Introduction

Throughout history, money has consistently evolved to fulfill three core functions: as a medium of exchange, a store of value, and a unit of account, while a relentless drive for faster settlement, lower costs, and borderless usability has propelled its transformation from localized barter systems to today’s global digital networks. Stablecoins represent the next phase in the evolution of money and payments, forming the foundation of a financial system with faster settlement, lower fees, seamless cross-border functionality, native programmability and a strong auditability trail.

Dollar-denominated stablecoins are in high demand across a range of use cases (including store of value, remittances, payments, yield generation, and trading) and are increasingly being recognized by governments and treasury departments as strategic instruments. Beyond their utility in digital finance, they are emerging as tools of shadow monetary policy, used to manage sovereign debt and extend the reach of national currencies and financial systems globally.

With the backdrop of an improving regulatory environment, the evolving US debt situation and improving technology, we project stablecoin market cap to reach roughly $4.9 trillion over the next decade: nearly a 20x expansion from today’s levels.

Plasma is a purpose-built L1 optimized for stablecoins. As stablecoins continue to gain traction globally, we believe Plasma is well positioned to capitalize on this megatrend by delivering a highly tailored infrastructure for payments, remittances, on/off ramps, foreign exchange, and DeFi.

Stablecoins

Stablecoins are onchain representations of fiat currencies, most commonly the U.S. dollar. In essence, they wrap the dollar in software, allowing it to move anywhere the internet reaches, at the speed of light. Put simply, stablecoins are the fastest form of the dollar in existence. The market for these stablecoins has expanded from just $30 million in total market cap in 2018 to >$250 billion today, representing a 263% compound annual growth rate. Initially used as crypto-native collateral and a settlement mechanism, particularly by market makers and arbitrageurs,stablecoins have since evolved into a broadly adopted financial primitive.

Today’s stablecoin landscape consists of several distinct types of stablecoin, primarily differentiated by their collateral backing, degree of decentralization, and the mechanism used to maintain their peg. Fiat-backed stablecoins dominate the market, accounting for over 92% of total stablecoin market capitalization. We segregate them into the following categories:

1. Fiat Backed - A fiat-backed stablecoin maintains its 1:1 peg by fully collateralizing each digital token with an equivalent amount of fiat currency held off-chain. For example, each USDC token is backed by $1 held in a combination of cash and short-term U.S. government debt. According to current reserve disclosures, each 1 USDC is supported by approximately $0.885 in U.S. Treasuries and $0.115 in cash. Select entities can mint and redeem fiat-backed stables, enabling arbitrage to keep the token pegged to $1. Fiat-backed issuers derive most of their revenue from deploying their reserves into interest-bearing US debt instruments. For instance, Tether earned approximately $7 billion in 2024 from holdings in U.S. Treasuries and repo agreements.

2. Crypto-backed - Crypto-backed stablecoins operate similarly but mostly utilise overcollateralized lending systems due to their decentralised / non-KYC nature. Typically, a user deposits collateral,such as $1,000 worth of BTC,into the protocol, which then mints up to $800 in stablecoins, reflecting an 80% loan-to-value (LTV) ratio. To protect the system from insolvency in the event of collateral depreciation, the protocol enforces liquidation thresholds. If the collateral value falls below a specified LTV ratio, the system automatically liquidates the user’s BTC to cover the outstanding debt, thereby preventing the accumulation of bad debt. This closely mimics how banks create new money through lending but with liquid, on-chain collateral.

3. Algorithmic - As opposed to fiat-backed and crypto-backed stablecoins, algorithmic stablecoins are not always backed by hard assets and instead rely on algorithms and smart contracts to maintain the peg. Seigniorage, or dual-token, algorithmic stablecoins use a two-token system to stabilize value. The other two categories are rebasing stablecoins, which adjust wallet balances directly to maintain a $1 peg (e.g., Ampleforth/AMPL), and fractional algorithmic stablecoins, which combine partial collateral (e.g., USDC, ETH) with algorithmic supply controls, as in early versions of FRAX. Under current US regulations and the GENIUS compliance Act, algorithmic stablecoins are essentially banned.

4. Strategy-backed - A new category of “stablecoins” has recently emerged,tokens that maintain a $1-denominated value while embedding exposure to yield-generating investment strategies. These instruments function less like traditional stablecoins and more like dollar-denominated shares in an open-ended hedge fund. The concept gained attention in March 2023 when Arthur Hayes, founder of BitMEX and a pioneer of the perpetual future contract, published Introducing the NakaDollar, which later manifested itself as the USDe stablecoin by Ethena. We refer to these strategy-backed stablecoins as a dollar product, or synthetic dollar product throughout, but it is important to note that they have a different risk profile to what many consider to be a traditional stablecoin.

Beyond the different categories of stablecoin issuers, a rapidly expanding ecosystem is emerging to support them: powering P2P, B2B, and B2C payments, orchestration, foreign exchange, payroll, consumer banking, and card issuance.

Stablecoin Use Cases

Store of Value

While most investors, particularly those in Bitcoin, recognize that the U.S. dollar is slowly losing purchasing power due to persistent inflation and currency debasement, as Ray Dalio aptly puts it, “the dollar is still the least dirty shirt in the hamper.” In fact, over 20% of the global population lives under regimes experiencing inflation rates of 6.5% or higher and over 51% live with worse inflation than in the USA (in 2025). In countries grappling with runaway inflation, weakening currencies, or strict capital controls, a grassroots financial shift is underway: individuals and businesses are increasingly turning to USD-pegged stablecoins as a store of value. Rather than hold rapidly depreciating local currencies, people in economies like Argentina, Turkey, Lebanon, Venezuela, and Nigeria are parking savings in digital dollars such as USDT, USDC, or DAI. In these environments, stablecoins function less as payment rails and more as digital savings accounts,offering a more stable alternative for preserving purchasing power. You can read more about this use case in our article on store of value here.

Remittance

Remittances represent a major use case for stablecoins. Each year, tens of millions of workers send a portion of their wages back home, supporting over 200 million recipients globally. In 2024, total remittance flows reached approximately $905 billion, a figure comparable to the GDP of a mid-sized developed economy. Continued growth is expected in 2025. A substantial share of these flows, around 76 percent or an estimated $685 billion, went to low and middle income countries (LMICs), where remittances often serve as a financial lifeline.

In the fourth quarter of 2023, the average cost to send $200 abroad was approximately 6.4 percent. In some corridors, that number exceeded 10 percent. For people already managing tight budgets, losing such a large portion of a remittance to fees can be a significant burden. These costs act like a regressive tax on some of the world’s poorest workers and despite the 2030 Sustainable Development Goal of reducing global remittance costs to 3 percent, fees have continued to rise, increasing by 3.2 percent year over year.

Just as the internet revolutionized information by enabling it to travel globally at the speed of light, stablecoins are doing the same for value transfer. Stablecoins and the crypto rails they run on offer an internet-native alternative for moving money, optimized for speed, transparency, and low cost. Plasma will enable zero transfer fees on USDT transactions, creating both one of the fastest dollars in the world, but also the cheapest. Stablecoins are well suited for remittances not only because they provide a more stable store of value (in digital dollars), but also because they benefit from the efficiency and settlement benefits of transferring value on blockchain rails.

Payments

While remittances form a distinct subsegment, the broader global payments ecosystem (which spans consumer-facing transactions, business-oriented flows, public-sector and social disbursements, as well as emerging and embedded rails) continues to grapple with legacy infrastructure. Core limitations such as high costs, slow settlement times, limited transparency, and poor composability persist across all segments. Yet despite these structural inefficiencies, the global payments industry remains one of the largest in the world, processing 3.4 trillion transactions in 2023, representing $1.8 quadrillion in value and generating $2.4 trillion in revenue.

A16Z offers a comprehensive overview of these traditional payment methods, detailing their associated fees, settlement times, and operational nuances. Compared to crypto rails, these legacy systems appear outdated: characterized by higher transaction costs, slower settlement, chargeback risks, closed networks, and limited accessibility.

In our view, the most immediate impact from stablecoin-based payments will be felt by U.S.-based companies, particularly those selling into the world’s largest consumer market: the United States itself. This is largely due to the high prevalence of credit card usage and the associated processing fees in the U.S.

Crypto Trading

As we highlighted in our stablecoin overview, these tokens first gained traction as crypto-native collateral and settlement rails: powering market makers and arbitrageurs to optimize capital efficiency. Today, trading firms and liquidity providers carry substantial stablecoin balances, while DeFi protocols embed them across collateral vaults, lending pools and AMM pairs. Centralized exchanges have likewise shifted their perpetual futures from BTC- or crypto-collateralized margining to stablecoin-based contracts (predominantly USDT pairs (with USDC fast growing)) which now dominate trading volumes and liquidity depth. Off-exchange, OTC desks routinely settle large trades in stablecoins, and USD-denominated tokens have become the preferred unit of account for market-neutral and crypto credit/yield funds.

Yield Generation

Beyond serving as a reliable store of value and a frictionless payment medium, stablecoins unlock permissionless access to a variety of yield-generating strategies: an especially significant benefit for investors shut out of traditional markets, including U.S. capital markets.

Monetary Policy

Stablecoins are also emerging as powerful instruments of shadow monetary policy, increasingly recognized by governments and treasury departments as strategic tools to manage sovereign debt and proliferate currency and financial system strength around the world. In Washington, this use case is moving to the forefront as the U.S. government seeks innovative ways to control its debt burden.

The mechanism through which stablecoins can help lower the government’s cost of borrowing operates as follows:

1. As outlined in the stablecoin category section, fiat-backed stablecoins typically allocate the majority of their reserves to short-term U.S. government debt instruments: primarily Treasury bills and reverse repurchase agreements. This strategy allows centralized issuers to earn yield on customer deposits, either as a revenue source or, in some models, to pass through to stablecoin holders.

2. It follows that as the market capitalization of fiat-backed stablecoins grows, demand for short-term U.S. government debt should increase in roughly linear proportion. Reserve disclosures from leading issuers support this trend: Tether and Circle currently hold the vast majority of their assets in government-backed instruments. Circle reports that 88.5% of its reserves are held in U.S. Treasuries, while Tether holds approximately 82.2% in a combination of Treasuries, repo agreements, and money market funds.

3. This additional demand for government debt puts upward pressure on bond prices, which (given the inverse relationship between price and yield) results in lower yields. As a result, the U.S. government can borrow at lower interest rates, reducing the cost of financing its operations.

The US national debt is reaching unprecedented absolute levels and record highs relative to GDP, with peacetime budget deficits of a magnitude never previously seen. This dynamic is driving a compounding increase in the overall debt burden. At the same time, traditional buyers of US Treasuries (such as foreign central banks and reserve managers) have materially reduced their demand, leaving relative value (RV) hedge funds as the marginal buyers setting prices at the margin. However, this mechanism is increasingly fragile. A notable example was during the post-Trump tariff war period, when many RV funds were rumored to have suffered significant losses, contributing to rising 10-year yields even as equity markets sold off. We discuss this more in our stablecoin report here.

TAM of Stablecoins

Stablecoins serve a wide range of functions, depending on the user. For individuals in autocratic or high-inflation regimes, they provide a self-custodial store of value and a means of preserving wealth. For others, they offer a fast and low-cost way to send money across borders to family and friends. For companies, stablecoins act as financial “superconductors,” enabling instant, 24/7 cross-border settlement at a fraction of the cost of traditional payment systems (directly improving efficiency and margins. And for governments) particularly the U.S. government: stablecoins are emerging as potent tools of shadow monetary policy, extending financial influence and dollar strength globally while also creating a new source of demand for U.S. sovereign debt. Stablecoins therefore touch many markets and segments and estimating the TAM or market capitalization growth of stablecoins requires a lot of assumptions.

By aggregating the major immediate use cases for stablecoins and applying reasonable assumptions for adoption levels across each (10% here), we can begin to estimate the potential scale of stablecoin supply as adoption grows. Focusing specifically on offshore USD demand, remittances, payments, and MMF substitution, our analysis suggests stablecoin supply could grow to approximately $4.9 trillion with modest levels of penetration.

This market capitalization would of course grow linearly with increasing levels of market penetration in each segment, not with counting the more speculative use cases of stablecoins such as AI native payments.

M2 (the broadest commonly cited measure of the U.S. money supply) comprises all of M1 (currency in circulation and checking deposits) plus “near-money” instruments such as savings deposits, small time deposits (under $100,000) and retail money-market funds. As of today, M2 stands at approximately $21.86 trillion, of which stablecoins account for just over 1.1 percent. With clearer regulatory guidelines, more robust infrastructure and the ongoing shift toward fully digital payments, we believe that stablecoins’ share of M2 could grow tenfold over the next ten years.

Plasma

Plasma combines a Byzantine Fault Tolerant (“BFT”) consensus protocol, PlasmaBFT, with an execution layer built on Reth. The chain is EVM-equivalent, meaning contracts, opcodes, and tooling behave the same as Ethereum. On top of EVM-equivalency, the chain adds stablecoin-native features at the protocol level: zero-fee USD₮ transfers and support for custom gas tokens.

PlasmaBFT

HotStuff Background

Hotstuff was created by VMresearch and further enhanced by LibraBFT from Meta’s former blockchain team. It achieved both linear view change and responsiveness, meaning it can efficiently rotate leaders while progressing at actual network speed rather than predetermined timeouts. HotStuff also uses threshold signatures for efficiency, and implements pipelined operation allowing new blocks to be proposed before previous ones are committed.

However, these benefits come with certain tradeoffs: an additional round compared to classic two-round BFT protocols leads to higher latency and the possibility of forks during pipelining. Despite these tradeoffs, HotStuff’s design enables better scaling, making it particularly suitable for large-scale blockchain implementations, even though it results in slower finality than two-round BFT protocols.

Below is a simplified breakdown of HotStuff:

• When transactions occur they are sent to one of the network’s validators, known as the leader.

• The leader compiles these transactions into a block and broadcasts it to the other validators in the network.

• The validators then verify the block by casting their votes, which are sent to the leader of the next block.

• To safeguard against malicious actors or communication failures, the block must undergo multiple rounds of voting before the state is finalized.

• Depending on the specific implementation, the block is only committed after successfully passing through two or three consecutive rounds, ensuring consensus is robust and secure.

PlasmaBFT Design

Compared to regular HotStuff, PlasmaBFT implements a few changes. PlasmaBFT is a pipelined implementation of Fast HotStuff written in Rust. The protocol guarantees that two conflicting blocks cannot both be finalized, as long as fewer than a third of validators are faulty. To finalize a block, at least two thirds of validators have to approve it. Because the two thirds groups always overlap, there will always be honest validators in common, and they will not sign conflicting blocks.

In the fast path, PlasmaBFT uses a two-chain commit rule so blocks can finalize after two consecutive quorum certificates instead of three. Pipelining allows leaders to propose new blocks before previous ones are finalized.

PlasmaBFT aggregates validator votes into quorum certificates (QCs). A QC is proof that a supermajority of validators approved a block. Validators sign the block if they agree, and when at least two thirds of votes are collected, those signatures are combined into a single certificate.

QC creation works as follows:

1. The leader proposes a block.

2. Validators vote by signing the block.

3. Once two thirds of votes are collected, they are aggregated.

4. The result is a QC, which proves the block is safe to extend.

During a view change, validators send their latest QC to the new leader. The new leader aggregates these into an aggregated quorum certificate (AggQC). The AggQC shows, in one object, the highest block that a supermajority considers safe. This prevents forks during leadership changes and reduces overhead by compressing many signatures into a single proof.

PlasmaBFT also differs in how it handles incentives. Instead of stake slashing, it uses reward slashing.In a stake-slashing system, if a validator misbehaves (double-signs, censors, goes offline), part of their staked capital is destroyed. This creates strong security but also high risk, since even accidental mistakes can cost a validator real funds.

In PlasmaBFT, misbehavior or non-participation does not burn the validator’s stake. Instead, the validator just doesn’t earn rewards for that period. Rewards are distributed only to validators who actively participate and follow the rules. If validators fail to sign blocks, sign conflicting blocks, or miss your duties, they don’t earn rewards.

PlasmaBFT does not have every validator vote on every block. Instead, it forms a smaller committee for each round. Committees are chosen using a stake-weighted random process. Committees reduce latency and reduce communication costs, as only the committee needs to exchange votes. Plasma also implements non-validating nodes, who do not take part in consensus. Instead, they follow the finalized chain from validators and provide RPC access to applications and users.

Execution Layer (Reth)

Plasma uses Reth (Rust ETH), an execution client built by Paradigm. Reth is a reimplementation of the EVM written in Rust. It processes transactions, executes contracts, and updates state. Plasma is EVM-equivalent, therefore every opcode and precompile behaves the same as on Ethereum mainnet.

Reth connects to PlasmaBFT through the Engine API. The Engine API enables:

• The consensus client to submit new block proposals to the execution client for processing.

• The execution client to execute transactions in the EVM, update state, and return the result.

• The consensus client to request block payloads from the execution client when proposing new blocks.

• Both components to synchronize and maintain agreement on which blocks are valid and finalized.

PlasmaBFT proposes and finalizes blocks, then passes them to Reth. Reth applies the transactions in order and updates the state root. This follows the same consensus–execution split that Ethereum introduced after the Merge.

Reth is built in a modular way. It separates the transaction pool, block building, execution, and storage into distinct components. The transaction pool holds pending transactions. The block builder selects transactions to include. The execution engine applies EVM rules to update state. Storage keeps track of account balances, contract code, and contract storage.

Reth also uses staged synchronization for downloading chain data. This means it processes headers, bodies, and state in stages, rather than all at once. The approach reduces memory and disk requirements and makes initial sync faster.

Plasma Native Features

Plasma integrates stablecoin-focused features at the protocol level. These include zero-fee USD₮ transfers, support for custom gas tokens, and confidential transfers (currently under development).

Before discussing zero-fee USD₮ transfers and custom gas tokens, it is important to briefly explain paymasters and EIP-4337.

Paymasters are smart contracts that enable flexible gas policies such as allowing applications to sponsor operations for their users (theoretically enabling free transactions), or accept gas payments in an ERC-20 (e.g., USDC) in place of the blockchain’s native currency. The paymaster smart contract was introduced originally in EIP-4337. At its base, paymasters improve onboarding, allow convenient gas policies, and give more programmability to transactions.

EIP-4337 introduces a model where user operations (UserOp) are handled separately from regular transactions. Bundlers collect these operations into blocks, and paymasters validate and sponsor gas under rules. Paymasters implement a validatePaymasterUserOp function to check eligibility, ensure bounded costs, and take responsibility for paying gas.

In Plasma, the paymaster model is used in two distinct ways: one for zero-fee USD₮ transfers, and another for paying gas with custom ERC-20 tokens.

Zero-fee USD₮ transfers

Plasma implements a protocol-managed paymaster based on EIP-4337. This paymaster only sponsors two methods: transfer and transferFrom on the official USD₮ contract. It cannot sponsor arbitrary calldata or generalized transactions. Gas for these operations is prepaid by the Plasma Foundation.

To prevent abuse, the paymaster enforces identity checks and rate limits. Only verified users can access this subsidy, and usage per wallet is capped. This ensures the free transfer mechanism cannot be spammed indefinitely. This was one of the preliminary concerns when Plasma announced free transfers. In theory, any transaction can be free, on any blockchain (assuming that there are no incentive issues for validators or miners), however gas fees apply due to concerns around spamming.

There is work in progress to reserve blockspace for these transfers. One proposed design is to tag eligible USD₮ transfers in the mempool and modify the block builder to allocate a portion of the block’s gas to them first; unused reserved space would revert to general transactions. Any EVM-compatible wallet can support these gasless USD₮ transfers without modification, and they are compatible with both EIP-4337 smart accounts and standard wallet flows.

Custom Gas Tokens

Plasma also allows fees to be paid in approved ERC-20s. This is handled by another protocol-operated paymaster. The process works as follows:

1. The user selects a supported token.

2. The paymaster prices gas using oracle data.

3. The user approves the paymaster to spend the token.

4. The paymaster pays consensus gas in the native unit while deducting the ERC-20 from the user.

The custom gas paymaster is distinct from the zero-fee USD₮ paymaster. The USD₮ paymaster subsidizes gas; the custom paymaster accepts ERC-20 tokens in place of gas. This mechanism removes the need for users to hold XPL. Initial support includes USD₮ and pBTC, with scope to add more tokens later. Only protocol-approved tokens are accepted.

Confidential Transfers

Confidential USD₮ transfers are still under research and not yet implemented. The intent is to offer optional privacy while preserving EVM compatibility and composability.

The design aims to support features like:

• Hidden transfer amounts and recipient addresses.

• Encrypted memos attached to transactions.

• Flows from private to public and public to private.

• Selective disclosure (for audits or regulatory compliance).

As the module is under active research, details are not finalized yet. The ultimate goal is that confidential transfers should act similarly to regular ERC-20 transfers at the user, application and wallet level, meaning existing contracts and wallets can interact with them transparently. In addition, the Plasma team wants to ensure that they are able to achieve this efficiently (low computation and gas cost), enabling optional usage. As of now, the team has outlined that they are exploring stealth addresses (sending funds to one-time derived addresses), memo encryption, indexing methods, and proof systems as possible approaches.

Plasma One

As we’ve discussed above, countries with weak currencies and strict capital controls individuals and businesses turn to USD-pegged stablecoins as a store of value. Rather than hold rapidly depreciating local currencies, people in economies like Argentina, Turkey, Lebanon, Venezuela, and Nigeria park savings in digital dollars, primarily USDT. In these environments, stablecoins function less as payment rails and more as digital savings accounts, offering a more stable alternative for preserving purchasing power. Typically, these users have preferred centralized exchanges for sending, receiving, and earning on their digital dollars.

However, there is also a growing market of more sophisticated users who want a self-custodied way to manage their stablecoins. Over the past year, we’ve seen a wave of crypto cards and neobank providers emerge.

Traditional neobanks like Revolut often aggressively flag crypto deposits and withdrawals or charge high fees and spreads. Meanwhile, most crypto neobanks and cards sit a step removed from DeFi, making it difficult to move funds in and out of useful ecosystems and products, missing out on yield, rewards and vaults. Plasma One enables Plasma to offer banking and payments that can effectively utilize DeFi protocols on the backend. Although the majority of emerging markets users will likely continue to use centralized exchanges to send and receive payments, we believe that Plasma One offers a potential alternative choice to these users, as well as offering a DeFi-integrated neobank to sophisticated users.

Stablecoin-Native Neobank

Plasma One is a non-custodial stablecoin-native neobank and card that brings saving, spending, earning, and sending into a single platform. The goal is to package core financial services around stablecoins into one application, allowing users to treat digital dollars as ordinary money.

A central feature of Plasma One is the ability to spend directly from a stablecoin balance while it continues to earn yield. Users can pay with funds that remain productive until the moment they are spent, with stated yields of 10% or more. In addition, purchases made with the Plasma One card generate up to 4% cashback (in XPL).

The card will be available globally through Visa’s network: in more than 150 countries. Transfers within the Plasma system are advertised as free, with users able to send USD₮ instantly without cost, although the company notes that third-party fees may still apply depending on the route.

pBTC

Overview

pBTC fits naturally within Plasma’s goal of becoming a crypto-first neobank (Plasma One), strengthening the platform in two key ways:

• First, it introduces Bitcoin as a counterpart to stablecoins in payments and savings.

• Second, it enables BTC to circulate on Plasma, where it can serve as collateral, facilitate transfers, and integrate across DeFi applications.

The primary value of BTC on Plasma lies in its role as collateral. Historically, users have wanted to maintain their Bitcoin exposure while accessing liquidity. With pBTC, users can post their BTC holdings and borrow stablecoins or other assets against them, creating capital they can spend or reinvest without selling their underlying Bitcoin position.

Users also seek ways to accumulate more Bitcoin, typically through custodial products like cbBTC or directly on the Bitcoin native chain. However, cbBTC requires users to trust Coinbase completely for secure reserve management and redemption guarantees, creating single-point-of-failure risk. This custodial control also introduces potential freezes or restrictions based on compliance or operational decisions. The native Bitcoin chain presents its own limitations, lacking support for DeFi that would enable lending, borrowing, or other programmable financial activities.

