohoo said MoneyGram, which operates in over 200 countries with nearly half a million cash-access locations, is helping facilitate that access.
«We see ourselves between physical finance and digital finance,» Soohoo said. «A lot of consumers in local economies want to hold value in dollars but still need to access it as cash to spend in places that don’t take digital currency.»
Stablecoin adoption in developed countries, meanwhile, has been slower. With clear regulation in place, stablecoins can streamline corporate treasury operations and cross-border disbursement, Fernandez da Ponte noted.
«We used to have this mad rush on Friday to make sure money was in the right places before the weekend,» he said. «Now we’re sending money to the Philippines and Africa in ten minutes with stablecoins.»
Both executives noted that real-world use cases, not hype, will determine if stablecoins could reach the trillion-dollar scale in the next years that’s been projected.
«Consumers don’t care about stablecoins. They care about solving problems.» Fernandez da Ponte said. «We’re five years into a ten-year journey, and regulation will define the next half.»
The global head of policy at TRM Labs, a blockchain analytics firm that helps law enforcement investigate crypto fraud, shared that he believes Coinbase’s handling of the latest hack is a “really great example to other businesses in terms of how to handle” dealing with hacks of exchanges.
At a panel at Consensus 2025, Ari Redbord discussed how easy it is for hacks to happen on crypto exchanges, as the industry is “the perfect storm of weak cyber controls and ultimately it’s a good target.”
Coinbase shared earlier on Thursday that some of its staff had been bribed to steal their customers’ data, and its founder Brian Armstrong had received a ransome note for $20 million dollars in bitcoin.
The team shared in a blog post that because of the breach, it could pay up to $400 million in remediation costs to affected customers, and that they were setting up a $20 million bounty on any information related to the attackers instead.
The news comes as the industry has experienced other major hacks, like Bybit which was hacked earlier this year for $1.5 billion, and defunct crypto exchange FTX in November 2022 for $400 million.
Though these episodes seem to happen frequently, Redbord believes more regulatory involvement can alleviate some of these issues. “There’s a lot we can do with governments in order to go after these bad actors that have nothing to do with crypto or blockchain intelligence,” he said. “We have cyber facilities.”
Read more: Coinbase Could Pay Customers Up to $400M for Data Breach
Bitcoin Holds Above $100K, Altcoins Slide as Analyst Sees Crypto Rally Into Summer
PayPal Crypto Head Says Banks Are Needed to Unlock Full Stablecoin Potential
‘Really Great Example’: Coinbase Praised for Hack Response Amid $400M Crisis
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