Beyond productive Bitcoin usage, pBTC gives users access to a harder monetary asset. Crypto has proven invaluable for people in countries with runaway inflation, capital controls, and poor central banking through digital dollar access. Bitcoin extends this concept, offering protection against monetary debasement even in developed economies. While the US dollar remains the dominant unit of account and medium of exchange, its purchasing power faces ongoing pressure from inflation. Concerns about high government debt raise questions about long-term dollar stability, as large debt loads typically require governments to raise taxes, cut spending, or accept higher inflation to erode the real value of their obligations. This risk of persistent inflation drives some savers toward assets that cannot be issued at will. Both Bitcoin and gold appeal to those worried about currency debasement because of their fixed or limited supply characteristics, positioning them as “hard” assets in an environment of monetary uncertainty

pBTC Mechanics

pBTC is designed to bring native Bitcoin onto Plasma’s without relying on centralized custody or fragmented wrapped assets. Unlike existing Bitcoin representations such as wBTC, which rely on custodians to issue per-chain wrappers, pBTC is implemented using LayerZero’s Omnichain Fungible Token (“OFT”) standard. This ensures that pBTC functions as a single asset with a unified supply that can move seamlessly across multiple LayerZero-connected chains, rather than existing as separate token contracts on each network. Notably, pBTC operates as a fungible ERC-20 token, but the OFT framework ensures that it can be transferred to other LayerZero-connected chains without requiring rewrapping or duplicating liquidity pools.

The architecture of pBTC consists of three core layers. At the custody layer, users deposit BTC into addresses controlled collectively by the system. Withdrawals are governed by threshold signatures (MPC/TSS), which prevent any single verifier from accessing the signing key. The verifier network forms the second layer. Each verifier runs its own full Bitcoin node and indexer, monitors deposits and withdrawals, and issues attestations once transactions have reached finality. These attestations are published onchain, and a quorum is required for action to proceed. Finally, the issuance layer handles the creation of pBTC. When a sufficient number of attestations confirm a deposit, the corresponding amount of pBTC is minted directly on Plasma and linked to the user’s mapped address.

Below is a simplified transaction lifecycle to illustrate how pBTC works in practice:

Deposits:

1. When depositing, a user sends BTC to a Plasma vault.

2. Each verifier independently observes the transaction on the Bitcoin network, confirms its finality, and broadcasts an attestation.

3. Once a supermajority is reached, Plasma mints pBTC to the user’s wallet.

Withdrawals:

1. For withdrawals, a user burns pBTC on Plasma and specifies a destination Bitcoin address.

2. Verifiers confirm the burn and collectively sign a Bitcoin transaction using MPC/TSS.

3. Only after a quorum is reached is BTC released back to the user on the base chain.

Although OFT still employs a burn-and-mint mechanism to preserve global supply, it differs from traditional bridges in a few important ways. Firstly, conventional bridges typically issue separate wrapped assets on each chain, fragmenting supply and liquidity. They also often rely on custodians or small multisigs to control locked collateral. In contrast, OFT treats the token as a single global supply and uses LayerZero messaging to transfer state between chains. Token issuers retain direct control of the contracts and configuration parameters, and the standard is designed for multichain use rather than retrofitted bridging.

Since pBTC exists as one unified supply across chains, liquidity is not fragmented across multiple wrapped versions. Withdrawals are secured through quorum-based threshold signatures rather than a single custodian, reducing unilateral control. In addition, all verification events are published onchain, making them auditable by any participant.

Tokenomics

Token Utility

XPL is the core asset securing the L1 via Proof of Stake (PoS) and is used to facilitate transactions as well as to reward those who provide network support by validating transactions. XPL safeguards the integrity of this new system and aligns long-term incentives as stablecoin adoption scales.

Token Supply

The initial supply will be 10B XPL at mainnet beta launch, with programmatic increases (inflation) for staking that will be introduced later. The initial XPL distribution is as follows:

• XPL Public Sale (10%) - On May 27th 2025, the Plasma team announced the XPL public sale, where 10% of the XPL supply (1B XPL) was allocated to participants in the deposit campaign. $50M XPL was sold pro-rata at a $500M valuation to participants who deposited stablecoins into the Plasma pre-deposit vault. You can see the full vault data on our Dune dashboard. The XPL sold in the public sale are unlocked as follows:

• XPL purchased by non-US purchasers are fully unlocked upon launch of the Plasma Mainnet Beta.

• XPL purchased by US purchasers are subject to a 12-month lockup and will be fully unlocked on July 28, 2026.

• Ecosystem and Growth (40%) - The Plasma team “plan to leverage XPL to intensify Plasma’s network effects, not just in crypto-native ecosystems, but across traditional finance and capital markets as well” and as such ‍have allocated 40% of the supply toward strategic growth initiatives that are designed to expand the utility, liquidity, and institutional adoption of the Plasma network. These tokens are unlocked as follows:

• 8% of the XPL supply (800,000,000 XPL) will be immediately unlocked at Plasma’s mainnet beta launch to provide for certain DeFi incentives with strategic launch partners, liquidity needs, support exchange integrations, and to implement early ecosystem growth campaigns.

• The remaining 32% (3,200,000,000 XPL) unlocks monthly on a pro-rata basis over the following three-year period, such that 100% of the Ecosystem and Growth allocation is unlocked on the date that is three years from the launch of the public mainnet beta.

• Team (25%) - 25% of the XPL supply (2,500,000,000 XPL) to incentivize current and future service providers. In addition to vesting schedules tied to start dates, the XPL allocated to the team are unlocked as follows:

• One-third of the XPL team tokens are subject to a one-year cliff from the date of the public launch of Plasma mainnet beta.

• The remaining two-thirds are unlocked monthly on a pro-rata basis over the following two-year period, such that 100% are unlocked on the date that is three years from the date of the public launch of Plasma mainnet beta.

• Investors (25%) -25% of the XPL supply was allocated to Plasma investors, both institutional and community with participation from Founder’s Fund, Framework, and Bitfinex, among others as well as the first Echo sale to private investors.

Emission and Inflation Schedule

At TGE, the XPL token will initially only have ~18% of the total supply circulating, with the remaining supply locked up per the vesting schedules. The initial token supply will be coming from the public sale allocation and 8% of the total XPL supply from the ecosystem and growth allocation. Supply on TGE will look as follows therefore:

Note: this assumes 100% of the public sale was sold to non-US citizens and undergoes an immediate unlock on TGE. In reality, the initial circulating supply will be lower as any US citizen participating in the sale will be locked for 1 year. For example, if 10% of the sale was conducted by US KYC’d accounts then the initial TGE supply would be: 1B * 90% + 800M = 1.7B XPL.

In terms of vesting, both the team and investors follow the same path to liquidity, while the ecosystem and growth allocation unlocks gradually on a linear schedule over three years. The outcome is as follows:

Since Plasma is a PoS blockchain, validator rewards are typically minted by the protocol with two goals: (i) ensuring validator economics remain attractive to secure the network with top-tier participants, and (ii) minimizing long-term dilution for XPL holders. As such, XPL rewards begin at a 5% annual inflation, decreasing by 0.5% per year to a 3% baseline, and only activate once external validators and stake delegation are live.

Emissions are distributed to stakers via validators, with the locked team and investor XPL excluded from rewards. To offset dilution, Plasma adopts an EIP-1559 model, permanently burning base transaction fees: creating a balance between new emissions and network usage. More details regarding validator rewards will be published before inflation and rewards go live.

You can track all tokenomics, XPL emissions, XPL token burn and gas fees on our dashboard here:

https://plasma.asxn.xyz

DeFi

Plasma appears to have a three pronged growth approach to reach their end goal of settling more dollar transaction value than any other blockchain or payments company in the world. The below report dives into these three prongs:

Tapping Into Existing USDT Users:

US Dollar Stablecoins are already a $292B market, up 69.7% YoY and 70x since the start of the decade. This is unfathomably quick growth, with all signs pointing towards multi-trillions in supply in the next several years. By offering zero fee USDT transfers, Plasma can quickly tap into the existing Tether supply ($170B) and take market share from chains that have failed to deliver a smooth user experience for people that just want to hold money, make payments and transfer dollars. Based on August 2025 Chainalysis data, 40% of all blockchain base fees were used for simple USDT transfers.

Growing The Pie and Onboarding Those With Broken Payment Infrastructure

Roughly 30% (2.4B people) of the world does not have access to basic, affordable financial services: which includes transactions, payments, savings and credit. While there is a clear learning curve to using stablecoins, it is likely the #1 easiest and fastest way to give people USD access to three of those four categories (credit still needs improvement). Distribution, UX and a broad ecosystem of financial primitives are the three things holding Plasma back from onboarding hundreds of millions of people to a less extractive and limited platform. Access to Plasma means self custody, access to a plethora of real world assets and 24/7 feeless transactions.

Onchain Economy for Crypto-Natives and Investors

Veda, Binance Earn and Maple brought in nearly $3B in USDT TVL on launch day. It will be completely dependent on Plasma to have a fully built out DeFi ecosystem that will enable this capital to be deployed at attractive rates, as well as attract the next hundred billion dollars to flow into the ecosystem. We will dive into Plasma’s Day 1 launch partners and explore how productive capital in crypto is currently deployed in the next section.

Having a L1 with many day 1 applications is clearly not a sufficient differentiator from competitors like Solana, Ethereum, Tron and Hyperliquid. Plasma’s opportunity is in offering the full end to end money experience, from getting paid, to paying your bills, to saving your money or making investments. The full end to end experience means that Plasma can find PMF not only with those lacking access to basic financial primitives, but also for crypto natives and a broader range of investors.

Other chains have made meaningful strides in terms of throughput and UX over the past 5 years, which is part of the reason we have seen tens of billions of dollars in stablecoin growth year after year. However, we firmly believe that the next several years of improvements across wallet security, smart contract resilience and quality asset issuance will be what is required to make stablecoins a $3T+ market and Plasma will be in a prime position to capture this growth.

We mentioned it in our first Plasma focused report, but the CEO of PayPal has focused on his platform’s inability to keep capital within their company’s system. In 2024, their 430M active users did 26B transactions totaling over $1.7T in volume, but far too often the receiving party of a PayPal transaction, whether P2P or P2B, immediately withdraws the cash into their bank account. This makes a lot of sense, given their users want to have tangible access to that money, where they can spend, earn interest / invest and pay bills. The below sections will cover Plasma’s plans to EVERYBODY access a best in class payments system (much like PayPal), but also have access to most of their financial needs on a single network.

Day 1 DeFi Ecosystem

In the next several weeks, Plasma will be home to billions of dollars in USDT. The network has been designed top to bottom to attract stablecoin inflows, and then retain them. Over the last several weeks, we have seen Plasma partner with some of the most successful protocols across other ecosystems (Aave, Maple, Veda, Uniswap, Pendle, etc). Focusing on the core primitives with these day one launch partners should hopefully allow a very targeted DeFi incentives campaign and we see that “8% of the XPL supply (800,000,000 XPL) will be immediately unlocked at Plasma’s mainnet beta launch to provide for certain DeFi incentives with strategic launch partners, liquidity needs, support exchange integrations, and to implement early ecosystem growth campaigns.” So what is needed to create a self sustaining DeFi ecosystem?

Asset Issuance, Credit and Inflow Drivers

Beyond USDT, Plasma will support a broad range of longtail stablecoins and tokenized vault products, including notable launch partners like Ethena, Centrifuge, USD.ai, Neutrl, Resolv and Clearpool. Given a Day 1 Pendle integration, there are fairly large growth expectations for all of these assets on Plasma mainnet. Below is a spotlight on a few of the launch partners:

• Ethena ($14B in TVL) will be live on Plasma at launch. Given USDe’s rapid growth, Ethena must continue to generate significant USDT / liquid stable deposits, on which they can earn yield and ensure withdrawals from the protocol can happen seamlessly without having to open and close positions at non-optimal times. This should be a black hole for hundreds of millions of dollars in USDT and BTC on Plasma

• Binance Earn and Plasma are launching a campaign that will offer Binance’s 280 million users a chance to make their $30B+ of USDT productive within the Plasma ecosystem, where they will earn onchain yields and XPL incentives

• Maple ($4B+ in TVL) launched a syrupUSDT vault that will bring $200m in deposits to Plasma at launch. The vault filled up immediately at launch, showcasing the high demand for XPL incentives and excitement to move stablecoins over to Plasma. Maple offers overcollateralized loans to crypto-native companies that need short term financing.

• Centrifuge ($1.2B+ in TVL) offers onchain access to tokenized assets, specifically treasury and credit funds. These tokenized vaults offer basically unlimited exposure to 4-5% yields given the market depth of US Treasuries and the wider AAA bond market. This should be an amazing market for non-US investors to get access to some of the safest lending opportunities onchain.

• USD.ai ($750m in TVL, $500m for Plasma) is a relatively nascent protocol that is financing hardware (GPUs) for AI companies. The borrower is able to tokenize these GPUs via a bankruptcy remote SPV and borrow from depositors of the USD.ai vault, compensating them at a rate several points above the risk free rate. Given AI’s growth over the last several years, we can predict that demand for GPU’s and the need to finance the actual hardware will continue growing exponentially. There are obviously different offchain risks here, but it is another liquidity sink for stablecoins chasing yield on Plasma.

There are a few, key prelaunch protocols, coming to market on Plasma that should get significant XPL incentives:

• Axis is an onchain vault that allows depositors to enjoy the upside of price discrepancy arbitrage across different trading venues.

• Daylight is a renewable energy company that looks to use the onchain economy to drive down the cost of solar installation and eventually create a marketplace for renewable electricity created on the decentralized grid.

• Uranium Digital is a 24/7, institutional uranium trading platform.

The Plasma team plans to continue pushing forward sourcing credit opportunities to drive new opportunities for stablecoin holders on the chain in the coming months post launch.

Liquidity and Trading

If the Plasma vision comes to fruition, there will be thousands of stablecoins for different currencies, with different upsides and trust assumptions. Being able to swap assets or currencies with little to no price impact is hugely important in bringing high value users to the ecosystem.

At launch, Uniswap, Curve, Fluid and Balancer will be deployed with professional pool management to support stablecoin swaps, ensuring that users of the chain should be able to enter / exit stablecoins near their peg at all times. Plasma has offered to direct tens of millions of dollars in XPL incentives to different USDT pools over 6 months, making sure there is permanent liquidity against XPL, ETH, weETH, XAUT and then many of its longer tail stablecoins that we mentioned in the section above.

Read more about Plasma’s incentive offers in Uniswap’s governance forum.

Onchain Leverage

Plasma’s DeFi ecosystem has an important scale to balance, provide high enough yields for stablecoin holders to flock to the network, but also ensure that borrowers can find competitive rates such that they are also interested in participating in Plasma DeFi. The key will be to find other drivers of yield, outside of the demand for onchain leverage and to incentivize Aave deposits with enough XPL to make people move their positions over from Ethereum. We believe that the roll out of Ethena and Plasma One will both bring a massive amount of supply side liquidity to borrow / lend protocols. Ethena needs to make their stablecoin balance productive to prevent drag and Plasma One card users will be keen to earn 4-5% on their stablecoin balances - as Plasma’s DeFi lead said, “Borrowers, meet lenders.”

Aave ($69B in TVL), the most trusted onchain lending platform, will be there to support the DeFi ecosystem on Day 1. Euler, Fluid and Wildcat are also day 1 launch partners, who will bring permissionless markets, undercollateralized lending and other borrower centric lending features to the network.

Vaults and Yield Management

Yield management and actively managed DeFi vaults have grown significantly over the past couple of years and will play an extremely important role within the Plasma ecosystem, given the abundance of stablecoin supply. Pendle and Veda are two launch partners that bring a great deal of customization to generating yield within the Plasma ecosystem.

1. Veda: A non-custodial DeFi vault curation protocol for automating and optimizing onchain capital allocation.

   1. Allows suppliers to passively earn best in class yield, without having to constantly manage their positions across dozens of protocols and keeps the DeFi ecosystem efficient and in balance as it attempts to deploy the passive capital to pools with the highest risk-adjusted returns at any given moment

2. Pendle: A tokenized yield trading platform that allows traders to speculate on future returns of yield bearing assets.

   1. Pendle lets traders lock in a fixed return on a yield bearing asset by allowing speculator to buy the rights to the future yield, if they believe that the returns will be higher than the Pendle market is pricing

The combination of these two launch partners builds out the Plasma ecosystem for both the sophisticated / active trader and the more passive DeFi users that may be using Plasma for payments and savings. Combining best in class yield with a feature rich DeFi ecosystem gives Plasma a real chance at competing with some of the best layer 1s in crypto.

Thesis

Stablecoin Supercycle

Stablecoins are emerging as the foundation of a new financial system. They offer faster settlement, lower transaction costs, seamless cross-border functionality, programmability, and auditability. Their adoption has been rapid: as mentioned above, the market has grown from $30M in 2018 to more than $250B today, a CAGR of 263%. Initially, they were primarily used in crypto-native contexts: primarily by market makers and arbitrageurs as collateral and settlement assets, in DeFi collateral structures, or by exchanges for stablecoin-based margining.

However, their use cases have grown beyond crypto-native applications. Citizens in high-inflation or economically unstable economies increasingly use stablecoins as a store of value, while remittance markets are adopting them for low-cost, near-instant cross-border payments. This adoption has been supported by improvements in infrastructure, including efficient on- and off-ramps, cheaper chains, and better wallets.

The market is expected to continue scaling into the trillions of dollars. This is primarily as their growth also intersects with global macroeconomics: reserves backing stablecoins increasingly include US Treasuries, making stablecoin issuers a structural source of demand for government debt. At present, stablecoins collectively rank as the 15th largest holder of Treasuries, with about $193B of exposure.

Policymakers have begun to recognize their strategic role. Stablecoins are seen as tools to reinforce dollar hegemony, manage sovereign debt, and strengthen financial systems. In the US, bipartisan legislation is advancing to regulate issuance and reserves, with the House-led STABLE Act and the Senate’s GENIUS Act both establishing frameworks for compliant dollar-pegged stablecoins. These developments suggest that regulatory clarity is within reach, further enabling growth for stablecoins. Plasma is set to benefit from growth of stablecoins, as they are positioning themselves as a purpose-built, stablecoin-optimized chain.

Ethereum and Tron Are Not Purpose-Built

Most stablecoins currently sit on Ethereum and Tron, but neither chain was designed with them in mind. Ethereum suffers from prohibitively high fees (at peak times), while Tron combines significant fees with centralization. Both limit stablecoins’ potential to function as efficient money-transfer systems.

This opens space for purpose-built infrastructure. Plasma addresses these limitations by offering zero-fee USDT transfers. With an existing Tether supply of $170B, there is significant opportunity to capture flows from users who currently bear unnecessary costs. As of August 2025, 40% of all blockchain base fees were spent on simple USDT transfers. Plasma’s model directly targets this inefficiency, providing a smoother and more cost-effective experience for payments and transfers.

Crypto-Native Neobank

Plasma One is designed as a stablecoin-native neobank. It combines saving, spending, earning, and sending into a single non-custodial application, allowing users to treat stablecoins like ordinary money. This positions Plasma as a full-service financial platform rather than just a payments rail.

There is also a growing market of more sophisticated users who want a self-custodied way to manage their stablecoins. Over the past year, multiple crypto cards and neobank providers have launched to meet this demand. Traditional neobanks such as Revolut often flag or restrict crypto-related transfers, while also charging high fees and spreads. At the same time, most crypto-native neobanks and cards remain disconnected from DeFi, limiting users’ ability to move funds into productive ecosystems that provide yield, rewards, and vault strategies. Plasma One addresses these gaps by enabling banking and payments that connect directly with DeFi protocols on the backend. This allows users to retain custody of their assets while accessing a broader range of financial opportunities.

Stablecoins themselves unlock permissionless access to diverse yield-generating strategies. Returns can be generated from Treasury holdings, liquidity provision in stablecoin pools, lending markets, structured strategies such as perpetual futures arbitrage, and private credit markets.

Currently, DeFi is concentrated on Ethereum, which limits accessibility due to high costs and complexity. By contrast, onboarding DeFi into a neobank-tied L1 could simplify access, integrate financial services, and expand participation. Incentives in the early stages are likely to drive user capture. Plasma’s approach positions it to serve both sophisticated crypto-native investors and broader markets, combining traditional financial primitives with integrated DeFi yield in a single platform.

Payments and Remittances

Stablecoins provide an internet-native alternative for moving money. They settle in seconds, are available at all times, and cost far less than traditional systems. By comparison, the global average cost to send $200 abroad in late 2023 was 6.4%, with some corridors exceeding 10%. These fees act as a regressive burden on workers who rely on remittances. On public blockchains, transaction costs are measured in cents or fractions of a cent. For example, recent average fees on Base were just $0.00024, compared to $0.155 on Ethereum. Plasma intends to push costs even lower, with zero-fee USDT transfers.

Remittances are particularly important in emerging markets, where centralized exchanges are often the primary channels for sending and receiving money. Plasma’s integration with Binance directly taps into this behavior. Through a joint campaign, Binance’s 280M users will be able to deploy over $30B of USDT into the Plasma ecosystem, earning onchain yields and incentives while also benefiting from cheaper transfers. This creates a direct path to onboard emerging-market users who already rely on CEX platforms, while also potentially extending services through the Plasma One app.

The role of stablecoins in these markets goes beyond payments. With over 20% of the global population living under inflation rates above 6.5% and more than half experiencing worse inflation than the US, digital dollars have become grassroots savings tools. In countries like Argentina, Turkey, Lebanon, Venezuela, and Nigeria, individuals and businesses increasingly use stablecoins to preserve purchasing power against volatile local currencies. In these cases, stablecoins act less as transactional mediums and more as digital savings accounts.

Disclaimer:

The information and services above are not intended to and shall not be used as investment advice.

You should consult with financial advisors before acting on any of the information and services. Kairos Research, Kairos Research staff, ASXN and ASXN staff are not investment advisors, do not represent or advise clients in any matter and are not bound by the professional responsibilities and duties of a financial advisor.

Nothing in the information and service, nor any receipt or use of such information or services, shall be construed or relied on as advertising or soliciting to provide any financial services.

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The protocol continues its aggressive revenue-based buyback strategy, with the Assistance Fund deploying $104M in HYPE buybacks over the past month, accumulating 8.58% of circulating supply worth $1.3B since inception.

Network security has strengthened with 43.10% of total supply now staked across permissionless validators, while the HyperEVM ecosystem is gaining significant traction with Kinetiq reaching $1.33B in total value locked.

Buybacks

The Hyperliquid AF bought back just above 310K HYPE over the past three days (worth approximately $14M USD).

Over the past week, the AF bought back 637K HYPE ($27.4M USD), which is nearly 0.2% of circulating supply.

Over the past month, the AF has bought back 2.4M HYPE ($104.18M USD), at an average price of $43.15 USD.

The HYPE assistance fund now holds 28.64M HYPE ($1.3B USD) or 8.58% of circulating supply.

Volumes and OI

Over the past month, Hyperliquid has averaged $10.57B USD in daily perpetual volumes. In our last update, back in February, Hyperliquid had averaged $5.6B in volume over the previous 3 months. Average volumes on Hyperliquid have since increased 88.75%.

Open interest on Hyperliquid sits at $15.72B as of today. Over the past month, the daily OI average has been $13.01B USD.

Spot Ecosystem and Stablecoins

24H HYPE/USDC volumes are $274.6M USD, higher than the past 7D ($153.4M USD) and past 30D ($157.9M USD) averages.

The native spot and perpetual order books utilize the same volume-based fee schedule for each address. However, fees collected in non-USDC HIP-1 spot tokens are burned. HYPE/USDC spot volume therefore directly results in the permanent burning of HYPE. Since inception, 360K HYPE has been burned

Spot volumes on HyperUnit are steadily increasing, with UBTC and UETH processing $161M and $129M in daily volume yesterday. HyperUnit assets made up 55.6% of daily spot volume over the past day.

The HyperEVM holds 18.7M HYPE ($898M) or 5.6% of circulating supply.

Currently 1.91% of all stables sit on the HyperCore (>$5B), with an account linked to Galaxy depositing $100M yesterday, August 13th 2025.

Spot USDC available on the HyperCore sits at just above $455M USD, while spot USDC holders are steadily increasing and have crossed 400K.

Circle committed to issuing native USDC on the HyperEVM, reducing the bridged USDC risk and enabling USDC to freely flow between core and EVM, which will greatly benefit HyperEVM apps that rely on stablecoins — such as HyperLend, Felix, etc.

Staking

At launch, Hyper Foundation validators had a combined HYPE stake of 300.96M (60.192M HYPE each). Now, there is 430.9M HYPE staked across a permissionless validator set — meaning that 43.10% of the total supply is now staked.

A cumulative 7.673M HYPE ($360.25M USD) will be unstaked over the next week. The largest daily unstaking will occur on August 20th, with 1.903M HYPE ($32.26M USD) being unstaked.

Recently Kinetiq’s kHYPE launched and has become the largest protocol on the HyperEVM with $1.33B in TVL.

ASXN joined Kinetiq's institutional LST, iHYPE, as a validator.

Auctions

Auctions are averaging $29.7K in HYPE over the past 30 days, with the most recent auction being won by Dexari for $24.8K.

Notable HyperUnit tickers over the past 30 days include BONK, SPX, and MOG. In addition, the ticker RYSK was bought on the 7th of August — potentially by the team behind Rysk Finance, an options-focused protocol.

HLP

Total HLP TVL sits at $433.6M USD, split across HLP A ($143.45M USD), HLP B ($145.83M USD), and the Liquidator ($600K). The HLP's max drawdown has been 5.93%, and its average weekly return is 1.56%. Cumulative PnL is now $72.8M (281.82% return), putting the HLP's Sharpe ratio at 2.9.

Disclaimer:

The information and services above are not intended to and shall not be used as investment advice.

You should consult with financial advisors before acting on any of the information and services. ASXN and ASXN staff are not investment advisors, do not represent or advise clients in any matter and are not bound by the professional responsibilities and duties of a financial advisor.

Nothing in the information and service, nor any receipt or use of such information or services, shall be construed or relied on as advertising or soliciting to provide any financial services.

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Written by Munehisa. To contact us reach out to @munehisa_asxn or @fromm_asxn on telegram.

Thanks to SS and Nathan for their thoughtful comments and feedback.

You can checkout out our stablecoin dashboard that we reference throughout the report here:

ASXN Stablecoin Dashboard

Executive Summary

• Throughout history, money has consistently evolved to fulfill three core functions, as a medium of exchange, a store of value, and a unit of account, while a relentless drive for faster settlement, lower costs, and borderless usability has propelled its transformation from localized barter systems to today’s global digital networks.

• Since the end of World War II, the U.S. dollar has emerged as the dominant global currency, meeting the key properties of money more effectively than any other.

• Stablecoins represent the next phase in the evolution of money and payments, forming the foundation of a financial system with faster settlement, lower fees, seamless cross-border functionality, native programmability and a strong auditability trail. Today’s stablecoin landscape consists of several distinct types of stablecoin, primarily differentiated by their collateral backing, degree of decentralization, and the mechanism used to maintain their peg.

• Stablecoins and specifically dollar denominated stablecoins are highly demanded for a variety of use cases: store of value, remittance, payments, yield generation, crypto trading & as shadow monetary policy tools.

• Stablecoins are emerging as powerful instruments of shadow monetary policy, increasingly recognized by governments and treasury departments as strategic tools to manage sovereign debt and proliferate currency and financial system strength around the world.

• We project stablecoin market cap to reach roughly $4.9 trillion over the next decade—nearly a 20x expansion from today’s levels.

Introduction

We provide a brief overview of the history of money, the US Dollar, and central banking below. You can skip ahead to the “stablecoin” section if you prefer.

In the aftermath of the Global Financial Crisis, and the subsequent government bailouts of over-leveraged financial institutions (“Chancellor on the Brink of Second Bailout for Banks”), Bitcoin emerged as a response: a non-sovereign alternative designed to fulfill the role of “a purely peer-to-peer version of electronic cash [that] would allow online payments to be sent directly from one party to another without going through a financial institution.” While Bitcoin successfully functions as a censorship-resistant, bearer asset outside the control of any central authority, it has thus far proven impractical for everyday payments due to a range of limitations, including low transaction throughput, slow settlement times, high fees, price volatility, and a subpar user experience. Although Bitcoin may ultimately prove to be a superior form of money (resistant to fiat debasement and insulated from the whims of central bankers) today, the bulk of global trade is still conducted in U.S. dollars. Increasingly, digital representations of these dollars are filling the role of the electronic cash system that Bitcoin originally set out to replace.

These “room-temperature superconductors for financial services” are proving transformative for individuals in high-inflation or autocratic regimes, by enabling low-cost, peer-to-peer remittance payments. They also enhance user experience and real-time functionality for multinational corporations. Furthermore, we believe the structural debt dynamics of the United States, and the need to identify a new marginal buyer for U.S. Treasuries and preserving the dollar hegemony, combined with the deregulatory stance and macroeconomic policies of the Trump administration, are laying the groundwork for a secular bull market in stablecoin adoption. Under this backdrop, we expect the total circulating market cap of stablecoins to scale well into the trillions of dollars.

The History of Money

To understand why stablecoins represent the future of money and settlement, it's important to first trace the historical evolution of money and identify the core properties that make a monetary system effective in serving society. This includes not only the broader arc of monetary development, but also the emergence of dollar hegemony and the “exorbitant privilege” the United States derives from issuing the world’s dominant reserve currency.

• Barter & Commodity Money - Early civilizations relied on barter, the direct exchange of goods and services. As societies grew more complex, barter proved inefficient, leading to the emergence of commodity money such as livestock (9000–6000 BCE) and cowrie shells (circa 1200 BCE in Asia). These early forms of money held intrinsic or socially accepted value, laying the groundwork for standardized mediums of exchange.

• Metal Coinage - As trade networks grew, societies increasingly adopted metal for exchange, valued for its durability and ease of division. In China’s Zhou dynasty (c. 1000 BCE), early forms of metal money appeared as miniature bronze tools and cast cowrie shell imitations. By the 7th century BCE, true coinage emerged independently in India, China, and the Aegean. Indian coins were punch-marked metal disks, while Chinese coins were cast bronze, often with holes for stringing. In Anatolia, the Lydian kingdom introduced the first standardized coins, stamped to certify their metal content. This marked a major innovation, coinage unified the functions of store of value and medium of exchange, while also allowing states to regulate money supply and profit through seigniorage.The shift from commodity barter to coined money significantly expanded long-distance trade; Athenian silver coins, for example, financed an empire and circulated widely, while Chinese bronze coins helped unify markets across East Asia.

• Paper Money & Credit - While coins dominated classical antiquity, the next major leap came in medieval China with the advent of paper money. During the Tang dynasty (618–907 CE), merchants used promissory notes, known as “flying cash” (飛錢), to avoid transporting heavy copper coins over long distances. This system evolved into a formal paper currency under the Song and Yuan dynasties, giving China over 500 years of early paper money. However, overissuance led to inflation, and by 1455 the Ming dynasty abandoned paper notes due to severe depreciation.Though paper money wouldn’t reach Europe for centuries, China’s experience highlighted both the efficiency and risks of fiat-like currency. Meanwhile, in 12th-century England, the royal Exchequer used tally sticks, notched wooden records of debts and taxes, as a form of credit money. These tallies circulated as “money of account” for transactions with the Crown and remained in use until the 19th century. Together, these innovations marked a shift toward abstract forms of money, written instruments and credit records, laying the foundation for modern banking.

• Banknotes, Exchange & Banknotes - By the late medieval and Renaissance period (15th–17th centuries), Europe saw the rise of formal banking and the first paper currencies. Wealthy families like the Medici’s in Florence operated banks that held deposits, extended credit, and pioneered double-entry bookkeeping, laying the groundwork for modern financial accounting. In the 16th century, financial centers like Antwerp and Amsterdam emerged, where bills of exchange, maritime insurance, and international credit supported expanding global trade. A major breakthrough came with the creation of public banks. The Bank of Amsterdam (founded 1609) accepted diverse coins and issued deposit receipts, creating a stable ledger currency or “bank money” widely used in European trade. Merchants could transfer balances directly on the bank’s books, anticipating modern checking accounts. Paper banknotes debuted in Europe in the 17th century. In 1661, Sweden’s Stockholm Banco issued the first public paper money, backed by heavy copper plate deposits. Though initially successful, overissuance led to the bank’s collapse by 1664. In 1694, the Bank of England was founded and began issuing banknotes as receipts for deposits and government loans. These early notes were representative money, redeemable for gold or silver. Over time, the Bank gained a monopoly on note issuance, marking a key shift from private to centralized, state-backed currency systems. This period marked the rise of central banking and national currencies. While medieval money was locally varied, the 17th–18th centuries saw governments begin to centralize and standardize currency. War financing was a key driver, England founded the Bank of England in 1694 to fund its war with France, issuing paper notes in the process. Similarly, colonial America issued paper bills, starting with Massachusetts in 1690, to pay soldiers. Paper money offered clear advantages, lighter, easier to use in large transactions, but relied on public trust, initially maintained through convertibility into gold or silver.

• Fiat Money & National Currencies - By the 18th century, paper money and banknotes were common in Western economies, though not always stable. During the American Revolutionary War and the French Revolution, governments issued paper currencies not fully backed by specie,an early form of fiat money. The U.S. Continental Congress printed “Continentals,” which quickly lost value due to over-issuance, giving rise to the phrase “not worth a continental.” In the 19th century, national currencies began to take modern form. Many countries established central banks or treasuries to issue standardized notes and coins. Metal-backed banknotes became the norm in peacetime, restoring public trust. In Britain, the Bank Charter Act of 1844 required Bank of England notes,originally private banknotes,to be backed by gold, making them the dominant legal currency. Other nations followed suit, tying their currencies to precious metals to enhance credibility. This marked the beginning of the Gold Standard era.

• The Gold Standard - Throughout the 19th century, a central monetary debate revolved around whether to base currencies on gold, silver, or both. Early in the century, many nations operated on a bimetallic standard, recognizing both metals as legal tender. For example, the U.S. Coinage Act of 1792 set a 15:1 silver-to-gold weight ratio. However, as global trade grew and new metal supplies emerged, fluctuations in relative values caused one metal to drive the other out of circulation,an example of Gresham’s Law. Britain led the shift to a pure gold standard in 1816, defining the pound solely in terms of gold and halting high-value silver coinage. Over the course of the century, other major economies followed, and by the late 1800s, gold had become the dominant standard for international trade. The bimetallic debate was especially intense in the United States. After large silver discoveries drove down its value, the U.S. passed the “Crime of ’73”, ending silver dollar coinage and moving the country toward a de facto gold standard. Despite strong populist pressure to restore silver, gold advocates ultimately prevailed. The U.S. formally adopted gold as its sole monetary standard with the Gold Standard Act of 1900. By then, the dollar was officially defined as approximately 1/20.67 of an ounce of gold, solidifying America’s commitment to a gold-based monetary system.

• Modern Central Banking and Global Institutions - To manage national currencies and ensure financial stability, countries increasingly turned to central banks. Early examples include Sweden’s Riksbank (1668) and the Bank of England (1694). In the 19th and early 20th centuries, more were established, such as the Bank of France (1800), German Reichsbank (1876), and Bank of Japan (1882). After a long absence of a central authority, the United States created the Federal Reserve in 1913 to address recurring banking panics and regulate credit. Central banks were typically granted exclusive rights to issue banknotes,for example, the Bank of England became the sole legal issuer in the mid-1800s, and the Federal Reserve took on that role in the U.S. after 1913. Under the gold standard, central banks also managed gold reserves and maintained fixed exchange rates, with ensuring convertibility between paper notes and gold being a key responsibility. However, during World War I (1914–1918), many countries suspended gold convertibility to finance war spending by printing money. The United States followed later, abandoning gold for domestic transactions in 1933, amid the depths of the Great Depression.

• Electronic Money - The form of money has continued to evolve with advances in technology. In the mid-20th century, banks began using computers, leading to the rise of electronic money transfers. By the 1970s, systems like SWIFT enabled instant global fund movement via electronic signals, replacing the need for physical cash. At the consumer level, payment cards transformed how people accessed money,starting with the Diners Club credit card in 1950, followed by widespread adoption of credit and debit cards in the 1960s–70s. By the late 20th century, most money existed as digital ledger entries, not paper currency. The internet accelerated this shift. By the 1990s and 2000s, online banking and platforms like PayPal enabled anyone to send money electronically. The 2010s saw a surge in mobile payments and fintech innovation, from M-Pesa in Kenya to apps like Alipay and Venmo. Today, most money in advanced economies is entirely digital, with physical cash making up only a small share of the total money supply.

Throughout history and across civilizations, money has independently evolved around a consistent set of fundamental characteristics that enable it to function effectively as a medium of exchange, store of value, and unit of account. These properties include:

• Fungibility: Each unit of money must be interchangeable with another unit of the same denomination. For example, one $100 bill is functionally identical to any other $100 bill, ensuring uniform value and eliminating the need to distinguish between individual units.

• Durability: Money must withstand physical wear and tear over time. It should retain its form and function after repeated handling and transactions, ensuring longevity in circulation.

• Portability: Effective money must be easy to transport and use across distances. Whether in physical or digital form, it must enable efficient transfer between parties without excessive friction or cost.

• Divisibility: Money must be easily divisible into smaller units to facilitate transactions of varying sizes.

• Uniformity: All units of the same denomination should be identical in appearance and value. Standardization promotes trust, simplifies recognition, and reduces transaction errors.

• Scarcity: To retain purchasing power, money must exist in limited supply. If supply expands too quickly relative to demand, its value erodes, leading to inflation and a breakdown of trust.

• Acceptability: Money must be widely recognized and accepted as a valid form of payment. Broad social and institutional acceptance underpins its utility and legitimacy.

Over time, the nature of money has steadily evolved in pursuit of greater efficiency. There has been a persistent drive toward forms of money that transact and settle more quickly, move at lower cost, and operate independently of geographic boundaries,progressing from localized barter systems to global, digital networks.

The Dollar Hegemony

Since the end of World War II, the U.S. dollar has emerged as the dominant global currency, meeting the key properties of money more effectively than any other fiat currency. It accounts for approximately 60% of central bank foreign exchange reserves and is used to invoice nearly half of all international trade, even in transactions where neither the buyer nor the seller is American. Being the world reserve currency means that the dollar is the most widely held foreign currency by central banks to fulfill multiple roles including to weather economic shocks, pay for imports, service debts, and moderate the value of their own currencies. Further, most countries want to hold their reserves in a currency with large and open financial markets, since they want to be sure that they can access their reserves in a moment of need. Central banks often hold currency in the form of government bonds, such as U.S. treasuries. The U.S. treasury market remains by far the world’s largest and most liquid, the easiest to buy into and sell out of, bond market.

The United States did not always enjoy the privilege of issuing the world’s reserve currency, nor was its financial system always the most dominant, centralized, and fiat-based, with the deepest and most investable capital markets in the world. The path to that position was marked by a long struggle to establish a national currency backed by a central bank. In fact, the evolution of money in the U.S. bears striking parallels to the current landscape of stablecoins, from the circulation of bank notes during the National Banking Era to the rise, regulation, and controversy surrounding Money Market Funds (MMFs).

We will briefly examine the ascent of the dollar to global hegemony, as this historical context offers important perspective on the secular tailwinds supporting stablecoin adoption, explored in greater depth later in the report. In our view, understanding stablecoins requires more than a technical lens, their trajectory is equally shaped by political and economic forces.

The History of the U.S Banking System & Dollar

Hamilton’s Blueprint (1775 – 1791) - Before the U.S. had a formal banking system, the Revolutionary War and Confederation period left the nation in financial disarray. The war was financed with “Continental” paper currency, which quickly collapsed in value,giving rise to the phrase “not worth a Continental.” To restore order, President George Washington appointed Alexander Hamilton as the first Treasury Secretary. Hamilton proposed federal assumption of state war debts, the issuance of federal bonds, and the creation of a national bank to regulate currency and credit. Disturbed by the chaos of competing state currencies, Hamilton persuaded Congress to charter the First Bank of the United States, calling it “a political machine, of the greatest importance to the state,” and believing it essential to unifying the republic’s financial system.

The First Bank Era (1791 – 1811) - Chartered by Congress in 1791 and signed by President Washington, the First Bank of the United States served as the nation’s first de facto central bank. Headquartered in Philadelphia with $10 million in capital, 20% government-owned and 80% privately held, it acted as the federal government’s fiscal agent, managing deposits, tax collection, payments, and issuing nationally accepted paper currency backed by specie (Gold & Silver). Under President Thomas Willing, it opened branches in major cities and brought stability to the post-war economy. The Bank’s creation sparked intense opposition from Jefferson and Madison, who argued it was unconstitutional and favored elites. Although effective, political resistance grew, and in 1811, Congress narrowly voted against renewing its charter. Without a central bank, the U.S. faced financial chaos during the War of 1812, highlighting the need for a new national institution and setting the stage for the Second Bank of the United States.

The Second Bank & Jackson’s “Bank War” (1816 – 1836) - In response to the financial chaos following the War of 1812, Congress chartered the Second Bank of the United States in 1816 for another 20-year term, with $35 million in capital and headquarters in Philadelphia. Even President James Madison, a former opponent of the First Bank, acknowledged the need for a central financial institution to stabilize the postwar economy. Led later by Nicholas Biddle, the Bank sought to regulate credit and the money supply. However, it became the target of President Andrew Jackson’s populist crusade against centralized financial power. Declaring the Bank a “den of vipers and thieves,” Jackson vetoed its re-charter and withdrew federal deposits, effectively destroying the institution.

Free‑Banking & Wild‑Cat Money (1837 – 1862) - The period from the late 1830s to the Civil War, known as the Free Banking Era, saw banking left to state control after the collapse of the Second Bank. States like New York passed “free banking” laws allowing nearly anyone to start a bank if they met basic requirements and posted bond collateral. With no federal oversight, over 8,000 distinct banknotes circulated, each trading at varying discounts based on the issuing bank’s reputation and distance from redemption. Some banks, known as “wildcat banks,” operated in remote areas to avoid redemptions and issued notes not fully backed by specie, leading to widespread instability and fraud. In places like Michigan, failures were common, and panics in 1837 and 1857 reinforced the public’s desire for a national banking framework and uniform currency.

Civil‑War Finance & the National Banking Acts (1863 – 1879) - The Civil War triggered a financial revolution as the Union scrambled to fund the war effort. Initially relying on bond sales and higher taxes, the North soon faced a cash crunch and, by late 1861, suspended gold convertibility as coinage vanished from circulation. In 1862, Congress passed the Legal Tender Act, authorizing $150 million in paper currency known as “Greenbacks”,non-interest-bearing Treasury notes made legal tender but not backed by gold. These fiat notes filled a critical currency gap, though they traded at a discount to gold and fueled inflation. Ultimately, about $450 million in Greenbacks were issued, becoming the first large-scale fiat currency in U.S. history and remaining in use well into the 20th century. Although the system brought stability and financed victory, it also triggered significant inflation,Northern prices rose roughly 80% during the war. After 1865, efforts shifted toward restoring gold-backed currency, culminating in the 1879 resumption of specie redemption at a fixed rate of $20.67 per ounce.

Gold, Populists & Morgan’s Midnight Rescue (1879 – 1907) - With the successful Resumption of Specie Payments in 1879, the United States firmly entered the classical Gold Standard era, pegging the dollar to gold at $20.67 per ounce and making paper currencies,Greenbacks, gold certificates, and national bank notes,freely convertible into gold. Spanning roughly 1880 to 1914, this period was marked by strong economic growth, rapid industrialization, and the U.S. rising as a global economic power. However, it was also plagued by recurring banking panics,in 1884, 1890, 1893, and most dramatically in 1907,highlighting deep structural flaws in the financial system. During these crises, credit and currency dried up, interest rates surged, and banks hoarded reserves, triggering contractions in lending. Clearinghouse associations in major cities attempted to contain the damage by issuing emergency loan certificates, but these ad hoc measures underscored the absence of a formal mechanism to inject liquidity. Meanwhile, political battles over monetary policy intensified, particularly among farmers and debtors in the West and South who, suffering from gold-induced deflation and falling crop prices, demanded the free coinage of silver to expand the money supply. The Panic of 1907, which forced financier J.P. Morgan to personally orchestrate a private-sector rescue,famously locking New York trust company heads in his library until they agreed to a bailout,became the final catalyst. The chaos convinced even Wall Street that the country needed an elastic currency and a true lender of last resort, setting the stage for the creation of the Federal Reserve.

 From Jekyll Island to the Federal Reserve (1907 – 1913) - In 1910, Senator Nelson Aldrich secretly convened five prominent financiers on Jekyll Island to draft a plan for a new central bank, operating under first-name aliases to conceal their identities,Paul Warburg later quipped it was “as secret as the Confederate navy.” The result was the Aldrich Plan, a detailed proposal for a central institution with regional branches, a currency backed by both commercial paper and gold to ensure elasticity, and governance dominated by bankers. Aldrich unveiled the plan in 1912, but political tides had shifted: Democrats, long skeptical of concentrated financial power, had won the White House and Congress with Woodrow Wilson’s election. The Aldrich Plan, viewed as too aligned with Wall Street and burdened by its secretive origins, met with resistance. Nevertheless, many of its core ideas were retained. Wilson himself acknowledged the plan was “60–70 percent correct.” Congressional Democrats, led by Congressman Carter Glass and Senator Robert Owen, reworked the proposal, and after considerable debate, Wilson shaped the final version. On December 23, 1913, the Federal Reserve Act was signed into law, establishing the Federal Reserve System,12 regional “bankers’ banks” empowered to issue flexible Federal Reserve Notes and manage the nation’s monetary system.

Fed Formative Years & the Roaring Twenties (1914 – 1928) -The Federal Reserve System began operations just as World War I (1914–1918) erupted in Europe. Although the U.S. remained officially neutral until 1917, the war had immediate economic repercussions. Capital fled war-torn Europe and flowed into the U.S., which became a key supplier of arms and goods to the Allies,financed largely through massive loans. New York’s financial markets expanded rapidly, and the U.S. dollar began to displace the British pound in international transactions. While many belligerents suspended the gold standard to print money for the war effort, the U.S. remained on gold, and gold inflows surged as European nations shipped bullion to pay for American exports. By 1917, the U.S. held a dominant share of global monetary gold, accounting for about one-third of central bank and treasury reserves, which totaled an estimated 11,000–12,000 tonnes globally. Continued inflows throughout the 1920s pushed the U.S. share to roughly 40% by 1930. When the war ended, the U.S. emerged as the world’s largest creditor nation, having financed much of the Allied war effort, and the global financial center of gravity began shifting from London to New York. By the mid-1920s, the dollar had become a serious rival to sterling as a reserve and lending currency. However, growing imbalances loomed: the U.S. had accumulated vast gold reserves and was lending aggressively abroad, while much of Europe remained mired in postwar debt and economic fragility.

Great Depression & New Deal  (1929 – 1945) - In October 1929, the long-building stock market bubble burst, triggering the Wall Street Crash and wiping out billions in wealth. This collapse shattered confidence and cascaded into the banking system, where many institutions,exposed through loans against stocks or securities affiliates,began to fail. As nearly 9,000 banks collapsed (about one-third of all U.S. banks), the Federal Reserve failed to act decisively. Its decentralized structure led to internal disagreements, and it prioritized defending the gold standard over expanding credit. Some officials embraced a “liquidationist” stance, believing that weak banks and borrowers should be allowed to fail. The result was a one-third contraction in the money supply, driving deflation, halving GDP, and pushing unemployment to 25%. In response, FDR declared a bank holiday, created the FDIC via the Glass-Steagall Act, and split commercial from investment banking. Through Executive Order 6102, Americans were forced to surrender gold in exchange for dollars at $20.67/oz, effectively nationalizing gold to stop dollar runs and enable monetary expansion. The 1934 Gold Reserve Act ratified this, devaluing the dollar by raising gold to $35/oz. With most of the world’s gold and a stabilized banking system, the U.S. dollar emerged dominant,poised to lead the post-WWII global monetary order.

Bretton Woods  (1944 – 1971) - Emerging from WWII with unmatched economic dominance, producing half the world’s output and holding ~70% of official global gold reserves, the U.S. was uniquely positioned to lead the reconstruction of the international monetary system. The British pound had weakened under massive war debts and dollar shortages, and many nations had imposed currency controls. Learning from the failures after WWI and the 1930s devaluations, 44 Allied nations convened in July 1944 at Bretton Woods, New Hampshire, to establish a new framework. Led by U.S. Treasury official Harry Dexter White and British economist John Maynard Keynes, delegates created the Bretton Woods system, founding the IMF and World Bank and fixing exchange rates with the U.S. dollar convertible to gold. This system effectively formalized the dollar’s central role in global finance,underpinned by U.S. economic strength and gold reserves, a status later dubbed an “exorbitant privilege” for enabling the U.S. to borrow freely and run external deficits. For the next quarter century, Bretton Woods defined international finance until its collapse ushered in the fiat dollar era.

Nixon Shock & the Petrodollar (1971 – early 1980s) - On August 15, 1971, President Nixon unilaterally suspended the dollar’s convertibility into gold, effectively ending the Bretton Woods system and severing the final link between the U.S. dollar and gold. This marked the shift to a fiat currency regime, where the dollar, and other major currencies, floated freely and were valued by market forces rather than a metal peg. Despite losing its gold backing, the dollar retained and even expanded its role as the dominant global reserve currency, due to limited alternatives and enduring confidence in U.S. financial markets. A critical development followed the 1973–74 oil shock, when OPEC dramatically raised oil prices, forcing importing countries to secure more dollars to pay for energy. In 1974, the U.S. struck a strategic deal with Saudi Arabia: in return for military protection and arms, Saudi Arabia agreed to price oil exclusively in dollars and to invest its oil revenues in U.S. Treasury securities. This arrangement, soon mirrored by other OPEC members, established the petrodollar system. As oil-exporting nations amassed large dollar surpluses, they deposited them in international banks or reinvested them in dollar-denominated assets,a process known as petrodollar recycling. By 1975, all OPEC countries had adopted dollar pricing, embedding the dollar at the center of global trade and finance. This recycling of petrodollars helped finance persistent U.S. budget and trade deficits while suppressing interest rates, reinforcing the dollar’s dominance and granting the U.S. a renewed version of its “exorbitant privilege.” In the 1970s, money market funds emerged as a corporate cash management tool, offering a stable $1 share price and easy access to short-term instruments. The first (Reserve Fund) launched in 1971 with $1 million in assets.

Deregulation, Globalization & the Eurodollar (1980s – 1999) - During the 1980s and 1990s, the U.S. dollar’s dominance solidified amid financial deregulation, the defeat of inflation, and accelerating globalization. Under Fed Chairman Paul Volcker, inflation fell from ~13% in 1980 to ~3% by 1983, restoring confidence in the dollar as a stable store of value. The dollar surged to record highs by the mid-1980s, prompting the 1985 Plaza Accord,where the U.S. and key allies coordinated to devalue the dollar, which subsequently fell ~40% against the yen and mark by 1987, helping to reduce trade imbalances. Financial deregulation, including the 1980 Depository Institutions Deregulation and Monetary Control Act, removed deposit rate caps and broadened access to the Fed’s services, allowing banks to compete more effectively for deposits. In the 1990s, globalization intensified, and the dollar became the currency of choice in expanding global capital markets. The eurodollar market boomed, and by the late 1990s, around 64% of global debt was dollar-denominated, with the dollar comprising 59% of FX reserves and 58% of international payments,cementing its central role in the global financial system.

The Global Financial Crisis & QE  (2000’s) - The 2000s tested the U.S. banking system and the dollar, most notably during the 2007–2009 Global Financial Crisis,the worst downturn since the Great Depression. Though the crisis began in the U.S. housing and banking sectors, it paradoxically reinforced the dollar’s global safe-haven status. Hedge funds and mortgage lenders began collapsing in 2007; by March 2008, Bear Stearns failed and was absorbed by JPMorgan with Fed support. The crisis peaked in September 2008 with Lehman Brothers' bankruptcy, freezing interbank lending and triggering runs on money market funds, one of which "broke the buck." Global contagion followed, as many foreign banks held U.S. mortgage securities or relied on dollar funding. The U.S. response was massive: the Fed slashed rates to near-zero, created emergency lending facilities, opened dollar swap lines with foreign central banks, and became a global lender of last resort. The Treasury launched the $700 billion TARP to inject capital into banks and stabilize institutions like AIG. The FDIC guaranteed bank debt and expanded deposit insurance to $250,000. Starting in late 2008, the Fed began quantitative easing (QE), purchasing long-term Treasuries and mortgage-backed securities. The 2010 Dodd-Frank Act imposed stricter capital and liquidity rules, while successive QE rounds (QE2 in 2010, QE3 in 2012–2014) helped support a slow but steady recovery and expanded the Fed’s balance sheet to $4.5 trillion.

Pandemic QE & De-Dollarization  (2010 – 2025) - Over the past decade, the U.S. has seen an extraordinary expansion of monetary stimulus. When QE3 ended in 2014, the Fed’s balance sheet stood above $4 trillion,four times its pre-crisis size. A brief attempt at QT in 2017 was cut short after the 2019 repo-market shock revealed systemic dependence on Fed liquidity. In response to COVID, the Fed slashed rates to zero, restarted QE, and launched emergency facilities, doubling assets to nearly $9 trillion by mid-2022,36% of GDP. Concurrently, over $5 trillion in fiscal stimulus pushed federal debt near 98% of GDP by FY2024. Inflation topping 9% in 2022 forced the Fed to reverse course, hiking rates above 5% and shrinking the balance sheet to $6.8 trillion by early 2025. The dollar still dominates FX markets,used in 88% of trades per BIS,but its share of global reserves has slid from 66% in 2015 to 57.8% by Q4 2024. De-dollarization is gaining traction: Russia’s reserve freeze following the Ukraine invasion raised alarm over dollar risk; Saudi Arabia's decision not to renew the petrodollar pact marked a symbolic shift; Iran increasingly settles trade in non-dollar currencies; and China is promoting renminbi trade settlement, especially amid deepening U.S. tensions since Trump’s tariff war.

Since President Nixon closed the gold window in 1971, the U.S. dollar has operated as a pure fiat currency, freely floating alongside other major currencies. Today, twelve regional Federal Reserve Banks issue a single national currency, Federal Reserve Notes, while the U.S. Treasury mints coins. Nearly all other “dollars” exist as electronic bank deposits settled through the Federal Reserve system.The federal government finances itself by selling Treasury securities into a market that remains the world’s deepest safe‑asset pool: foreigners hold about $8.8 trn of Treasuries, and Japan alone owns $1.13 trn. Persistent global demand keeps yields relatively low,ten‑year notes hover near 4 %,even though publicly‑held debt is now ≈ 122 % of GDP and climbing. That “reserve‑currency dividend” is the flip side of dollar dominance: the U.S. can run large deficits and still borrow cheaply because the rest of the world needs dollar assets for trade, safety and regulation.

Another characteristic of the modern U.S. monetary system is it is now overwhelmingly digital. Of approximately $21 trillion in broad money (M2), around $18.5 trillion, nearly 90%, consists of digital ledger entries maintained by commercial banks or the Fed’s reserve database. Physical currency in circulation totals just $2.36 trillion, and Federal Reserve studies estimate that about 60% of that,especially $100 bills,is held overseas as a portable store of value. Despite the digital nature of money, most retail payments in the U.S. still rely on legacy infrastructure rails such as the half-century-old ACH system, where transfers typically settle the next day,or even two or more days later.

In short, today’s dollar is largely digital, officially singular, fiat‑based and globally coveted, but it moves across a payments grid that is only partially modernised and is backed by a federal balance‑sheet whose size, and future affordability, have become the system’s key long‑term question.

Stablecoin Overview

Stablecoins represent the next phase in the evolution of money and payments, forming the foundation of a financial system with faster settlement, lower fees, seamless cross-border functionality, native programmability and a strong auditability trail. In effect, they wrap the U.S. dollar in software, enabling it to move anywhere the internet reaches,at the speed of light. Put simply, stablecoins are the fastest form of the dollar in existence.

Stablecoins have emerged as the most compelling product-market fit in crypto to date, with their growth trajectory reflecting extraordinary adoption. The market has expanded from just $30 million in total market cap in 2018 to >$250 billion today, representing a 263% compound annual growth rate. Initially used as crypto-native collateral and a settlement mechanism, particularly by market makers and arbitrageurs,stablecoins have since evolved into a broadly adopted financial primitive. Today, trading firms and market makers routinely hold stablecoins on their balance sheets, while DeFi protocols have deeply embedded them into collateral structures and trading pairs. Centralized exchanges are increasingly moving away from BTC-collateralized perpetuals toward stablecoin-based margining. Beyond intra-crypto applications, stablecoins are also gaining traction as a store of value among citizens in high-inflation or politically unstable regions, as well as a tool for fast, low-cost remittance flows. This broader adoption has been enabled by significant improvements in infrastructure,ranging from more efficient on- and off-ramps and high-throughput, low-fee blockchains to better-designed wallets and user-friendly apps built on advances in private key management.

Stablecoin Categories

Today’s stablecoin landscape consists of several distinct types of stablecoin, primarily differentiated by their collateral backing, degree of decentralization, and the mechanism used to maintain their peg. Fiat-backed stablecoins dominate the market, accounting for over 92% of total stablecoin market capitalization. Other categories include crypto-collateralized stablecoins, algorithmic stablecoins, and the more recent emergence of strategy-backed stablecoins. Broadly, a stablecoin is a digital token that maintains a 1:1 value with an established currency, typically the U.S. dollar.

Fiat-backed

Fiat-backed stablecoins mirror the bearer banknotes of America’s National Banking Era (1865–1913): back then, individual banks issued notes that customers could redeem for government-issued greenbacks or specie, and their worth hinged on each bank’s reputation and the holder’s ability to cash them in. Today’s fiat-backed stablecoins promise a one-to-one redeemability with a given fiat currency, but just as 19th-century note-holders relied on secondary markets when they couldn’t reach the issuing bank, modern users depend on platforms like Uniswap or centralized exchanges to swap their tokens for dollars at par (if a direct redeem isn’t possible). This reliable convertibility—enforced by audited reserves and robust trading infrastructure—has fostered the same confidence in fiat-backed stablecoins as widespread redemption assurances did for banknotes over a century ago.

A fiat-backed stablecoin maintains its 1:1 peg by fully collateralizing each digital token with an equivalent amount of fiat currency held off-chain. For example, each USDC token is backed by $1 held in a combination of cash and short-term U.S. government debt. According to current reserve disclosures, each 1 USDC is supported by approximately $0.885 in U.S. Treasuries and $0.115 in cash. The cash portion is held at regulated financial institutions, while the Treasuries, comprising short-dated securities and overnight Treasury repurchase agreements, are custodied at The Bank of New York Mellon and managed by BlackRock.

Typically, select entities can mint and redeem fiat-backed stables. For example, Circle Mint customers, businesses and institutions with verified accounts, can redeem USDC directly with Circle at a 1:1 ratio for U.S. dollars. Redemptions are initiated by sending USDC to the smart contract’s burn function via the Circle Mint dashboard or API, alongside a submitted redemption request. Customers can choose between two options: Standard Redemption, which offers near real-time settlement and is fee-free for amounts up to $15 million per day (with a 0.1% fee on amounts above that), or Basic Redemption, which is entirely fee-free but settles within up to two business days. Once processed, Circle transfers USD to the customer’s linked bank account via ACH or wire, depending on the selected payment rail. This structure supports the 1:1 peg of USDC by enabling arbitrage: when deviations from par occur in secondary markets, traders can capitalize on the discrepancy, helping to restore price stability.

Stablecoin issuers derive most of their revenue from deploying their reserves into interest-bearing US debt instruments. For instance, Tether earned approximately $7 billion in 2024 from holdings in U.S. Treasuries and repo agreements. As a result, stablecoin issuers are incentivized to scale supply, enabling them to invest a larger amount of capital and capture yields that closely track the federal funds rate, currently around 4.25%.

Fiat-backed stablecoins bear a strong resemblance to Money Market Funds (“MMFs”). In the wake of the great depression, the Glass-Steagel Act of 1933 sought to prevent commercial banks from engaging in risky behaviors that had exacerbated bank failures, one such provision, ‘Regulation Q’, capped the interest that banks could offer on deposits. As prevailing market interest rates exceeded the cap on deposit rates, depositors missed out Bruce Bent and Henry Brown launched the first money market mutual fund in 1971, pooling small‐investor cash to buy short‐term commercial paper and repurchase agreements. These funds, unencumbered by Regulation Q’s rate caps (as it was managed by an investment firm), could offer returns that banks simply couldn’t match whilst keeping each share worth $1.

The similarities between fiat-backed stablecoins and MMFs extend beyond structural design. The political and regulatory debates surrounding their oversight echo one another closely. When MMFs first emerged, they faced many of the same criticisms now directed at stablecoins, including concerns over financial stability, insufficient regulation, and the potential for systemic risk:

1. Financial Stability Risks - Money Market Funds (MMFs) operate without access to federal deposit insurance or central bank backstops, unlike regulated banks. This structural vulnerability makes them prone to liquidity crises and investor runs, as demonstrated during the 2008 financial crisis.

2. Regulatory Arbitrage - MMFs effectively mimic core banking functions,such as offering a stable, dollar-denominated store of value, while operating outside the stringent regulatory and capital frameworks imposed on traditional depository institutions. This creates a parallel credit system with fewer safeguards.

3. Monetary Policy Erosion - The growth of MMFs may dilute the effectiveness of the Federal Reserve’s policy toolkit. As assets migrate from the regulated banking system into less regulated vehicles, tools like reserve requirements lose potency, undermining the central bank’s ability to control liquidity and credit conditions.

Although MMFs were introduced in the early 1970s, they did not begin to attract significant assets under management until a combination of broad-based financial deregulation, enabling legislation, and key technological advances (such as electronic settlement systems and the internet) laid the groundwork for mass adoption. A pivotal moment came with the passage of the Gramm–Leach–Bliley Act in November 1999, which repealed key provisions of the 1933 Banking Act and removed long-standing legal barriers separating commercial banking from investment-fund sponsorship and distribution. This regulatory shift allowed banks to fully integrate MMFs into their product suites, making them a seamless part of broader financial offerings. Banks moved quickly to capitalize on these new powers, launching and distributing their own MMFs as part of emerging “financial supermarket” models. By embedding MMFs into core deposit accounts and Treasury-like yield products, banks attracted both institutional and retail investors, who funneled record sums into these vehicles. By the end of 1998, just prior to the Gramm–Leach–Bliley Act, the U.S. MMF industry had already reached approximately $1.4 trillion in assets. Despite the turmoil of the 2008 financial crisis, MMFs continued to grow, reaching roughly $3.8 trillion in assets under management by year-end 2008. In many respects, their growth pattern parallels the current trajectory of stablecoins, which are similarly benefiting from structural tailwinds and evolving financial infrastructure as we will discuss later.

MMF AUM has now surpassed $7 trillion and continues to grow steadily. In comparison, seven years after their introduction, MMFs had accumulated just $12.8 billion in AUM,or approximately $62.8 billion in today’s dollars when adjusted for inflation. By that metric, stablecoins are already tracking nearly 4x ahead of MMFs at the equivalent point in their lifecycle. Looking at the CPI-adjusted trajectory of MMF AUM, stablecoins appear to be following a remarkably similar growth path. Over the subsequent 15,000 days (roughly 41 years), MMFs scaled their AUM by 55x in real terms, driven by broader distribution, regulatory clarity, and advances in financial infrastructure and technology.

Crypto-Backed

Crypto-backed stablecoins closely resemble the privately issued banknotes of America’s Free Banking Era (1837–1862), which preceded both the National Banking Acts of 1863–64 and the Federal Reserve Act of 1913. In the absence of federal oversight, individual states enacted “free banking” laws that allowed any group meeting modest capital and collateral requirements, usually in the form of state bonds,to charter a bank. By 1860, over 8,000 distinct banknotes circulated, each trading at a discount or premium according to the issuer’s creditworthiness, the cost of physically redeeming the note for specie, and local market conditions. Like today’s crypto-backed stablecoin issuers, these free banks accepted specie (gold or silver coin) and, in some states, short‐term government securities as reserves, then issued their own notes against those reserves while making loans under a fractional‐reserve system.

This same money creation mechanism persists today, which works something like:

1. A customer deposits $1,000 into their checking account, creating a $1,000 asset (reserves) and a $1,000 liability (the deposit) on the bank’s balance sheet.

2. Regulators require, for example, a 10% reserve ratio, so on that $1,000 deposit the bank holds $100 in reserve and can lend out $900.

3. Each time loans are made and redeposited at other banks, the process repeats, multiplying the original base money into a larger total of bank-created deposits. In fact, the majority of broad money (M2) is created this way.

Crypto-backed stablecoins operate similarly but mostly utilise overcollateralized lending systems due to their decentralised / non-KYC nature. Typically, a user deposits collateral,such as $1,000 worth of BTC,into the protocol, which then mints up to $800 in stablecoins, reflecting an 80% loan-to-value (LTV) ratio. To protect the system from insolvency in the event of collateral depreciation, the protocol enforces liquidation thresholds. If the collateral value falls below a specified LTV ratio, the system automatically liquidates the user’s BTC to cover the outstanding debt, thereby preventing the accumulation of bad debt.

The Maker / Sky protocol issues the largest decentralised crypto-backed stablecoins (DAI & USDS) in the space and has been doing so since the launch of their Single-Collateral Dai in 2017. Users mint Dai by depositing accepted collateral,ranging from crypto assets like ETH, wBTC, stETH, and rETH, to stablecoins such as USDC and GUSD, and tokenized real-world assets including U.S. Treasuries, real estate-backed tokens, and loans,into Vaults (formerly CDPs). Each collateral type is subject to a minimum collateralization ratio (e.g., 150% for ETH), and if a Vault’s value falls below this threshold, it is subject to liquidation to preserve the system’s solvency. The process works as follows:

1. A user deposits 1 wBTC into a Maker Vault as collateral, worth $100,000. The wBTC Vault type requires a 150% collateralization ratio (66.67% LTV).

2. The user can then mint a maximum of 66,666 Dai ($100,000 * 66.67%)

3. If the user mints 50,000 Dai, creating a buffer above the minimum ratio, the vault will now hold 1 wBTC as collateral against a 50,000 Dai debt, with a collateralization ratio of 200% or 50% LTV.

4. If the value of wBTC falls below $75,000, the Vault collateralization ratio falls above 150% and the vault would become undercollateralized.

5. At that point, the Vault is subject to liquidation: a portion of wBTC is auctioned / sold to cover the Dai debt, plus liquidation penalties.

6. If the users wishes to unlock collateral at anytime, the user must repay the 50,000 Dai (plus accrued stability fees), after which they can withdraw the wBTC.

This closely mimics how banks create new money through lending but with liquid, on-chain collateral and each stablecoin is evaluated like the varying banknotes in the free banking era, whereby holders must evaluate the risk of the stablecoin by looking at (non-exhaustive):

1. The quality, liquidity and volatility of collateral backing the on-chain loans

2. The protocols ability to safely unwind undercollateralised loans

3. The security of the smart contracts & mechanism design

For example, during the March 2020 market crash, ETH dropped 53% in two days, exposing major weaknesses in DAI's ETH-only collateral model. The sharp price decline triggered mass liquidations, spiking Ethereum network congestion and delaying oracle price feeds. As a result, DAI lost its peg, trading between $0.96 and $1.13 on March 13. The instability highlighted the risks of relying solely on ETH as collateral, prompting the DAI community to propose adding USDC on March 16 2020 to diversify risk and improve peg stability. Since 2021, DAI has remained relatively stable:

Algo Stablecoins

As opposed to fiat-backed and crypto-backed stablecoins, algorithmic stablecoins are not always backed by hard assets and instead utilise an algorithm and a set of smart contracts to maintain the peg. We can further break down the algorithmic stablecoin category into a few different models for maintaining the peg using Kraken’s analysis:

Seigniorage, or dual-token, algorithmic stablecoins use a two-token system to maintain a stable value. The first token is the stablecoin itself; the second is a bond or utility token used to manage supply and demand dynamics through incentive mechanisms and smart contracts.

• When the stablecoin trades above $1, it signals excess demand. In response, the protocol mints new stablecoins and distributes them,typically to holders of the governance or bond token. This increase in supply is intended to exert downward pressure on the price, guiding it back toward the $1 target.

• Conversely, if the stablecoin drops below $1, the protocol contracts supply by allowing users to buy bond tokens at a discount (e.g., $0.75). These bonds are redeemable for $1 once the peg is restored. This mechanism both incentivizes buyers and reduces circulating stablecoin, in theory helping to bring the price back to parity.

Terra Luna & the UST stablecoin followed this model with the LUNA token being burned/minted upon price fluctuation to return UST’s value to $1, however, in early 2022 UST lost its $1 peg and the protocol collapsed upon a loss of trust in the system and a highly inflationary LUNA supply that had reflexive effects on the protocol. In just a couple of days, ~$18 billion of value was wiped off the UST market cap as it dropped below sub 10 cents.

The other two broad categories of algorithmic stablecoins are:

• Rebasing Stablecoins - Rebasing stablecoins adjust supply directly in users' wallets to maintain a $1 peg. When the price rises above $1, token balances increase proportionally; when it falls below $1, balances decrease. This elastic supply model doesn’t rely on minting or redemption mechanisms. Ampleforth (AMPL) is the best-known example.

• Fractional Algorithmic Stablecoins - These stablecoins combine partial collateral backing with algorithmic supply control. A portion is backed by assets like USDC or ETH, while the rest relies on programmatic adjustments. Early versions of FRAX used this model, maintaining a collateral ratio below 100%,e.g., 90% USDC backing.

Since the collapse of Terra Luna and UST, experimentation with algorithmic stablecoins has declined sharply, with many projects,such as Frax Finance and Near Protocol,shifting away from the model. This retreat has been driven in part by regulatory headwinds: a draft U.S. bill proposes a two-year ban on the issuance of new algorithmic stablecoins, while the EU’s Markets in Crypto-Assets Regulation (MiCAR) has imposed a blanket ban. These measures specifically target “endogenously collateralized” stablecoins,those backed by assets native to the same ecosystem. While some experimentation is likely to persist, driven by the appeal of a decentralized and capital-efficient stablecoin, we expect algorithmic models to remain a niche segment. De-peg risks and an increasingly restrictive regulatory environment are likely to limit their role in the future growth of the stablecoin market.

Strategy Stablecoins

A new category of “stablecoins” has recently emerged,tokens that maintain a $1-denominated value while embedding exposure to yield-generating investment strategies. These instruments function less like traditional stablecoins and more like dollar-denominated shares in an open-ended hedge fund. The concept gained attention in March 2023 when Arthur Hayes, founder of BitMEX and a pioneer of the perpetual future contract, published Introducing the NakaDollar. In it, he proposed a hypothetical stablecoin, NUSD, structured as: 1 NUSD = $1 of Bitcoin + Short 1 BTC/USD Inverse Perpetual Swap. Inspired by this idea, Guy Young founded Ethena, which has since become the leading project in this emerging category with its strategy-backed stablecoin, USDe.

Each USDe is minted by depositing an equivalent dollar value of crypto assets (e.g., ETH, BTC, or liquid staking tokens), while simultaneously shorting an equal notional amount through perpetual swaps or futures. This forms a delta-neutral “long + short” basis trade, where price movements in the underlying asset are offset by the short position, keeping the net portfolio value anchored near $1. This structure allows USDe to maintain full 1:1 collateralization without requiring the overcollateralization buffers typical of traditional crypto-backed stablecoins.

USDe is also yield-generating. The short leg of the hedge earns funding payments when perpetual swap funding rates are positive. In this sense, Ethena is effectively providing/funding leverage into the market as there tends to be cyclical but high demand for leverage within crypto. Users can capture this yield by staking USDe to receive sUSDe,the yield-bearing version of the token. sUSDe acts like a savings instrument, accruing yield from funding rates, liquid staking returns, and other protocol revenues, while base USDe remains a non-interest-bearing stablecoin if held idle. In 2024, sUSDe delivered an average annual yield of approximately 19%, reflecting robust demand for leverage and staking rewards in crypto markets.

The launch of Ethena and the success of USDe has spurred on many other strategy-backed stables such as Resolv USD and most recently Neutrl, which is tokenizing access to the OTC arbitrage trade (long discounted OTC rounds, short perpetual) via NUSD.

We refer to these strategy-backed stablecoins as a dollar product, or synthetic dollar product throughout, but it is important to note that they have a different risk profile to what many consider to be a traditional stablecoin (i.e. one that is based on treasury bills or short term government debt instruments). We cover the varying risk models in our report on Ethena which you can find here.

The Case for Stablecoins

Store of Value

While most investors, particularly those in Bitcoin, recognize that the U.S. dollar is slowly losing purchasing power due to persistent inflation and currency debasement, as Ray Dalio aptly puts it, “the dollar is still the least dirty shirt in the hamper.” In fact, over 20% of the global population lives under regimes experiencing inflation rates of 6.5% or higher and over 51% live with worse inflation than in the USA (in 2025). In countries grappling with runaway inflation, weakening currencies, or strict capital controls, a grassroots financial shift is underway: individuals and businesses are increasingly turning to USD-pegged stablecoins as a store of value. Rather than hold rapidly depreciating local currencies, people in economies like Argentina, Turkey, Lebanon, Venezuela, and Nigeria are parking savings in digital dollars such as USDT, USDC, or DAI. In these environments, stablecoins function less as payment rails and more as digital savings accounts,offering a more stable alternative for preserving purchasing power.

A currency’s effectiveness as a store of value hinges on a few core economic fundamentals. When these underlying factors deteriorate, confidence in the currency erodes over time. Key drivers include:

• Inflation - Low and stable inflation is critical for a currency to hold its value. High inflation quickly erodes purchasing power.

• Monetary Policy - If markets believe a central bank lacks discipline or independence – for example, if it prints money to finance deficits or pursues unorthodox policies – the currency’s value can plummet. Turkey illustrated this: despite 40%+ average inflation, the central bank cut interest rates in 2022– 2023, undermining credibility and contributing to a 300% loss in the lira’s value over 2020–2023.

• Fiscal Discipline - Unsustainable fiscal policy can lead to currency debasement. If a government runs chronic deficits and accumulates debt that investors doubt can be repaid, it may resort to monetizing the debt (i.e. printing money). This expands the money supply and fuels inflation, impairing the currency’s value. Lebanon’s government debt default and deficit monetization in the late 2010s, for instance – experienced currency collapse and triple-digit inflation

• Money Supply - Closely related, the rate of money supply expansion relative to real economic growth impacts long-term value. If the money supply grows far faster than the economy (often the case when central banks finance government spending or bail out banks), inflation and depreciation usually follow. For example, Venezuela’s broad money supply skyrocketed during its hyperinflation period, contributing to the bolívar’s collapse as a store of value.

• Capital Controls & Convertibility - A currency’s value storage appeal also hinges on the ability to freely convert or transfer that value. When governments impose capital controls – limiting foreign exchange access, restricting cross-border transfers, or fixing unrealistic exchange rates – the currency becomes “trapped” and often overvalued domestically. This undermines confidence because people fear they can’t exit into a stable asset when needed.

• Political & Institutional Stability - Finally, broader political risk factors play a role. Regime instability, the threat of expropriation or bank freezes, and lack of rule of law all reduce confidence in local currency and banks. A dramatic example was Lebanon’s banking crisis: banks imposed informal capital controls and froze deposits in 2019–2020, shattering trust in holding wealth in local institutions

For many countries,and indeed, the majority of the global population,the U.S. dollar serves as a superior store of value. This is largely due to its relative strength across key dimensions: lower inflation, fewer capital controls, and greater political stability. In addition, the dollar offers access to the world’s most liquid financial markets, underpinned by a (mostly) disciplined Federal Reserve that operates with explicit targets around core economic indicators.

We can take a closer look at some case studies of how citizens in emerging economies and how they are utilising stablecoins to protect their wealth:

Argentina

Argentina is a textbook example of capital flight to stable value via crypto. Decades of chronic inflation and recurring currency crises have eroded public trust in the peso. While current inflation stands around 20%, the country endured a staggering 143% inflation rate in 2023, driving roughly 40% of Argentinians into poverty. In December 2023, newly elected President Javier Milei devalued the peso by 50%,a move he called “shock therapy”.

“To protect themselves from this economic crisis, some Argentinians have turned to the black market to acquire foreign currencies, most commonly the U.S. dollar (USD). This “blue dollar” is the U.S. dollar traded at a parallel, informal exchange rate, often purchased through clandestine exchange houses called “cuevas,” found throughout the country. Others have explored USD-pegged stablecoins, which is reflected in our data.

We looked at monthly stablecoin trading volume with the ARS on Bitso, a leading regional exchange in Latin America, and saw that the peso’s decreasing value consistently sparked an increase in monthly stablecoin trading. For instance, when the ARS’s value fell below $0.004 in July 2023, the monthly stablecoin trading value surged to over $1 million in the following month. Similarly, when the ARS’s value dropped below $0.002 in December 2023 , when President Milei made his announcement , the stablecoin trading value exceeded $10 million the following month.” - Chainalysis.

USDT is widely used for everyday transactions in some circles, effectively acting as a parallel currency. Even Argentina’s tax authority has taken notice – one province (Mendoza) began accepting stablecoins for tax payments in 2022, legitimizing their role as money in practice. For the average Argentinian, stablecoins represent a lifeline: a way to hold “dollars” that won’t melt away in value, accessible without special permission.

Lebanon

Lebanon’s financial collapse, which began in 2019, illustrates why ordinary citizens turn to stablecoins when traditional financial systems break down. The Lebanese pound (LBP) lost over 98% of its value during the crisis, wiping out personal savings and driving inflation above 200% by 2023. At the same time, banks froze U.S. dollar accounts and imposed arbitrary withdrawal limits,effectively enacting capital controls that cut depositors off from their own funds. Amid this financial paralysis, many Lebanese turned to crypto assets, particularly stablecoins, as a functional substitute for dollars.

Tether USDT quickly gained traction in Lebanon, becoming a de facto quote currency among local money-changers and dealers,effectively forming a crypto-based parallel exchange market. One report described USDT as “the bureaux de change crypto of choice for dodging banking restrictions.” Its peer-to-peer transferability allowed users to bypass the frozen banking system and official currency peg, trading pounds or other crypto for USDT via Telegram groups or local brokers. Once in USDT, users held a stable store of value shielded from hyperinflation, with the added ability to make online purchases or transfer funds abroad,both otherwise blocked by capital controls.

Lebanon also highlights the trust advantage of stablecoins, particularly when paired with self-custodial wallets. With domestic banks widely seen as insolvent and untrustworthy, storing funds in a personal crypto wallet offered users a sense of control and security. Many Lebanese treated stablecoins like digital savings accounts, holding USDT or USDC for weeks or months and converting to LBP only at the moment of spending.

Stablecoins as a Store of Value

For brevity, we’ve included only select case studies, but Chainalysis offers a great overview of similar trends across Latin America. Broadly speaking, dollar-denominated stablecoins (e.g., USDT, USDC, DAI) hold strong appeal in high-inflation, capital-restricted economies. Several factors make them an attractive store of value:

• Preservation of Purchasing Power - For someone in Argentina or Nigeria, moving from a currency losing 20–100% of its value annually into a USD-pegged stablecoin offers instant dollarization and halts purchasing power erosion. Even with U.S. inflation around 3–4%, the contrast is stark. Stablecoins inherit the dollar’s relative stability and credibility,an appealing alternative in countries where trust in local currency has collapsed.

• Self-custody - Users self-custody the cryptographic keys of their addresses, meaning their assets aren’t subject to a local bank’s solvency or a government’s freeze order. This is a powerful proposition in places where banks might be bailed-in or withdrawals arbitrarily limited (Lebanon, Nigeria, etc.). With stablecoins, a user can store $100 or $100k on a secure hardware wallet or even a paper backup, and no local authority can devalue or seize it without also somehow compromising the global crypto network.

• Liquidity - Holding stablecoins isn’t just about passive saving; they are also highly liquid and usable for transactions. This makes them functionally useful in daily life. Traditional dollar exposure methods (like offshore accounts or physical cash) cannot match that fluidity.

• Censorship Resistance - Traditional dollar avenues (banks or remittance services) are subject to surveillance, censorship, or political interference. Stablecoins, especially when transacted on peer-to-peer or decentralized platforms, can offer greater privacy and resistance to censorship.

For these reasons, it is no surprise we are seeing a rapid growth in stablecoin activity, especially in the LATAM and African countries which saw over 40% YoY growth in stablecoin activity as judged by transfers under $1M and Chainalysis’ de-anonymizing software.

Remittance

Remittances represent a major use case for stablecoins. Each year, tens of millions of workers send a portion of their wages back home, supporting over 200 million recipients globally. In 2024, total remittance flows reached approximately $905 billion, a figure comparable to the GDP of a mid-sized developed economy. Continued growth is expected in 2025. A substantial share of these flows, around 76 percent or an estimated $685 billion, went to low and middle income countries (LMICs), where remittances often serve as a financial lifeline. In many of these regions, remittance income covers essential needs such as food, education, and healthcare, underscoring its critical role in household welfare.

As noted, remittances are heavily concentrated in LMICs, where they can account for a significant share of national GDP. Yet these same countries often face the chronic store-of-value challenges we touched on earlier, including weak local currencies, capital controls, and political instability. This makes cross-border inflows particularly vulnerable to value erosion—creating a strong case for stablecoin adoption as a more resilient and efficient alternative.

Stablecoins are well suited for remittances not only because they provide a more stable store of value, especially when pegged to the US dollar, but also because they offer faster, cheaper, and more secure cross-border transfers. Currently, most remittances are sent through traditional banks, money-transfer operators such as Western Union and MoneyGram, or mobile-money platforms like M-Pesa in select regions. While these channels are widely used, they often involve high fees and delayed settlement. In the fourth quarter of 2023, the average cost to send $200 abroad was approximately 6.4 percent. In some corridors, that number exceeded 10 percent. For people already managing tight budgets, losing such a large portion of a remittance to fees can be a significant burden. These costs act like a regressive tax on some of the world’s poorest workers and despite the 2030 Sustainable Development Goal of reducing global remittance costs to 3 percent, fees have continued to rise, increasing by 3.2 percent year over year.

Among the primary remittance channels, banks remain the most expensive, with an average cost of 12 percent in the fourth quarter of 2023. Post offices followed at 7.7 percent, money transfer operators averaged 5.5 percent, and mobile money services were the lowest at 4.4 percent. Despite being the most cost-effective option, mobile operators account for less than 1 percent of total remittance volume. In addition to high costs, traditional remittance methods often involve delays. Recipients may wait two to five business days for funds to clear, as payments are routed through multiple correspondent banks. Along the way, hidden fees and unfavorable exchange-rate markups further reduce the final amount received.

Stablecoins for Remittance

Stablecoins and the crypto rails they run on offer an internet-native alternative for moving money, optimized for speed, transparency, and low cost. Just as the internet revolutionized information by enabling it to travel globally at the speed of light, stablecoins are doing the same for value transfer. Because they operate on public blockchains, transactions settle in seconds rather than days and are available 24/7, 365 days a year.

While the global average fee for remittances is 6.4%, on-chain transaction costs are typically measured in cents or even fractions of a cent, thanks to recent advancements in blockchain scalability. For example, Base has seen median transfer fees average just $0.00024 over the past two weeks, compared to Ethereum’s $0.155. High-throughput blockchains like Solana and soon Plasma promise to push costs even lower, with Plasma aiming for zero transfer fees on USDT transactions.

On top of that the entire payment path is visible on the ledger. No banking relationships or pre-existing accounts are needed: anyone with an internet connection and a digital wallet can send or receive stablecoins, opening access in regions with limited or underdeveloped banking infrastructure. A sender can on-ramp via debit card or bank transfer into USDC or USDT, transmit those tokens across borders almost instantly, and off-ramp into local currency through a network of local partners. Even when off-ramp fees are factored in, now often as low as 0–2 percent in competitive corridors, the total cost frequently falls below 2 percent of the transaction. This reduction in both time and cost represents a dramatic improvement for families who rely on remittances to make ends meet.

Payments

While remittances form a distinct subsegment, the broader global payments ecosystem—which spans consumer-facing transactions, business-oriented flows, public-sector and social disbursements, as well as emerging and embedded rails—continues to grapple with legacy infrastructure. Core limitations such as high costs, slow settlement times, limited transparency, and poor composability persist across all segments. Yet despite these structural inefficiencies, the global payments industry remains one of the largest in the world, processing 3.4 trillion transactions in 2023, representing $1.8 quadrillion in value and generating $2.4 trillion in revenue.

If we take a brief look at the most common payment rails used today, we can begin to see how stablecoins and crypto rails can reduce fees and settlement times and therefore improve the bottom line and functioning of business around the world:

• Card Networks - Card networks and payment cards trace back to the 1950 launch of the Diners Club charge card and have since scaled to facilitate over $40 trillion in annual transactions globally.A card-payment system is a multi-party network that connects four core participants: the cardholder, the merchant, the issuing bank (which provides and authorizes the card), and the acquiring bank (which settles funds on the merchant’s behalf). These parties interact through open-loop schemes (Visa, Mastercard) or closed-loop networks (American Express). When a consumer pays, data flow from the merchant’s gateway (which encrypts and routes the information) to a payment processor, then through the card network to the issuer for authorization. Once approved, funds are captured and ultimately settled in batch cycles. Fee structures—interchange paid to issuers, scheme fees to networks, and settlement fees to acquirers—are set by the card networks, vary by region and card type, and are between 2 % and 3 % of the transaction plus a fixed fee (around $0.30). Modern payment facilitators (PayFacs) and orchestration platforms streamline merchant onboarding and optimize routing, boosting acceptance rates while reducing costs.

• ACH - The Automated Clearing House (ACH) is a foundational U.S. payments network that moves trillions of dollars annually across over 10,000 financial institutions. Originally developed in the 1970s to replace paper checks, ACH gained national adoption when the federal government began using it for Social Security disbursements. Today, it underpins everything from direct deposit and utility bills to corporate supplier payments. The system handles both credit (“push”) and debit (“pull”) transfers, operating in batches rather than in real time. Each transaction involves an originator, their bank (ODFI), an operator (like the Fed or The Clearing House), and the receiving bank (RDFI). The originating bank assumes liability for the transaction’s legitimacy, especially in debit scenarios—hence the 60-day consumer dispute window. Same Day ACH, introduced in 2015, allows faster processing but still faces limitations, including transaction caps and lack of international reach. Despite its age, ACH remains deeply embedded in U.S. financial infrastructure, favored for its reliability, ubiquity, and low cost ($0.21-$1.50) relative to card networks.

• Wire Transfer - Wire transfers are the backbone of high-value, time-sensitive payments in the U.S., facilitated primarily through two systems: Fedwire and CHIPS. Fedwire, operated by the Federal Reserve, uses real-time gross settlement (RTGS) to process each transaction individually and instantly. This is critical for payments such as securities settlements and large corporate deals. CHIPS, run by The Clearing House and owned by major U.S. banks, serves fewer institutions and nets payments between them to reduce liquidity needs, settling most transfers on the same day. Wire transfers are typically irreversible once sent, making them a trusted rail for final settlement. For international wires, banks often rely on SWIFT, a secure global messaging network used by over 11,000 financial institutions, to transmit instructions, though not funds directly. SWIFT-enabled cross-border payments usually settle within one business day but can vary depending on the correspondent bank chain. These systems together move trillions of dollars daily and anchor the global payments infrastructure.

• Payments App - P2P payments apps like Venmo and PayPal allow individuals to send and receive money digitally within a closed network where users must create accounts and log in to transact. These platforms typically offer a seamless, low-friction user experience—particularly in developed markets—often enabling free transfers between individuals using linked bank accounts or balances and instant to sub 1 day settlement times. However, cross-border payments are more complex, with added fees, currency conversion, and regulatory friction. While P2P transfers may be free, business-related transactions generally incur a fee of around 3%, making these platforms attractive for casual personal use but relatively costly for merchants or commercial transactions.

Whilst the banking experience in the U.S is seamless, in countries like Venezuela where inflation is high and trust in the banking system is low, stablecoins represent a way for users to transfer value safely.

A16Z offers a comprehensive overview of these traditional payment methods, detailing their associated fees, settlement times, and operational nuances. Compared to crypto rails, these legacy systems appear outdated—characterized by higher transaction costs, slower settlement, chargeback risks, closed networks, and limited accessibility.

Merchants & Companies

In our view, the most immediate impact from stablecoin-based payments will be felt by U.S.-based companies, particularly those selling into the world’s largest consumer market—the United States itself. This is largely due to the high prevalence of credit card usage and the associated processing fees in the U.S.

A16Z provides a compelling case study highlighting the profit potential of integrating stablecoin payment infrastructure into large-scale U.S. businesses. By reducing payment processing fees to 0.1%, the uplift to profitability can be material:

• Walmart reported $648B in FY2024 revenue and likely paid around $10B in credit card fees, against $15.5B in net income. Eliminating these fees could boost its profit by over 60%, significantly increasing its valuation, all else equal.

• Chipotle, with $9.8B in revenue and $1.2B in net income, spends approximately $148M on credit card fees. Cutting these fees could lift profits by 12%—a gain unmatched elsewhere in its income statement.

• Kroger, operating on sub-2% margins, may be paying as much in card fees as it earns in net income. For low-margin retailers like Kroger, stablecoin payments could potentially double profitability.

In short, for large U.S. businesses facing significant drag from payment processing costs, crypto-native rails—particularly stablecoins—offer a compelling and underexploited opportunity to unlock margin and enhance enterprise value. Indeed, WSJ recently reported that Walmart and Amazon are exploring issuing their own stablecoins.

Cross border business payments

Cross-border B2B transactions remain a major bottleneck in global commerce. Even a routine payment—from a Kenyan distributor to a Malaysian supplier—can pass through multiple banks and FX providers, each adding fees, delays, and settlement risk. What should be a straightforward transfer often turns into a multi-day process weighed down by legacy infrastructure. Banks continue to dominate this space, handling approximately 92% of global B2B cross-border payment flows

Payment service providers face similar challenges. Platforms like Stripe can take up to a week to complete international merchant payouts, with funds tied up to manage chargebacks, currency exposure, and settlement uncertainty. Shortening this cycle would free up substantial working capital and reduce systemic friction across the value chain.

This makes even small reductions in transaction fees—on the order of 1–2%—highly impactful to their bottom line, a pattern consistently observed in previous case studies. Speed is equally critical: accelerating settlement times from days or weeks to just hours can significantly enhance working capital efficiency and improve overall cash flow management. You can read more on these B2B payments, XB supplier payments & receivables as well as foreign aid disbursements with Archetype’s crypto rails report.

Novel Payments Use Cases

Payments via stablecoins also enable entirely new use cases for internet-native payment infrastructure:

• Instant Settlement & Availability – Stablecoins enable near-instant transactions at any time—24/7, 365 days a year—making them ideal for time-sensitive payments that traditional financial rails simply can’t support. Adoption is already underway: Robinhood CEO Vlad Tenev recently shared that the company is “using stablecoins to power a lot of our weekend settlements,” something previously impossible with legacy infrastructure.

• Programmatic Payments - Stablecoins unlock more complex and automated payment flows through smart contracts and the inherently permissionless, composable nature of crypto infrastructure. Payments can be triggered by real-world events, executed conditionally, or streamed continuously—allowing backend payment processes to be fully automated and trustless. For example, Superfluid enables continuous, per-second salary streaming tied directly to active work sessions, while Centrifuge leverages smart contracts to automatically release funds to suppliers upon verified delivery milestones, with every transaction recorded transparently on-chain for real-time auditability.

• AI Agent Value Transfer- The ability for AI agents to transfer value is a foundational capability that will become increasingly critical as these agents mature. In the near term, value transfers will primarily support the humans operating these agents—facilitating payments for services and products. But as agents become more autonomous and capable, we expect a shift toward agent-to-agent transactions, executed independently to coordinate, collaborate, and accomplish tasks beyond their individual scope. We believe a meaningful share of global value transfer will eventually be conducted by AI agents—and that crypto rails are the natural infrastructure for this evolution. Unlike traditional banking systems, crypto enables agents to permissionlessly create wallets and transfer value without undergoing human-centric KYC processes, making it the only system that matches the speed, scale, and flexibility of agent-native economies. You can read more about our AI thesis here.

• Micropayments - Micropayments—typically defined as transactions under one dollar, and sometimes just fractions of a cent—are commonly used to enable digital-native use cases such as online tipping, in-game purchases, real-time royalties, and pay-per-use content. However, traditional payment rails are poorly suited to handle these transactions due to high fixed costs. For example, a $0.50 payment may incur a $0.30 fixed fee plus a 2% variable fee, resulting in total costs of $0.31—over 60% of the transaction value. This cost structure makes micropayments economically unviable at scale. Stablecoins offer a compelling alternative, enabling low-cost, instant, and programmable settlement. By removing the friction and overhead of legacy infrastructure, stablecoins unlock new categories of applications built entirely on micropayment models.

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Shadow Monetary Policy Tool

Stablecoins are also emerging as powerful instruments of shadow monetary policy, increasingly recognized by governments and treasury departments as strategic tools to manage sovereign debt and proliferate currency and financial system strength around the world. In Washington, this use case is moving to the forefront as the U.S. government seeks innovative ways to control its debt burden. The mechanism through which stablecoins can help lower the government’s cost of borrowing operates as follows:

1. As outlined in the stablecoin category section, fiat-backed stablecoins typically allocate the majority of their reserves to short-term U.S. government debt instruments—primarily Treasury bills and reverse repurchase agreements. This strategy allows centralized issuers to earn yield on customer deposits, either as a revenue source or, in some models, to pass through to stablecoin holders.

2. It follows that as the market capitalization of fiat-backed stablecoins grows, demand for short-term U.S. government debt should increase in roughly linear proportion. Reserve disclosures from leading issuers support this trend: Tether and Circle currently hold the vast majority of their assets in government-backed instruments. Circle reports that 88.5% of its reserves are held in U.S. Treasuries, while Tether holds approximately 82.2% in a combination of Treasuries, repo agreements, and money market funds.

3. This additional demand for government debt puts upward pressure on bond prices, which—given the inverse relationship between price and yield—results in lower yields. As a result, the U.S. government can borrow at lower interest rates, reducing the cost of financing its operations.

To fully grasp the significance of this stablecoin use case, it's essential to first understand the current state of the U.S. national debt and the growing trend of de-dollarization. These dynamics create a backdrop in which stablecoins could play a pivotal role—not only in reinforcing the dollar’s global dominance, but also in generating sustained demand for U.S. government debt.

The US National Debt

The U.S. national debt has emerged as a central political and economic issue over the past decade, with total debt reaching $36.22 trillion—approximately 123% of GDP. This mounting debt burden has brought with it a set of urgent and compounding challenges. Much of the Trump administration’s economic agenda has been shaped by this reality. The Department of Government Efficiency (DOGE) was tasked with identifying $1–2 billion in annual savings through the elimination of “fraud, waste, and abuse.” Simultaneously, efforts to boost external revenue via tariffs and the External Revenue Service aimed to generate an additional $1-2 billion. Key figures like Bessent pushed for lower yields on the 10-year Treasury, while deregulation and broad-based tax cuts were implemented to stimulate growth and help the U.S. "grow out" of its debt problem. Bessent discussed this “3-legged stool” plan in depth during the All-in podcast here.

And while the absolute level of U.S. government debt—now at $36.2 trillion, or approximately 123% of GDP—may not be unusual for a global reserve currency, the rate of debt accumulation in recent years is a growing concern. The federal government has consistently run budget deficits, spending more than it collects in revenue. This structural imbalance was sharply exacerbated by the COVID-19 pandemic, during which the government enacted unprecedented fiscal stimulus measures such as the CARES Act and the American Rescue Plan, significantly expanding the national debt.

These interventions resulted in the largest peacetime deficits in U.S. history, with the federal deficit reaching 14.67% of GDP in 2020. The long-term implications of this borrowing are now beginning to materialize. In 2025 alone, $9.2 trillion of U.S. debt—roughly 25.4% of the total—will mature or need to be refinanced. Over $6 trillion of that must be rolled over at much higher interest rates than when it was initially issued.

As a result, interest payments have surged and are now the second-largest line item in the federal budget, surpassing even defense spending. The compounding nature of the federal debt adds pressure to an already strained fiscal position and raises serious questions about the long-term sustainability of U.S. debt dynamics.

US Treasury Market

These growing debt pressures are unfolding against the backdrop of global de-dollarization and a decline in foreign appetite for U.S. debt, particularly from traditional buyers such as China and Japan. To understand how U.S. debt enters and circulates through the financial system, consider the following process:

1. The U.S. Treasury determines the issuance schedule, amounts, and types of securities based on the government’s funding requirements. It chooses to raise capital either through short-term instruments (like T-bills and Treasury notes) or long-term bonds (such as 10-year and 30-year Treasuries).

2. These securities are issued through a Dutch auction, in which all successful bidders receive the same yield. Primary market participants include: large banks and financial institutions, the Federal Reserve, domestic investment funds (e.g., pension and mutual funds), individual investors (directly or through brokers), and foreign governments and central banks.

3. Once the securities are issued, the Treasury records the official holder, which could be the end investor, a broker, or a clearinghouse.

4. The debt then begins to trade on secondary markets, similar to stocks, where bond prices fluctuate based on supply and demand. The Treasury pays interest to bondholders on a regular schedule, typically semi-annually.

5. As existing debt matures, the Treasury usually issues new debt to refinance the principal—effectively rolling over the obligation in a process often referred to as “monetizing the debt.”

US Treasury Demand

Since World War II, U.S. government debt has served as the cornerstone safe-haven asset in global financial markets, with Treasury bills commonly referenced as the “risk-free rate.” Historically, demand for U.S. debt was robust, driven by both domestic investors and foreign central banks and governments. However, over the past decade, traditional buyers—including the Federal Reserve, major U.S. banks, and foreign sovereign investors—have steadily reduced their purchases. In their place, relative-value hedge funds, primarily domiciled in tax-efficient jurisdictions such as the U.K., Cayman Islands, and Luxembourg, have emerged as dominant players in the Treasury market. These funds have been instrumental in containing U.S. government debt yields, a trend evident in both the shifting regional ownership patterns of U.S. debt and instrument specific data such as Hedge fund repo positioning, commentary within the Treasury’s quarterly refunding announcements specifically called them out specifically as the marginal buyer keeping a lid on yields. However, this dynamic is increasingly vulnerable. Rising repo rates and tighter margin requirements are beginning to strain the ability of hedge funds to maintain these positions. If these pressures persist, they pose a growing risk to the stability of the Treasury market. You can read more about the RV trade here.

Japan, China & the Oil exporters have gradually reduced their Treasury holdings whilst tax-advantaged countries where RV Hedge funds domicile have been increasing their holdings.

The Increase in repo positions, act as a proxy on the size of the basis trading position within the market.

Major U.S. commercial banks were the Treasury market’s “natural” buyers, but that role has been eroded by both mark-to-market pain and post-crisis capital rules. Their combined Treasury-and-agency book peaked at $4.69 trn in February 2022 and has slipped to $4.50 trn as of April 2025 as the fastest Fed hiking cycle since the early 1980s drove the 10-year yield above 5 % and forced balance-sheet shrinkage. The rate shock left a deep mark in capital: the FDIC’s latest Quarterly Banking Profile shows $413 bn of unrealised losses on securities outstanding at Q1-2025, down from a high of roughly $680 bn in Q3-2023 but still multiples of the pre-pandemic norm. Compounding the valuation hit, every extra dollar of Treasuries must be funded with Tier 1 capital equal to at least 3 % (and 5–6 % for G-SIB subsidiaries) under Basel III’s Supplementary Leverage Ratio (SLR), a non-risk-weighted constraint that makes even “risk-free” bills balance-sheet-expensive. Treasury Secretary Scott Bessent has therefore proposed exempting Treasuries (and reserve balances) from the SLR. In March 2025 remarks to the American Bankers Association he said: “There’s a capital charge to banks for buying Treasury bills. If we take that away…it could pull Treasury bill yields down by 30 to 70 basis points. Every basis point is a billion dollars a year.”Academic work from the Boston Fed corroborates the direction of the effect, finding that relaxing the SLR measurably boosts dealer balance-sheet capacity and Treasury-market liquidity. The policy would plug a widening demand gap—foreign official holders are in retreat and leveraged hedge-fund “basis” traders now set marginal pricing—but it also trades off higher systemic leverage: a 50-bp drop in yields on the roughly $28 tn outstanding market would cut federal interest expense by about $140 bn per year, yet thinner capital buffers could magnify losses in the next rate shock.

Foreign governments & institutions once absorbed roughly one-third of outstanding Treasuries, but Treasury data show their share slipped to about 30 % in late-2024, the lowest since before the global financial crisis. Much of that demand traditionally came from surplus economies—oil exporters such as Saudi Arabia and (pre-sanctions) Russia, and manufacturing powerhouses China and Japan—that recycle dollar earnings into U.S. bills and notes. Yet the recycling machine is sputtering. China illustrates the shift: despite running a record-high $992 billion goods-trade surplus in 2024, its Treasury portfolio shrank by ≈ $10 billion to $759 billion, extending a decline from a $1.3 trillion peak a decade ago. Similar, if smaller, reductions are evident across Gulf sovereigns as they channel petrodollar inflows into diversified-currency sovereign wealth funds.

The dollar still dominates global reserves, but its edge is eroding: IMF data put the greenback’s share at 58 % of allocated reserves in 2024 Q4, with the euro a distant second near 20 %. In parallel, a growing roster of energy and commodity trades is being invoiced in renminbi, euros or local currencies, and new bilateral clearing systems (e.g., the China–Saudi petroyuan pilot and Russia’s MIR card network) bypass the dollar altogether. These incremental “de-dollarization” steps have not yet produced a full-fledged substitute reserve currency, but they do help explain why foreign demand for Treasuries has flattened even as global trade surpluses persist—leaving the U.S. increasingly reliant on domestic investors and leveraged hedge-fund “basis” trades to finance its expanding debt stock.

The trend toward de-dollarization effectively began in 2014, following the initial sanctions imposed on Russia and when we overlay key events in this trend onto the foreign ownership of US debt, a clear pattern emerges: a gradual decline in foreign holdings over time in relation to total US debt, punctuated by several pivotal moments, including:

• 2014 – Russia’s first sanctions: After the Crimea annexation, U.S./EU sanctions spurred Moscow — and later Beijing — to pare Treasury holdings, build gold reserves and sign large renminbi swap lines, marking the modern starting-gun for official de-dollarisation efforts.

• Oct 2015 – China launches CIPS: Beijing’s Cross-Border Interbank Payment System went live, giving banks a yuan-based clearing and messaging alternative to SWIFT and laying the plumbing for more trade to be invoiced outside the dollar.

• Feb 2022 – $300 bn of Russian FX reserves frozen: The West’s seizure of roughly half of Russia’s hard-currency war-chest after the Ukraine invasion jolted central banks worldwide, accelerating reserve diversification and prompting greater use of local-currency swap lines. In effect, it signaled that no matter who you were, property rights were not rights but a privilege and the US treasury market could be weaponized to penalize countries who were not aligned with US interests.

• 2023-24 – Energy trade and BRICS push: Saudi officials signalled willingness to price oil in yuan, Brazil set up a yuan-clearing arrangement for China trade, and successive BRICS summits prioritised a cross-border payments platform to reduce dollar reliance.

Tariffs & Trade Imbalances

Since the Bretton Woods Agreement in 1944, which established the US dollar as the de facto global reserve currency, there has been consistently strong demand for dollars—driven by the needs of global trade, financial stability, and central bank reserve accumulation. Today, the dollar still accounts for approximately 59% of global foreign exchange reserves, and roughly half of all international trade is conducted in dollars.

This persistent global demand for the dollar gives rise to what economist Robert Triffin articulated in the 1960s as the “Triffin Dilemma”: the inherent conflict between a reserve currency issuer’s obligation to supply liquidity to the global system—often through persistent trade deficits—and the need to maintain long-term confidence in the currency’s value. A strong dollar, while reinforcing its reserve status, makes US exports more expensive and reduces American firms’ competitiveness abroad, contributing to chronic trade deficits, particularly in goods. Redressing this imbalance—especially the bilateral trade deficit with China—has been a central focus of Trump’s economic agenda.

While the strong dollar exacerbates the trade deficit, it simultaneously channels significant benefits to US capital markets. Foreign countries that accumulate dollar surpluses frequently recycle those funds into US assets—most notably Treasury securities and equities—bolstering demand for US financial instruments. This process, when driven by oil-exporting nations, is commonly referred to as “petrodollar recycling.”

The Trump administration’s focus on eliminating trade imbalances inadvertently worsens the U.S. debt problem by reducing foreign demand for Treasurys. As trade surpluses shrink, so too does the pool of foreign capital available to be recycled into U.S. debt—traditionally viewed as a safe-haven asset. The resulting decline in demand pushes yields higher, creating a compounding effect on the national debt burden.

Stablecoins as the Marginal Buyer

The US national debt is reaching unprecedented absolute levels and record highs relative to GDP, with peacetime budget deficits of a magnitude never previously seen. This dynamic is driving a compounding increase in the overall debt burden. At the same time, traditional buyers of US Treasuries—such as foreign central banks and reserve managers—have materially reduced their demand, leaving relative value (RV) hedge funds as the marginal buyers setting prices at the margin. However, this mechanism is increasingly fragile. A notable example was during the post-Trump tariff war period, when many RV funds were rumored to have suffered significant losses, contributing to rising 10-year yields even as equity markets sold off.

Looking forward, the US government faces the critical challenge of sustaining robust demand for Treasuries to prevent a destabilizing rise in yields and an unsustainable increase in interest costs. Several policy tools and structural shifts could help. The temporary exemption of large banks from the Supplementary Leverage Ratio (SLR) constraints should facilitate greater balance sheet capacity for Treasury purchases. In parallel, initiatives like the proposed 'Mar-a-Lago Accords'—which envision the issuance of ultra-long-dated (century) bonds to nations under US security umbrellas—could create new, strategic sources of demand.

Yet the most scalable and organic source of incremental Treasury demand may lie in the global growth of stablecoins. By embedding Treasuries within the reserve assets backing these digital currencies, stablecoin adoption can structurally reinforce Treasury demand, diversifying the buyer base and helping anchor yields over time. In fact, when we look at the major foreign holders of treasury bonds, we see that stablecoins are already the 15th largest holder at $193.2 billion of holdings.

ASXN calculated stablecoin holdings by taking the Tether & USDC holdings & then approximating the treasury backing of the total fiat-backed stablecoin market.

Over the past year, Washington has recognised the potential of stablecoins to proliferate the dollar hegemony and has shifted to a broad, bipartisan consensus that dollar-pegged stablecoins require clear federal oversight. Both parties now view the sector as critical for payments competitiveness, consumer protection and US dollar dominance, softening traditional political divides. As a result, companion bills—the House-led STABLE Act (H.R. 2392) and the Senate-led GENIUS Act (S. 394)—are advancing with strong bipartisan support, signaling that comprehensive U.S. stablecoin rules are within reach. The STABLE Act, reported out of the House Financial Services Committee in April, mandates that only federally or qualifying state-approved issuers may mint USD-pegged stablecoins; requires full 1-for-1 reserves in cash or high-quality liquid assets with monthly disclosures; bans marketing implying sovereign backing; and tasks FSOC and Treasury with updating tech standards and systemic risk studies. Meanwhile, the GENIUS Act, which passed Senate cloture 66-22 in May, creates a dual charter regime for banks and non-banks (with an opt-in state option for sub-$10 billion issuers); directs regulators to set tailored capital, liquidity, and recovery/resolution standards while prioritizing coin-holders in bankruptcy; clarifies that compliant payment stablecoins are not securities; and authorizes Treasury and the Fed to recognize equivalent foreign regimes to enable cross-border issuance.

The Trump administration has played a pivotal role in advancing stablecoin regulation, positioning the asset class as a central pillar of Treasury Secretary Bessent’s strategy to both reduce government debt and expand the reach of the U.S. financial system and dollar globally. The following quotes illustrate how the administration views the strategic importance of stablecoins:

• David Sacks, White House AI & Crypto Czar - “Stablecoins have the potential to ensure American dollar dominance internationally, expanding digital-dollar use as the world’s reserve currency and creating potentially trillions of dollars of demand for U.S. Treasuries.”

• Howard Lutnick, US Secretary of Commerce - “Dollar hegemony is fundamental to the United States of America, that’s why I’m a fan of properly backed stablecoins. I’m a fan of Tether; I’m a fan of Circle. They drive demand for U.S. Treasuries are fundamental for the U.S. economy.”

• Scott Bessent, US Secretary of the Treasury - "As President Trump has directed, we are going to keep the U.S. the dominant reserve currency in the world, and we will use stablecoins to do that". Most recently Bessent stated that stablecoins could provide $2 trillion of demand for treasury bonds.

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Yield Generation

Beyond serving as a reliable store of value and a frictionless payment medium, stablecoins unlock permissionless access to a variety of yield-generating strategies—an especially powerful benefit for investors shut out of traditional markets, including U.S. capital markets. Each stablecoin’s yield profile is shaped by its chosen mechanism and attendant risks. The primary sources of stablecoin yield include:

• Government debt: A portion of issuer reserves is invested in short-term U.S. Treasury bills, with the resulting interest distributed pro rata to token holders. The yield here is driven by prevailing T-bill rates (i.e., the short-term “risk-free” rate set by the market and influenced by Federal Reserve policy), the maturities selected (e.g., 4-week vs. 13-week), and any spread the issuer retains as fees.

• Liquidity provision: By supplying liquidity to stable–stable AMM pools—such as USDC/USDT on Curve or Uniswap—holders earn a share of trading fees each time the pool is used. This yield depends on the pool’s trading volume, the fee rate per trade (typically 0.01–0.04 %), and the total value locked (TVL) in the pool (which dilutes per-LP fee share). Because both assets target a 1:1 peg, impermanent loss is minimal so long as neither depegs.

• Lending markets: Platforms like Aave or Kamino enable stablecoin holders to lend directly to borrowers in exchange for a base APY. The interest earned here is a function of the protocol’s utilization rate (borrowed vs. supplied assets), the dynamic interest-rate curve parameters set by the protocol governance, and any additional governance-token incentives (e.g., reward emissions).
  

• Strategy-backed -Stablecoins are actively deployed capital into yield-generating investments. For example, Ethena’s USDe and Neutrl’s nUSD capture funding-rate returns by taking short positions in perpetual futures, while other fiat- or crypto-collateralized coins can be parked in vaults that farm additional yield.Take Hyperliquid’s HLP as a case in point: it accepts USDC deposits and automatically allocates funds to market-making, funding-rate arbitrage and liquidation services, currently earning an 8 % APY. You can explore detailed risk metrics on the HLP dashboard here: ASXN HLP Risk Dashboard

• Private Credit - Stablecoins can be deployed directly into on-chain private credit markets by lending to a single known borrower under transparent, borrower-set terms (APR, duration, reserve ratio, minimum deposit) and receiving tradable debt tokens that accrue fixed interest. On Wildcat Finance, for example, a company might raise 2 M USDC over eight months at 15 % APR with a 10 % collateral buffer; lenders who deposit 100 k USDC mint debt tokens and, at maturity, receive ~110 k USDC (reflecting a 15 % annualized yield), while the on-chain reserve and optional off-chain legal agreements help mitigate default risk.

There are many more yield opportunities for stablecoins which appear frequently, allowable by the permissionless, global rail of internet capital markets and crypto rails. Each avenue entails its own trade-offs—credit and duration risk in government debt, smart-contract and depeg risk in AMMs, and protocol and utilization risk in lending markets as well as more idiosyncratic risk in more speculative yield opportunities. Investors should align their risk tolerance and return objectives with the yield source that best matches their needs.

To help stablecoin yield investors find, compare and analyse stablecoins yields we have create a stablecoin yields dashboard by utilising DeFi Llama’s extensive dataset. You can view this dashboard here: https://stablecoins.asxn.xyz/crypto-yields

Crypto Trading

As we highlighted in our stablecoin overview, these tokens first gained traction as crypto-native collateral and settlement rails—powering market makers and arbitrageurs to optimize capital efficiency. Today, trading firms and liquidity providers carry substantial stablecoin balances, while DeFi protocols embed them across collateral vaults, lending pools and AMM pairs. Centralized exchanges have likewise shifted their perpetual futures from BTC- or crypto-collateralized margining to stablecoin-based contracts—predominantly USDT pairs (with USDC fast growing)—which now dominate trading volumes and liquidity depth. Off-exchange, OTC desks routinely settle large trades in stablecoins, and USD-denominated tokens have become the preferred unit of account for market-neutral and crypto credit/yield funds.

The TAM of Stablecoins

Stablecoins serve a wide range of functions, depending on the user. For individuals in autocratic or high-inflation regimes, they provide a self-custodial store of value and a means of preserving wealth. For others, they offer a fast and low-cost way to send money across borders to family and friends. For companies, stablecoins act as financial "superconductors," enabling instant, 24/7 cross-border settlement at a fraction of the cost of traditional payment systems—directly improving efficiency and margins. And for governments—particularly the U.S. government—stablecoins are emerging as potent tools of shadow monetary policy, extending financial influence and dollar strength globally while also creating a new source of demand for U.S. sovereign debt. Stablecoins therefore touch many markets and segments and estimating the TAM or market capitalization growth of stablecoins requires a lot of assumptions. We can look at at each segment and the penetration levels that stablecoins could have, specifically for USD-pegged stablecoins:

Offshore USD

The number of dollars offshore held offshore in various forms is estimated to be $23.5 trillion across these main segments:

• Physical USD cash abroad - Physical banknotes held offshore, mostly used in EMs for savings, payments, and crisis hedging.

• Official FX reserves - USD assets held by foreign central banks (mainly Treasuries, deposits, and USD securities).

• Euro-dollars - Offshore USD deposits, loans, bonds, and interbank funding — core of the international USD banking system.

• USD private sector securities offshore - USD bonds and Eurobonds held by private investors and institutions outside the U.S.

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Remittance

Whilst yearly remittance flows are estimated to be between $833 billion - $1 trillion per year, much of this is in the form of local currency. USD denominated remittance flows totals around $600–700 billion/year with US to Mexico, India, Philippines & Pakistan and Saudi to India being the biggest corridors for this remittance. In order to model stablecoin market capitalization growth we need to make a few assumptions around the velocity of these remittance flows. We can draw on research around remittance velocity:

1. Classic MTO remittance behavior (receiver converts within weeks) - World Bank and IMF data show most remittance funds are converted within 1–4 weeks after arrival — driving high implied velocity (~12–26×/year).
   

2. Stablecoin-based remittance apps– Reports from Deloitte, IMF, BIS show transfers often held in USD/stablecoins for “weeks to months”, not immediately cashed out .
   – ECB data indicates a growing share of stablecoins held for 1–12 months.

3. Dollarized economies (e.g., Lebanon, Argentina) – Anecdotal and market reports show users hold USD for months, especially when local currency is unstable—supporting velocities as low as 2–3× per year.

Taking into account the velocity of different types of remittance, we can estimate the stablecoin market cap required to facilitate these annual flows. For example, with $500B in stablecoin-based remittances and a velocity of 10×, a market capitalization of $50B would be needed to support this activity.

Payments

The payments universe is enormous—everything from a $4 coffee swipe to trillion-dollar wholesale wires runs through it—and it moves across a patchwork of rails. Industry tallies (e.g., BIS CPMI “Red Book”, McKinsey Global Payments Report 2024) show that about 3.4 trillion transactions cleared in 2023, moving roughly US $1.8 quadrillion of value.

Those headline figures blend radically different pipes and ticket sizes, so they tell us nothing about how much money stock sits behind each rail or how quickly that stock turns over. Operator filings show that the nine largest USD payment rails handled roughly $2.9 quadrillion of gross throughput in 2024. McKinsey reports a lower $1.8 quadrillion for 2023 because it counts each transaction only once, de-duplicating hops such as a single $100 million export payment that appears sequentially in SWIFT → CHIPS → Fedwire. Summing the operators’ own disclosures therefore runs higher.

Dividing each rail’s flow by a realistic liquidity “float” (e.g., commercial-bank deposits for ACH/Zelle/RTP, revolving card balances for the networks, Fed balances for Fedwire, BIS inter-bank claims for CHIPS & SWIFT), then weighting by flow share, yields a blended turnover speed of ~150× per year—meaning the average dollar is reused every 2.4 days. Fedwire, at ~340×, is the chief accelerator; omitting it, or assuming a larger working balance for it, drags the composite down sharply.

Applying this 150× velocity to stablecoins implies that settling $1 quadrillion of annual volume would require a float of roughly $6–7 trillion ( $1 quadrillion / 150 ≈ $6.7 trillion ). If real-world stablecoin turnover proves lower—say 10–30×, typical of retail or remittance flows—the necessary float scales proportionally, to roughly $33–100 trillion. In short, velocity assumptions drive stablecoin-market-cap math, and high-frequency wholesale rails like Fedwire materially skew blended velocity upward.

Money Market Funds

Another vertical poised for disruption by stablecoins is the MMF space, as we noted earlier. Fiat-backed stablecoins already function much like MMFs, typically earning yield on their underlying assets—though that yield is often retained by issuers. However, a new trend is emerging: yield-distributing stablecoins. For example, Circle and Coinbase now offer a 4.5% yield to USDC holders on the Coinbase platform, while products like Ondo Finance and Sky’s USDS tokenized treasuries enable stablecoin-backed exposure to RWAs, primarily short term treasuries.

Driven by improving regulatory clarity, we expect large traditional financial institutions to enter this market, issuing their own stablecoins and ultimately passing yield back to users through opt-in vaults or similar mechanisms. While the current GENIUS Act explicitly prohibits yield distribution on payment stablecoins—Section 2 bars issuers from offering interest or yield to maintain their cash-equivalent status and avoid regulatory arbitrage—we believe this restriction may evolve over time. Alternatively, we expect growth in purpose-built tokenized MMFs, where users can deposit stablecoins to earn yield in a regulated wrapper—exemplified by products such as BlackRock’s BUIDL.

Indeed, the US department of the treasury see the possibility of this in their stablecoin report, specifically mentioning the benefits of tokenizing US treasuries:

“Key potential benefits of tokenizing U.S. Treasuries

• Improvements in clearing and settlement
  Tokenized Treasuries allow for more streamlined, “atomic settlement,” where all parts of a transaction involving Treasuries settle simultaneously across all parties, reducing the risk of settlement failure.

• Improved collateral management
  Smart contracts programmed directly into the tokenized Treasury enable more efficient collateral management, including pre-programmed collateral transfers once pre-set conditions are met.

• Improved transparency and accountability
  Immutable ledgers could provide greater transparency in Treasury market operations, reducing opacity and giving regulators, issuers, and investors real-time insight into trading activities.

• Composability and innovation
  The ability to bundle different tokenized assets could spur the creation of new, highly customizable financial products and services based on U.S. Treasury securities—such as derivatives and structured products.

• Increased inclusion and demand?
  Tokenization can make Treasuries more accessible to a wider range of investors, including smaller retail participants (via fractionalization) and those in emerging markets.

• Increased liquidity?
  Tokenization could unlock new investment and trading strategies through seamless integrations and programmable logic; tokenized Treasuries might trade 24/7 on blockchain networks, though the net impact could go either way.”

It is easy to see how the ease of deployment, global accessibility, instant liquidity, and transferable nature of tokenized treasuries could drive substantial demand for stablecoins—potentially capturing a significant share of marginal flows currently going into money market funds. In fact, the U.S. Department of the Treasury, referencing a Bank of America report, estimates that stablecoins could generate up to $8 trillion in additional demand for U.S. Treasuries.

Stablecoin Market Capitalization Model

By aggregating the major immediate use cases for stablecoins and applying reasonable assumptions for adoption levels across each (10% here), we can begin to estimate the potential scale of stablecoin supply as adoption grows. Focusing specifically on offshore USD demand, remittances, payments, and MMF substitution, our analysis suggests stablecoin supply could grow to approximately $4.9 trillion with modest levels of penetration.

This market capitalization would of course grow linearly with increasing levels of market penetration in each segment, not with counting the more speculative use cases of stablecoins such as AI native payments.

M2—the broadest commonly cited measure of the U.S. money supply—comprises all of M1 (currency in circulation and checking deposits) plus “near-money” instruments such as savings deposits, small time deposits (under $100,000) and retail money-market funds. As of today, M2 stands at approximately $21.86 trillion, of which stablecoins account for just over 1.1 percent. With clearer regulatory guidelines, more robust infrastructure and the ongoing shift toward fully digital payments, we believe that stablecoins’ share of M2 could grow tenfold over the next ten years.

According to Artemis’ methodology, which strips out intra-CEX transfers and MEV-driven activity such as flash loans, stablecoins have averaged $1.85 trillion in monthly transfers in the past 12 months, or roughly $22.2 trillion on an annualized basis. By contrast, a 10 percent share of the global remittance and payments market would equate to about $280.1 trillion in annual flows; at today’s volumes, stablecoin-based payments represent just 7.9% of that opportunity.

The Current Landscape

Total Stablecoin TVL

As we spoke about in the introduction section, the majority of stablecoin TVL comes from fiat-backed stables. Namely, Tether & USDC which account for 81% of total stablecoin supply.

The stablecoin market has seen rapid growth over the past year, with market capitalization increasing by $90 billion—up 56% year-on-year. Tether continues to dominate the landscape, holding a 62% share of total stablecoin market capitalization. However, new entrants are gaining traction: Ethena, in particular, has launched the fastest-growing stablecoin to date, reaching a $3 billion market cap in record time.

Meanwhile, market dynamics are shifting within the more established players. Over the past year, USDC has begun regaining market share from Tether, as confidence in Circle gradually recovers following the disruptions caused by the SVB crisis. At the same time, algorithmic stablecoins have largely faded from the market in the wake of the Luna collapse and tightening regulatory scrutiny.

Chain Distribution

In terms of stablecoin supply distribution by chain we find supply remains highly concentrated on two blockchains: Ethereum (50.2%) and Tron (30.94%). This reflects Ethereum’s established network trust and deep on-chain markets, as well as Tron's early distribution efforts and low transaction fees.

Meanwhile, both Solana (4.5%) and Hyperliquid (1.4%) have rapidly gained share, driven by elevated on-chain activity—particularly in trading and in the case of Hyperliquid, the use of stablecoins as collateral for perpetual futures.

Since 2020 we have seen a gradual decrease in the market share of stablecoin supply on Ethereum, owing to Tron’s impressive growth and the rise of alt-L1s and L2s in 2020-2021. The next evolution of this trend will likely see stablecoins moving to stablecoin specific chains such as Plasma, Stable, 1Money & Codex.

Currency Distribution

In terms of stablecoin currency distribution, the US dollar pegged stablecoins overwhelmingly dominate the space with 99.78% of stablecoin market cap coming from dollar denominated stables. The next most popular stablecoin is the Euro with just $361 million in market capitalization. Unlike foreign reserves, stablecoins are overwhelmingly dollar denominated and this represents a major opportunity for the United States to proliferate the dollar hegemony worldwide with incoming regulations.

Stablecoin Ecosystem

The following section provides a high-level overview of the stablecoin ecosystem, showcasing select projects and case studies from each category. We have published a stablecoin market map, which you can view here:

https://stablecoins.asxn.xyz/

If you would like your stablecoin project added to the market map you can do so by filling out this form: https://forms.gle/64SF9jNn33f3Uwb89

Blockchains

The current generation of blockchains has proved to be a reliable substrate for value transfer and stablecoin issuance, but we’re now witnessing a shift toward application-specific blockspace optimized for a single, high-value use case. Hyperliquid’s success as a trading-optimized L1 is a prime example. Beyond trading, we see stablecoins as the next clear product-market fit. Today, the vast majority of stablecoins reside on Ethereum and Tron, yet neither chain was designed with them in mind: Ethereum suffers from prohibitively high fees, and Tron combines high fees with extreme centralization. This creates an opening to build a base layer purpose-built for stablecoins—one that embeds tailored features and performance characteristics to unlock their full potential and overcome the limitations of existing platforms.

There are a few teams working on this:

Plasma

Plasma is a high-performance, scalable, and secure L1 blockchain specifically engineered to host stablecoins and power the applications that rely on them. At its core, Plasma employs PlasmaBFT—a custom consensus protocol inspired by Fast HotStuff—to deliver rapid finality and low-latency transaction throughput. Its execution layer, built on Reth (a modular, Rust-based Ethereum-compatible engine), introduces targeted performance optimizations while maintaining full EVM compliance. To reinforce security and interoperability, Plasma integrates a native, trust-minimized Bitcoin Bridge that periodically anchors state differences onto the Bitcoin network. On the stablecoin front, Plasma offers several purpose-built features:

• Custom Gas Tokens: Transaction fees can be settled in leading assets such as USDT or BTC via an automated swap mechanism, eliminating the need to hold native tokens.

• Zero-Fee USDT Transfers: Simple USDT transactions incur no fees, thanks to adaptive prioritization that balances network load with user experience.

• Confidential Transactions: In the future, the network will obscure transaction amounts and parties, preserving privacy without sacrificing auditability or compliance.

Plasma recently held a pre-launch deposit vault to participate in their XPL token ICO and quickly secured $1B in stablecoins. You can check out our stablecoin model: https://x.com/asxn_r/status/1935768755461931221

And our accompanying Dune analytics dashboard which shows vault details: https://dune.com/asxn_research/plasma-vault-deposits

Stable

Details of the Stable chain are currently sparse and we expect these to be released alongside an external testnet. What we do know is that Stable is a new L1 where:

• USDT is native gas

• Free peer-to-peer USDT transfers

• USDT0 enables seamless cross-chain USDT transfers

• Smart contracts run on stablecoins

• Apps can offer a gas-less UX

• Fiat ramps plug in natively

• Throughput is guaranteed with enterprise lanes

1money

The 1Money Network is a L1 blockchain built for stablecoin payments and real-world assets (RWA). As co-founder and CEO Brian Shroder explains, "1Money will make stablecoin payments more accessible and practical for everyday use cases, from paying friends to making e-commerce purchases and sending remittances." Under the hood, 1Money leverages a Byzantine Consistent Broadcast (BCB) protocol aimed at mitigating network delays, reducing surge-pricing fees, and priority-gouging attacks. Every transaction is processed immediately with equal priority—without reordering or priority execution. Transactions are set to confirm in under a second and settle with fixed, low fees paid directly in the stablecoin being used. In addition, the chain aims to have built-in compliance, KYC/AML and sanctions screening.

Codex

Codex is a purpose-built, API-first blockchain designed for B2B stablecoin transactions. Built on Optimism, it combines the EVM environment with a stable, predictable fee model that remains flat regardless of network congestion. This design ensures rapid, reliable, and cost-efficient movement of stablecoins, enabling enterprises to automate and scale on-chain financial workflows without worrying about gas spikes or unpredictable latency.

Beyond its core chain capabilities, Codex offers a suite of programmable services: a RESTful API for cross-border stablecoin transfers, and an autonomous FX liquidity venue that provides real-time foreign-exchange execution without relying on intermediaries. Integrated off-ramp partnerships—ranging from crypto exchanges to local fiat brokers—allow organizations to convert stablecoins into local currencies on demand. And while leveraging the transparency of a public ledger, Codex also incorporates selective confidentiality features, giving users the ability to shield sensitive transaction details when needed.

Converge

Ethena is building out Converge, a new chain focused on onboarding tokenized RWAs, and connecting them with DeFi and cryptocurrencies (hence the name, Converge). Tokenization is still a nascent sector, but is likely to exponentially expand. As of today, many chains, both permissioned and permissionless have made bids to attract tokenization onto their network, with some providing KYC, AML and complete control of the stack (Avalanche Subnets, L2s, and other institutional chains) while others offer composability, burgeoning DeFi, and adjacency to cryptocurrency issuance and activity (Solana, Ethereum etc.). As discussed later in the report, Converge attempts to offer both control and composability to institutions looking to onboard assets.

Converge is envisioned as a high-throughput, low-latency chain that is EVM-compatible. The chain will launch with a 100 ms block time, targeting a reduction to 50 ms by Q4 2025. The chain aims for at least 1 gigagas per second of throughput, i.e., the ability to process on the order of 1 billion gas units per second. For context, Ethereum processes ~15 million gas per block (~100 million gas per minute).

Architecture

Converge is built on the Arbitrum Orbit stack with Celestia as a data availability layer. It uses an optimized Arbitrum-based sequencer (Conduit G2) for execution and ordering of transactions. Converge runs the Arbitrum Nitro stack (which provides fraud-proof based security and EVM compatibility), but with a custom sequencer and configuration tailored for high throughput.

For data availability, Converge initially publishes data to Celestia, to publish data blobs at high volume, cheaply. Celestia’s architecture supports very large blobs (its recent testnet demonstrated 128 MB blobs and ~21 MB/s throughput, with a roadmap toward 1 GB blocks).Through Celestia, Converge can post large amounts of data for transactions in parallel, without being constrained by Ethereum’s current data throughput limits.

Transaction ordering on Converge is handled by a Conduit G2 sequencer, which is a high-performance sequencer implementation from Arbitrum. This sequencer is responsible for collecting transactions, executing them, and proposing blocks at a rapid cadence. The target block interval is approximately 100 ms, meaning new blocks (sometimes called mini-blocks or flash blocks) are produced 10 times per second on average. Converge plans to push block times even lower – targeting sub-50 ms block times by Q4 2025 by introducing optimizations such as continuous mini-block streaming and improved RPC handling.

Converge Validator Network (CVN) and Security

A key component of Converge is the Converge Validator Network (“CVN”), a specialized validator layer. The CVN is a permissioned set of validators, which act as a “security council” with discretionary authority. The validator set can intervene in emergencies (pause the chain, rollback in case of major hacks or bugs, etc.). Unlike a typical validator set that only handles block production or ordering, the CVN’s role is to provide secure guardrails for the network’s economic integrity and user funds.

For example, the CVN can throttle or block malicious cross-chain messages that come through bridges to prevent bridge-based exploits. It can also trigger protocol-level circuit breakers (halting or pausing certain contracts or the entire chain) if there are signs of oracle manipulation, critical smart contract bugs, or other economic anomalies that could lead to loss of funds. In extreme cases, the CVN even has the authority to dispute the chain’s finality or coordinate a network halt/fork if required to protect users. These powers are designed to be used as a last resort, providing a safety net for institutional users (who often require risk mitigation) without fundamentally compromising the chain’s decentralization or liveness.

Execution

Converge implements a multi-threaded execution pipeline that can process transactions in parallel where possible, leveraging multi-core CPUs. Unlike the traditional single-threaded EVM, this design executes independent transactions concurrently while maintaining strict determinism in results.

Instead of producing monolithic blocks at longer intervals, the sequencer emits a continuous stream of small “flash blocks” (micro-blocks) as transactions come in. Validator nodes can begin executing and verifying these mini-blocks incrementally, rather than waiting for a full block. This reduces propagation latency across the network and keeps the system highly responsive even under heavy load. Essentially, block production is more continuous, smoothing out bursts of transactions and cutting down the time for new transactions to reach validators.

To handle the rapid state growth that comes with high TPS, Converge uses a flat, path-based state storage model backed by a high-performance database. This improves the efficiency of reading and writing contract state. The storage engine supports concurrent reads and writes, meaning multiple parts of the state trie can be accessed/updated in parallel without conflicts. It also includes online state pruning capabilities to discard old state as needed. These features are crucial for a chain pushing 10× the throughput of current networks, preventing the state database from becoming a performance bottleneck or growing impractically large.

Converge itself is a permissionless chain at the base layer: anyone can bridge assets to it and any developer can deploy smart contracts freely. However, it supports an ecosystem where some applications may enforce their own permissioning at the application level (especially those dealing with regulated assets). Converge expects to host two parallel categories of apps: (1) fully permissionless protocols and (2) regulated or permissioned apps for traditional finance use cases. Crucially, both types can interact. A permissioned RWA platform can benefit from onchain liquidity and composability with DeFi primitives (e.g., a bond token could be used as collateral in a DeFi lending pool) as long as those interactions respect whatever compliance rules are needed. Converge’s design does not impose any global permissioning; decisions about access control are made at the smart contract level by the app developers or asset issuers.

You can read our full Ethena report here:

Issuers

Stablecoin issuers are the parties that mint and redeem tokens—whether fiat-, crypto-, strategy-, or algorithmic-backed—a topic we explored in detail in the report’s opening section on stablecoin categories.

Cap Money

Cap is a stablecoin protocol offering transparent, code-verifiable financial guarantees through two tokens:

• cUSD - A dollar-denominated token on Ethereum, fully backed 1:1 by blue-chip stablecoins (USDC, USDT, pyUSD, BUIDL, BENJI). By pooling compliant reserves into a single fund, cUSD acts as a neutral on-chain bridge—enabling fast, secure, 24/7 swaps at par for any underlying asset without preference.

• stcUSD - A yield-bearing token minted by staking cUSD. An autonomous pool of operators self-selects based on the protocol’s hurdle rate to generate yield, while smart-contract guarantees ensure users’ full downside protection.

Cap functions as a three-sided marketplace, autonomously powered by economic incentives. It outsources yield generation for stcUSD to a diverse network of institutional operators—banks, HFT firms, and market makers—and its “Shared Security Network” trust marketplace ensures perpetual, competitive yield under any market conditions.

Recently, Cap announced PayPal USD as its inaugural partner in the Stablecoin Network (CSN), establishing an open, interoperable settlement layer for institutions—enabling 1:1 collateral exchange, transparent on-chain guarantees for active yield, and base yield on idle reserves.

M^0

M^0 is an EVM-compatible, immutable decentralized coordination layer that enables permissioned actors to generate and manage the $M stablecoin. Launched on Ethereum mainnet on May 7, 2024, the protocol functions as infrastructure for building application-specific stablecoins backed by U.S. Treasury bills held in Special Purpose Vehicles.

The core protocol mechanics center on three permissioned actor types approved through governance processes. Minters serve as authorized entities that can mint and burn $M tokens through collateral deposits, operating within strict collateralization ratios between 100% and 650%. Validators function as independent entities providing cryptographic attestations of off-chain collateral values using EIP-712 structured data signing, with mandatory collateral updates every 30 hours. Earners represent approved addresses that receive yield on their $M balances through an automated rebasing mechanism.

The protocol implements a dual-balance accounting system within the $M token itself. Non-earning balances function as standard ERC20-style token balances that remain static, while earning balances automatically increase through continuous compounding interest accrual. This architecture allows the same token to serve both traditional DeFi applications requiring static balances and yield-generating applications requiring dynamic balances.

M^0 generates revenue through interest rate spreads between collateral returns and distributed yields. Minters pay interest on outstanding $M tokens based on dynamic rate models, while approved earners receive yield distributed through the rebasing mechanism. Excess yield flows to the DistributionVault for distribution to ZERO token holders.

Wallet Infrastructure

Wallets are the primary gateway for end users to interact with blockchains, allowing them to self-custody and transact stablecoins at will. They range from “hot” wallets—accessible via mobile apps or browser extensions—to “cold” solutions like Ledger hardware devices. Because managing private keys is fundamentally different from using a bank account, wallet UX plays a critical role in bringing non-technical users on board: the fear of losing funds to hackers or misplacing keys remains a major hurdle. Fortunately, a growing number of providers are bridging this gap with familiar Web2-style logins and biometric passkeys (e.g., Face ID), letting users safely self-custody their stablecoins without the steep learning curve of traditional key management.

Privy

Privy (recently acquired by Stripe) provides an API for building on crypto rails. Users can create whitelabel, hardware-secured wallets (whether the user signs up via email, SMS, social login, passkey or an existing crypto wallet). The platform uses SOC 2–compliant, TEE-based custody that uses distributed key-sharding plus optional hardware-token support for security. Programmable policies let you enforce KYC/AML checks or daily transfer limits on stablecoin redemptions, while built-in gas abstraction and meta-transaction support let you pay fees in stablecoins. Everything runs inside hardware-isolated TEEs, so you can manage fleets of wallets, automate onchain actions, and access real-time webhooks and SDKs with enterprise-grade reliability and millisecond-scale performance.

Onramp / Offramps

Robust on- and off-ramp infrastructure is essential for stablecoins to achieve real-world liquidity and utility. On-ramps seamlessly convert fiat currencies into blockchain-native stablecoins, empowering users and businesses to tap into digital markets and DeFi applications. Conversely, off-ramps redeem stablecoins back into local fiat, preserving liquidity, ensuring regulatory compliance, and enabling value to flow smoothly between traditional and decentralized finance. A diverse ecosystem—from centralized exchanges and mobile wallets to region-specific gateways—is actively building these bridges.

Moonpay

MoonPay operates as a gateway between fiat currencies and digital assets, providing users access to crypto. MoonPay supports major payment methods including debit and credit cards, as well as Google Pay, and has onboarded over 30 million accounts across 180+ countries. The platform has processed transactions for more than 500 businesses, handling over $9 billion in volume.

Coinbase

Alongside more specialized on- and off-ramp services, centralized exchanges are the backbone of fiat-to-stablecoin flows, handling the lion’s share of volume. Users on platforms like Binance, Coinbase and Kraken can buy and sell stablecoins using multiple payment methods—including cards, bank transfers and digital wallets—and withdraw fiat back to their bank accounts. In 2024, stablecoins represented over two-thirds of all cryptocurrency transactions, with USDT alone accounting for nearly 80% of stablecoin trading volume on exchanges

Exchanges also serve as powerful distribution channels: Tether cemented its lead through early integration with Binance, while USDC has scaled to a $60 billion supply—and even overtook USDT in transaction volume in August 2024—propelled in part by a revenue-sharing deal that grants Coinbase 50% of USDC’s reserve yields, cementing USDC as the native stablecoin on Coinbase and its Base L2 network.

Cards

Crypto cards (often issued as Visa or Mastercard debit cards) let you spend crypto—whether Bitcoin, Ether, or stablecoins—anywhere that accepts plastic by automatically converting your crypto into fiat at the point of sale. They come in both physical and virtual forms, typically link to a mobile app for real-time balance management, and can offer perks like cashback rewards paid in crypto.

Gnosis Pay

Gnosis Pay is a self-custodial crypto payments platform and API that lets businesses issue stablecoin-based Visa debit cards powered by EURe (Monerium's regulated euro e-money token) so users can spend digital euros anywhere Visa is accepted while retaining full onchain custody in hardware-secured Safe smart-contract wallets. It bridges traditional rails (SEPA IBAN, Visa settlement) with onchain settlement for instant, low-cost stablecoin payments, complete with built-in KYC/AML flows and programmable compliance policies under SOC 2 and TEE-based security.

Bybit Card

Bybit Card is a Mastercard-branded debit card that turns crypto holdings including Bitcoin, Ethereum and major stablecoins into spendable fiat at over 90 million merchants worldwide. By linking directly to users' Bybit Funding Account, it provides an off-ramp while letting users withdraw from ATMs. The Bybit card offers up to 10% cashback on purchases while also providing 100% rebates on subscriptions like OpenAI, Netflix & Amazon Prime.

B2B

Acctual

Founded in 2023, Acctual is a digital-asset accounting platform that integrates into ERP workflows in minutes, letting teams issue and manage invoices in fiat and stablecoins (USDC, USDT) across 129 countries. It supports crypto-to-crypto, fiat-to-crypto and crypto-to-fiat transactions—clients processed over $25 million in USDC by October 2024—and syncs with QuickBooks and Xero for real-time ledger updates. Acctual also offers built-in fraud protection and multi-level approval workflows to streamline digital-currency accounting.

Stripe

Stripe, one of the largest traditional payments providers, has made strategic moves to cement its role in the stablecoin infrastructure space and improve it’s payments services by utilising crypto rails. In October 2024, Stripe announced it would acquire Bridge—an API-based stablecoin orchestration platform—for $1.1 billion, a deal it completed in February 2025, giving it end-to-end control over minting, custody, conversion and settlement of dollar-pegged tokens via a single API. In June 2025, Stripe deepened its crypto toolkit by acquiring Privy, the hardware-isolated wallet provider to accelerate Stripe’s ability to embed secure, TEE-based wallets and transaction signing into any application

Building on these capabilities, Stripe launched Stablecoin Financial Accounts in private preview, enabling businesses in 100+ countries to hold, send and receive funds in USD (via ACH/wire), EUR (via SEPA) and USDC on major blockchains, with Bridge custody and forthcoming support for Bridge’s closed-loop USDB token. To bridge on-chain balances with everyday spending, developers can now issue USDC-denominated Visa debit cards through Bridge and Stripe Issuing—initially live in Latin America and rolling out to Europe, Africa and Asia—where stablecoins convert to local fiat at the point of sale. And via Stripe Connect, platforms like Shopify can instantly enable USDC payments for their users—Shopify merchants in 34 countries began accepting USDC on Base this June—while offering payouts in local currency or directly in USDC. Finally, Bridge’s USDB stablecoin—backed 1:1 by cash and short-duration money market funds—provides a closed-loop, yield-sharing settlement option for developers and end users seeking low-cost, on-chain transfers.

Peer-to-Peer

P2P stablecoin payment apps let users send and receive dollar-pegged tokens instantly and cheaply—no banks, no wire fees, no waiting days. By tapping into on-chain rails, these apps eliminate FX friction and settlement delays, making global P2P transfers as easy as messaging on the internet.

Paypal

Since 2020, PayPal’s wallet has supported buying, selling, holding and spending crypto—including Bitcoin, Ethereum and, as of August 2023, PayPal USD (PYUSD), its fully reserved, 1:1 U.S. dollar–backed stablecoin issued with Paxos Trust Company . PYUSD lives on Ethereum and Solana, can be sent on-chain to external wallets, and moves fee-free between PayPal and Venmo accounts. To boost adoption, PayPal partnered with Coinbase—waiving PYUSD trading fees and enabling direct dollar redemptions—and integrated PYUSD into merchant and cross-border flows via Fiserv, all accessible through its developer APIs .

Sling Money

Sling Money is a Solana-based P2P payments app enabling instant, fee-free transfers in USDP (Pax Dollar) and EURC (Euro Coin) . It provides virtual USD (ACH) and EUR (SEPA) accounts, with incoming funds auto-converted on-chain via Bridge’s orchestration API, letting users hold, send or withdraw stablecoins worldwide . Regulated under U.S. FinCEN and the Dutch AFM, Sling supports self-custody through any Solana wallet and is live with fee-free transfers in 145+ countries .

Commerce Orchestrators

A stablecoin orchestrator is a developer-focused infrastructure layer that abstracts and automates the entire lifecycle of stablecoin transactions—minting, custody, conversion, cross-chain transfers, compliance checks, fee management, and settlement—via a single, unified API. Rather than building and maintaining their own on-chain integrations, regulatory workflows, and fiat–crypto rails, businesses can simply call an orchestration API to:

• Move & accept stablecoins globally at internet speed, with built-in gas management and on-chain security

• Store & custody balances under professional, compliant custody arrangements

• Convert & settle between stablecoins and fiat rails (ACH, SEPA, card networks) automatically

• Enforce KYC/AML - Programmable transfer limits, and other compliance policies without custom code

  ---

Bridge

Bridge's Orchestration APIs let users mint, custody, convert, and settle USDC, USDB, or any USD-equivalent token. Bridge handles regulatory and compliance requirements, onchain gas management, and cross-chain transfers. Beyond simple transfers, Bridge's Issuance APIs enable users to launch stablecoins in minutes, with reserves invested in U.S. Treasuries and yield shared back to applications. Bridge's Money Transfer services power instant, low-cost cross-border payments and bank-style accounts in USD and EUR for both consumers and businesses worldwide.

In production today, Bridge underpins use cases as diverse as Starlink's repatriation of Argentine peso sales, Nigerian consumers paying for YouTube Premium in stablecoins, and U.S. SMBs accepting crypto from anywhere on Earth.

Loans

Stablecoins—crypto assets pegged to fiat currencies such as USD—have become the backbone of DeFi lending and borrowing thanks to their price stability and deep liquidity. In established money markets like Aave, depositing USDC or DAI mints interest-bearing aUSDC or aDAI tokens that automatically rebase to reflect earned yield, while borrowers can choose between variable- or “stable”-rate loans against their collateral. Syrup Finance, which began as Maple’s permissioned, under-collateralized credit layer, transitioned in early 2024 to a permissionless stablecoin yield protocol: users now deposit USDC into SyrupUSDC pools on Maple, minting SyrupUSDC tokens that accrue interest from over-collateralized institutional loans, with the SYRUP token providing governance rights and revenue-sharing incentives .

Alongside these open-ended, variable-rate services, a growing segment of DeFi focuses on borrower-led, fixed-term credit markets. Wildcat Finance is an Ethereum–based platform that empowers ratified borrowers to launch bespoke stablecoin credit markets by defining interest rates, reserve ratios, lockup periods, and withdrawal cycles. Rather than pooling liquidity in a single contract, each market functions as a direct credit line between borrower and lender—enabling under-collateralized or even zero-reserve lending of USDC, DAI, or USDT—while Wildcat itself only verifies borrower eligibility and deploys the market controllers, without underwriting credit risk. Lenders deposit stablecoins into these custom markets and receive transferable debt tokens that accrue yield at the borrower-specified APR. Markets can be configured as fixed-duration—typically 30–90 days—automatically converting to open-term after a set maturity (for example, a six-month lockup), providing predictable lockups and supporting carry-trade strategies. By packaging loans into fixed-duration, yield-bearing notes, Wildcat reduces interest-rate volatility for lenders and brings DeFi lending closer to traditional corporate debt markets, all while preserving on-chain transparency and programmable settlement.

Payroll

Payroll solutions built on stablecoin rails are enabling businesses to pay teams anywhere in the world with fiat-like stability, lower fees, and real-time settlement. By integrating USDC, USDT, DAI and other dollar-pegged tokens—and in many cases leveraging streaming-payment protocols—these platforms streamline cross-border payroll, automate compliance, and give employees instant, on-demand access to their earnings without traditional banking delays.

Deel

Deel is a San Francisco–based HR and global payroll platform (founded in 2019) that helps companies hire, pay, and manage employees and contractors in 150+ countries by unifying payroll, compliance, tax and benefits into a single dashboard—replacing manual spreadsheets and multiple vendors with an end-to-end solution

To eliminate cross-border friction, Deel lets businesses fund payroll directly in USDC via Coinbase. By paying in a dollar-pegged stablecoin, companies slash FX and wire fees, achieve near-instant settlement, and give contractors the flexibility to withdraw in local fiat or crypto—all without the delays and unpredictability of traditional banking rails

LlamaPay

LlamaPay is a multi-chain streaming protocol that automates payroll by the second. Employers fund a pool once, and salaries stream continuously in stablecoins (e.g., USDC, USDT) across Ethereum, Polygon, Avalanche, Optimism and more—letting recipients withdraw at any time without manual transactions .

ASXN

If you’re building a stablecoin or contributing to its ecosystem, we’d love to talk. At ASXN, we offer a comprehensive suite of services to crypto projects:

• ASXN Advisory - A boutique consultancy firm helping early-stage crypto founders and protocols with strategy, research and growth. We advise and work with founders on positioning, fundraising, research and thesis development, technical documentation and blogs, go-to-market strategies, business development and growth, as well as data and dashboards.

• ASXN Validators - We operate high-performance validators across multiple Layer-1 networks, managing over $220 million in delegated assets. The latest network being Hyperliquid Mainnet. Beyond validation, we publish open-source monitoring dashboards and alerting systems, and collaborate directly with protocol teams to fine-tune network performance, bolster reliability, and drive overall chain health.

• ASXN Block Explorer - We provide a Block Explorer–as-a-Service that bundles a full suite of data-indexing tools and chain-data APIs, all engineered for real-time, low-latency performance. Our modular parsing and aggregation engine can be customized to surface whatever makes your blockchain unique—whether that’s social and protocol-level events, privacy features, stablecoin-specific KPIs, or any other on-chain activity.

• ASXN Liquidity Provision - ASXN Labs is our market making and proprietary trading arm, actively trading across centralized and decentralized exchanges. We enhance market stability and ensure tighter spreads by providing deep liquidity across order books.

• ASXN Data - We create custom data dashboards for crypto projects, whether that be on Dune analytics or hosted on our data site or your site. Check out our stablecoin dashboard here:

• ASXN Research - We write and work with teams on creating institutional grade research for their projects.

Disclaimer:

The information and services above are not intended to and shall not be used as investment advice.

You should consult with financial advisors before acting on any of the information and services. ASXN and ASXN staff are not investment advisors, do not represent or advise clients in any matter and are not bound by the professional responsibilities and duties of a financial advisor.

Nothing in the information and service, nor any receipt or use of such information or services, shall be construed or relied on as advertising or soliciting to provide any financial services.

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Ethena's strategy has centered on the two primary use cases of cryptocurrencies, as outlined by the team in various interviews, which are:

1. "Settlement for speculation" - meme coins, derivatives, yield farming and casino-type activity. The team has pursued this market historically, through USDe and sUSDe.

2. "Settlement for stablecoins, digital dollars and tokenization" - bringing traditional financial assets onchain. The team has increasingly shifted focus here, with iUSDe, USDtb and Converge.

In relation to speculation, the protocol has focused extensively on integrating USDe throughout both decentralized and centralized venues to ensure proximity to trading-related activities.

In DeFi, this integration manifests in multiple ways: users can borrow against their USDe holdings (to engage in speculation, or earn yield), trade sUSDe yield on platforms like Pendle, or utilize USDe as collateral on perpetual and trading platforms across both decentralized and centralized venues. Through this approach, Ethena attempts to build its competitive moat by positioning itself adjacent to speculation and trading activities, serving as the asset users can borrow against and use as collateral. In certain cases, USDe becomes the traded asset itself, as seen with Pendle.

Regarding settlement and tokenization, Ethena has begun expanding its product suite more extensively. The initial years of Ethena's existence focused clearly on growing the core USDe product, an effort in which the team demonstrated strong execution.The protocol experienced rapid growth: with USDe supply growing to $6B in circulation within its first year, making USDe one of the fastest growing dollar products and DeFi protocols in crypto. Since then, it has become the third most popular dollar product within crypto and DeFi, behind Tether (USDT) and Circle (USDC).

However, over the past year their focus has increasingly been on bringing traditional financial assets onchain, and focusing on settlement for stablecoins, digital dollars and tokenization. Ethena's founder, Guy, has stated that the “inflows of institutional capital into the space is the single most important narrative of this entire cycle and like going forward”. To position itself to successfully capture institutional capital flow, the team has developed a variety of products (iUSDe, USDtb and most importantly Converge) to launch alongside USDe, which work to not only attract institutional capital and onboard tokenized assets, but are also complementary to one another.

Recently, the case for cryptocurrencies has changed significantly. While decentralization, trustless systems, permissionless access, and transparent markets and finance remain important, the settlement and efficiency improvements that cryptocurrencies can bring to traditional financial infrastructure have become increasingly prominent. Ethena's product expansion directly targets these institutional efficiency trends through stablecoins and tokenization.

Ethena

USDe

USDe is Ethena's cornerstone product, a tokenized basis trade represented as a synthetic dollar product. USDe’s growth was catalyzed by high embedded yield which users could access by staking for sUSDe, and integrations across both DeFi protocols and centralized exchanges. The team followed an aggressive path towards making sure that USDe was integrated across venues, where it often became the highest yielding dollar product. As Guy (the cofounder) has mentioned throughout the past few years, USDe’s offering was fundamentally different from that of USDT and USDC, which often internalize their yield (they keep the Treasury interest rate, or return it only on specific venues, i.e. USDC and Coinbase). Instead of competing with USDT and USDC on velocity or liquidity, Ethena competed on returns - passing on the basis trade yield completely to stakers and USDe holders.

As of May 2025, circulating USDe sits at $5.3B, around 2% of total stablecoin market cap. In particular, Ethena has permeated money markets, yield products, and other CDP based stablecoins, often becoming the source of yield, the instrument to be traded, or the collateral which is used.

We refer to USDe as a dollar product, or synthetic dollar product throughout this report, but it is important to note that it has a different risk profile to what many consider to be a traditional stablecoin (i.e. one that is based on treasury bills or short term government debt instruments).

It's important to note here that Ethena has in particular focused on offering a store of value or savings product for users in the form of their synthetic dollar, USDe. As discussed later, the team has not attempted to compete outright with USDT, and to a lesser extent USDC, to become a major player in payments and settlement. USDT has strong network effects and wide distribution, especially dominant amongst MENA, Africa and Asia regions. Instead, Ethena has provided a semi-complementary product, USDe, which shares yield with users and can act as a savings account (albeit with higher risk due to the higher yield), allowing Ethena to grow market share amongst users who are seeking yield on dollarized products. The team has only recently started offering a treasuries-backed stablecoin product, USDtb, which is positioned to complement USDe, instead of outright competing with USDT and USDC.

Unlike fiat-backed coins, USDe is backed by volatile crypto assets hedged with short positions in derivatives markets. For each USDe minted, the protocol holds an equivalent dollar-value of crypto (e.g. ETH, BTC, or liquid staking tokens) and simultaneously shorts an equal notional amount via perpetual swaps or futures. This creates a self-hedged “long + short” position (known as a basis trade) where the crypto’s price moves cancel out: if the underlying asset’s price rises, the short position loses value, and vice versa, keeping the net portfolio value approximately constant at $1. Because price risk is neutralized, USDe can be fully collateralized at 100% (1:1 backing) without needing the large buffers that traditional over-collateralized stablecoins require.

To earn the yield generated by Ethena mechanism, users must stake USDe for sUSDe, the yield-bearing version. sUSDe can be understood as a savings token: it accrues protocol revenue (funding rates, etc.) over time, whereas base USDe itself remains a non-interest-bearing stablecoin if held idle. Users can stake USDe to receive sUSDe, which accrues the yield generated by the system. In 2024, sUSDe delivered an average ~19% APY to holders by capturing crypto market yields.

Minting Mechanics

Minting USDe involves converting assets into a hedged structure. For example, a whitelisted market maker might deposit $100 of USDC or USDT to Ethena and receive 100 USDe. On the backend Ethena uses those funds to buy spot assets and open a short perpetuals position of equal value. This process is atomic and automated, the backing assets are immediately hedged at creation. Ethena does not charge a spread or profit on minting/redemption beyond execution costs.

All backing assets remain custodied off-chain in secure accounts (with providers like Copper and Ceffu) rather than sitting on exchanges, which minimizes counterparty risk. Due to this, Ethena was able to withdraw positions and not lose user collateral during the Bybit hack. Exchanges are only delegated temporary control of assets as needed for margin, due to the existence of said “off-exchange settlement” custody solutions.

USDe Mechanics and Yield

Ethena’s design starts with the basis trade as the core yield, then layers in additional yield sources.

Basis Trade

At the core of USDe is the basis trade. Historically, perpetual futures often trade at a premium to spot, meaning longs pay a funding rate to shorts to maintain parity. Ethena’s USDe essentially tokenizes the basis trade described by Arthur Hayes as the “Nakadollar” concept: long the underlying crypto, short a perpetual swap, resulting in a synthetic USD position. Because the long and short offset each other’s price movements, the position’s value stays approximately constant, but the short accrues the periodic funding payments from perpetual swaps. In addition, if the underlying asset is yield-bearing (e.g. staked ETH that earns protocol rewards), those rewards also accumulate. The net effect is that USDe’s collateral generates yield from two sources:

Perpetual Funding Rates

When there is net demand to be long crypto, shorts receive funding. Crypto markets tend to have persistent long bias; for example, ETH perpetuals often trade at an annualized premium (funding) due to ETH’s deflationary and staking yield properties. By being perennially short, Ethena captures this yield.

One topic often brought up with regard to Ethena’s yield strategy (specifically the basis trade) is around its sustainability. Based on funding rate data for ETH and BTC, we can see that negative funding persistence is quite low: negative funding rates rarely sustain for extended periods - BTC experienced a maximum of only 8 consecutive negative days, while ETH saw up to 13 consecutive negative days. On average, negative funding periods last just 1.6 days for BTC and 2.2 days for ETH, suggesting that the market's structural long bias quickly reasserts itself.

Notably, the above chart includes an outlier following Ethereum’s switch from PoW to PoS, driven by arbitrage across perpetual markets. Below is the data without the outlier.

The histogram analysis reinforces this positive skew: BTC funding rates were negative only 10.5% of the time, while ETH showed negativity 12.5% of the time. The distribution is heavily right-skewed, with both assets showing mean funding rates (BTC: 7.27%, ETH: 7.62%) well above their medians, indicating occasional very high positive funding rates that boost average yields. Most notably, the funding rate distributions show that the most common ranges are solidly positive, with both BTC and ETH spending the majority of time in the 5-10% annualized funding rate range.

Funding rates for BTC and ETH markets have changed throughout the past few years. From the relatively low averages in 2022 (BTC: 1.69%, ETH: -1.92% due to the Merge-related anomaly where funding briefly hit -276%), funding rates increased considerably in 2023 (BTC: 7.59%, ETH: 9.09%) before reaching their peak in 2024 (BTC: 11.12%, ETH: 12.68%).

With Ethena now commanding nearly $6 billion in TVL and representing a significant portion of the perpetual futures short interest, there's a theoretical risk that the protocol's own hedging activities could compress funding rates over time. However, the data still shows funding rates remain comfortably positive, well above the threshold needed to generate attractive yields when combined with other rewards. The fact that funding rates have stabilized at these levels even with Ethena's massive scale suggests the market can accommodate the protocol's hedging demand without completely eroding the basis trade opportunity.

Underlying Yield (Staking and Lending)

Ethena holds various forms of collateral. A portion (increasingly minimal) is staked ETH (and liquid staking tokens like stETH) that earn ETH staking rewards. This adds a baseline yield to the collateral pool. Ethena also can hold stablecoins as part of collateral (e.g. idle USDC/USDT in reserve) and deploy them in safe yield opportunities (e.g. lending markets). The inclusion of liquid stables both provides a buffer in volatile markets and earns extra yield for the protocol when placed in yield venues. By dynamically allocating between crypto collateral and stablecoins, Ethena can optimize yield while managing risk (holding more stablecoins in downturns when funding is low or negative).

Ethena's exposure to ETH staking yields has reduced since the launch of the protocol, as staking rates have changed. Guy discussed recently that when Ethena first launched, staking rates were around 5-6%, but over time yields have drifted below 3%. He argues that current returns no longer appropriately compensate for the duration and liquidity risks inherent in staking. This perspective has driven a dramatic reallocation in collateral for the protocol - Ethena has moved from being 80% backed by LSTs initially to now sub 6%.

ETH staking yields peaked above 13% in early 2023 but have compressed significantly since then. Starting from around 4.3% at proof-of-stake launch in September 2022, yields averaged 3.9% in early 2024 before declining further to current levels around 3.1%.

Ethena's collateral composition reflects this pivot. Staked ETH allocation declined from 6.4% in December 2024 to 5.4% by June 2025, while liquid cash expanded to nearly 50% of total collateral. The shift represents a clear prioritization of robust collateral and capital preservation.

The risk-return profile makes this reallocation logical. At 3% yields, stakers face multiple risk layers: unstaking periods create duration risk, liquid staking protocols introduce smart contract risk, and validator operations carry slashing risk. These risks accumulate for returns that do not exceed traditional risk-free rates. In addition, Ethena's core perpetual futures strategy already generates substantial yield without requiring additional staking exposure, which introduces complexity and additional effort due to necessity of monitoring and further risk analysis, despite low returns.

In addition to perpetual funding rates and staking rewards, Ethena pursues supplemental yield strategies to enhance USDe’s return or ensure resilience:

Protocol Revenue Sharing

Ethena charges 10bps on mint, and zero fees redeem. The mainly protocol earns revenue by capturing any yield not paid out to users. Only staked USDe (sUSDe) earns yield. This reserve can be used to bolster collateral or fund initiatives. It effectively means Ethena can have a sustainable yield source to fund operations or insure the peg. For users, it creates an incentive to stake. As of May 2024, Ethena’s reserve fund had grown substantially, with monthly protocol earnings in the millions of dollars after distributing sUSDe yields.

Liquidation and Trading Fees

The protocol may occasionally realize gains from rebalancing collateral. If a backing asset price moves and the position is re-hedged, there could be small arbitrage profits or losses (Ethena likely minimizes this, but any structural gain goes to the system).

External Yield Integration

Ethena has explored integrating with DeFi platforms that generate yield on top of USDe. For instance, depositing USDe in lending markets (when not needed for hedging) or in liquidity pools can earn fees. Ethena mentions that even the “liquid stablecoin” portion of backing might earn rewards depending on where they are held. This hints that Ethena actively manages idle collateral , e.g., holding some USDT in a yield-generating account when funding rates are low, or using protocols like Aave to earn on reserves without compromising peg stability. Each protocol has to be approved by governance - the risk committee.

Market Volatility

Although not constant, Ethena can also benefit from market volatility. For example, earlier in the year, when there were cascading liquidations on Ethereum, which sent price below 2.2K USD, since Ethena was short the instrument that's dislocating to the downside, which led to the protocol profiting around 5 to 7% in PnL, even though the position should be delta neutral. This is because the short perpetuals position dislocated to the downside, due to cascading liquidations, and was dislocated from the spot price.

Ethena’s Growth

Ethena’s growth has been characterized by rapid integration into both DeFi protocols and CeFi (centralized finance) platforms, driving demand for USDe and expanding its use cases. Below we outline key growth vectors:

CEX and Trading Integrations

A core focus for Ethena has been integrating USDe across perpetual futures exchanges. This taps into a large existing use case for stablecoins (collateral on trading platforms). In 2024, Ethena announced their integration with Bybit, to support USDe. Bybit both listed USDe trading pairs, and additionally allowed traders to post USDe as margin for perpetual contracts and earn yield on it. Traditionally, traders use USDT or USDC as margin, which, as mentioned before, keeps yield. By allowing users to use USDe, Bybit’s users could offset some of their funding fees by the yield USDe generates. More than 700M USDe was held on the exchange before the hack incident, demonstrating significant uptake.

In early 2025, Ethena signaled plans to integrate USDe on Deribit, the leading crypto options exchange, and more recently, announced their integration with Hyperliquid. In addition, USDe is integrated into Ethereal, a Converge native perpetuals DEX. The protocol is working towards making USDe a standard margin asset alongside USDT/USDC across trading venues. Each exchange integration can lead to large inflows: if traders migrate their collateral to USDe due to its yield-bearing nature. Given the tens of billions of USD are used as collateral on exchanges industry-wide, Ethena is tapping into a substantial market. For exchanges, supporting USDe can attract liquidity, as traders can earn yield on their collateral. In addition, exchanges typically have an existing relationship with the protocol, given that the short-leg for Ethena’s basis trade is done on exchanges. For Ethena, it creates a virtuous cycle: more USDe on exchanges means more funding yield captured, which increases sUSDe APY, attracting more users to mint USDe.

Lending and Borrowing Integrations

Money markets and lending and borrowing platforms are a natural fit for a yield-bearing dollar product. Protocols like Aave, Morpho, Euler and others allow users to borrow and lend stablecoins and dollar products. USDe integration into these protocols allows users to lend USDe and earn both the lending interest as well as the inherent sUSDe rewards.It also lets users borrow USDe against collateral, which could be attractive since a borrower of USDe could stake it to partly offset interest, and potentially capture the spread.

Spark Protocol, the lending sub-DAO under Sky (formerly MakerDAO), began integrating with Ethena early in 2024. On 29 March 2024 Spark used Maker’s Direct-Deposit-Module (DDM) to move USD 100 million in newly-minted DAI into two Morpho Blue markets (DAI/USDe and DAI/sUSDe). The DAI is lent against over-collateralised USDe positions, creating a credit line for traders while producing stability-fee income for Maker. Governance disclosures published in February 2025 state that Spark may expand direct holdings of USDe and sUSDe, or related credit exposures, up to USD 1.1 billion if market conditions remain acceptable. sUSDS (formerly sDAI) makes up a considerable portion of Ethena’s TVL, at 1.4B.

In addition, Ethena is heavily integrated into Pendle (discussed further below). Pendle principal tokens, particularly PT-SUSDE and PT-EUSDE, are heavily integrated across Morpho, Euler and Aave.

Pendle and Yield Derivatives

One of the most important integrations for Ethena has been with Pendle Finance, a protocol for tokenizing yield. Pendle allows users to split yield-bearing assets into Principal Tokens (“PT”) and Yield Tokens (“YT”) and trade them. USDe/sUSDe ideal for tokenizing yield: sUSDe is a yield-bearing asset (earning basis yield). Ethena and Pendle’s integration led to the creation of SY (Standardized Yield) USDe markets, where users could deposit USDe and receive an SY token that accrues the yield, or trade future yield via YT and PT.

The outcome has been mutually beneficial growth. Pendle’s platform attracted USDe holders by offering them fixed yields or leveraged yield opportunities. For example, in mid-2024 users could deposit USDe into a Pendle pool maturing July 2025 for a fixed ~32% APY, essentially locking in the high funding rates of the time. Others bought YT to speculate on or amplify the yield (with YT-sUSDe giving much higher effective APY, albeit with higher risk). This flexibility drove a significant portion of USDe supply into Pendle (over 17% by July 2024). Pendle’s volumes and TVL increased drastically due to the popularity of sUSDe yields, boosting Pendle’s growth as well.

Ethena, for its part, actively incentivized this via campaigns such as the “Sats Campaign”, a rewards program where users earned Bitcoin sats points for holding or using USDe in certain ways. Pendle deposits were given among the highest reward multipliers (e.g. 20x for depositing USDe into Pendle YT/LP). This drove even more USDe into Pendle, creating a positive feedback loop: high yield, which led to more USDe demand, which led to increased Pendle usage, which led to yields staying competitive, etc. By rewarding usage in external protocols, Ethena effectively bootstrapped liquidity and utility without having to build those services itself.

Risk Profiles: USDe, USDC and USDT

Ethena’s USDe differs fundamentally from fiat-backed stablecoins like USDC and USDT in its construction and risk.

Collateral and Transparency

USDe is crypto-collateralized and hedged, whereas USDC/Tether are fiat-collateralized. For USDe, the collateral assets (BTC, ETH, etc.) reside onchain or in crypto custody, and a matching liability (short position) exists on centralized, derivative exchanges. For USDC/USDT, collateral is cash or bonds (i.e. treasury bills or short term government debt instruments) held in bank/trust accounts offchain. This means USDe’s backing is transparent onchain (with some offchain exchange elements), and can include crypto assets, while USDC/USDT rely on offchain audits (e.g. USDT)

USDe is arguably more transparent, one can monitor the value of backing assets on-chain (e.g., see how much collateral Ethena holds in custody addresses if published, and the size of short positions via exchange APIs). Ethena also publishes monthly custodian attestations for USDe backing, proving assets are in off-exchange custody. USDC has monthly attestations by auditors too; USDT does quarterly attestations. Decentralization-wise, USDe has more moving parts but also more distributed trust (multiple exchanges, multiple custodians, smart contracts). USDC/USDT are fully centralized (single point of issuance control). That means USDe cannot be censored or frozen unilaterally , an advantage for censorship-resistance.

Counterparty and Exchange Risk

USDC and USDT are exposed to the traditional financial system , bank failures (as seen with Silicon Valley Bank causing USDC to depeg to $0.88 in 2023), regulatory freezes (e.g., OFAC blacklists addresses, Circle or Tether can freeze tokens), and lack of transparency (especially USDT, though Tether has improved disclosures). USDe’s risks are more crypto-native: it depends on exchange counterparties (if a major exchange holding Ethena’s short positions goes insolvent, Ethena could face losses or difficulty re-hedging). This happened partially with Bybit’s hack (an effective stress test): Bybit lost assets, but Ethena’s off-exchange custody meant only the derivatives PnL (unrealized) was at risk, which Ethena’s reserve could cover. Ethena had ~$30M exposure on Bybit at time of hack, which was more than offset by its reserve fund , and they promptly reduced exposure to zero after. This demonstrates that Ethena’s model, while exposed to exchange risk, has mitigations like distributed custody and a reserve buffer. Nonetheless, if a larger exchange (or multiple) failed suddenly, USDe could be under-collateralized until collateral is recovered or reserves fill the gap.

Stability Mechanism

USDC/USDT rely on the simple promise of redeemability: if price dips, arbitrageurs can buy the token cheap and redeem 1:1 for USD from the issuer (assuming the issuer honors redemptions). USDe’s stability relies on market mechanisms and the arbitrage of its hedge. If USDe < $1, arbitrageurs can buy USDe and redeem via Ethena’s process: burning USDe returns the underlying collateral (which is worth $1 if the hedge is in place). The catch is, only authorized parties can directly redeem; however, in practice, those parties (market makers) will do so if profitable, thereby keeping the peg tight. Additionally, Ethena’s system may use its reserve fund to stabilize if needed (though no explicit peg defense via reserves has been publicized, the reserve mainly covers shortfalls). So far, USDe has held its peg closely, aided by deep liquidity pools.

Scale and Backing Limits

USDC and USDT can, in theory, grow as large as fiat inflows allow (hundreds of billions, limited by banking capacity and market trust). USDe’s growth is linked to derivatives market capacity and crypto collateral availability. There are practical limits: e.g., to mint huge amounts of USDe, Ethena needs to execute equally large short perps. Open interest limits on exchanges could constrain growth. Ethena already accounts for significant portions of OI on some platforms (e.g. ~4.3% of BTC perp OI and ~4.9% of ETH perp OI across major exchanges by July 2025). If USDe doubled, it might strain these markets or force spreads. Ethena mitigates this by using multiple exchanges (Binance, Bybit, OKX, Bitget, etc.) and will likely push for USDT-margined perp markets to expand. In contrast, USDT’s growth might be limited by how much US debt Tether can buy or banking relationships, but those limits are high (Tether has grown to $80B+ without issue).

Volatility, Funding and Market Risk

USDe is exposed to derivatives market conditions. A prolonged period of negative funding (where shorts pay longs) would mean Ethena’s positions lose value steadily. Ethena would have to pay these funding costs out of pocket or via collateral , effectively a bleed. The protocol can handle short bouts (using reserve fund), but if the market regime changed fundamentally (e.g., massive demand to short crypto for months), USDe could face a yield deficit or even risk collateral if not managed. Ethena’s introduction of USDtb is partly to address this scenario by shifting to a positive-yield asset in such times. Traditional stablecoins don’t have this risk , their value doesn’t depend on market rates, just on solvency of the issuer.

USDe’s peg could, in theory, be more fragile during extreme crypto moves. If crypto prices double overnight, Ethena’s short positions would incur losses that might slightly lag the collateral gains or vice versa, causing minor imbalance (though the design is 1:1, slippage in execution could matter). If exchanges’ liquidity is thin, rebalancing large positions might incur costs. These could translate to a small fraction off the $1 backing until arbitraged. However, Ethena’s daily PnL is typically settled and collateral adjusted, so this risk is minimal in normal conditions. USDT and USDC can also depeg if people panic-sell (USDC’s $0.88 event was due to fear its banks failed), but arbitrage usually restores it if reserves are intact. A key difference: trust vs algorithm , USDC/USDT rely purely on trust in issuers; USDe relies on an algorithmic hedge plus trust in Ethena’s operations. In any scenario where Tether’s reserves are doubted, USDT could depeg significantly (like if a major audit failure happened). USDe’s depeg would likely come from a technical failure (smart contract bug, cascade of exchange defaults) or extreme funding inversion.

Regulatory and Institutional Adoption

From a risk perspective for institutions: USDC and USDT are well-understood and have clear legal frameworks (USDC is regulated as a stored value, etc.). USDe might be seen as riskier or more complex, possibly falling through cracks of regulation. Institutions might worry about the operational risk of USDe , e.g. how to explain a short position backing a stablecoin to risk committees. USDtb will likely be the product pitched to institutions to alleviate those concerns, while USDe finds more use among crypto-native funds, prop desks, and DeFi users. Over time, if USDe proves its mettle, even institutions (like hedge funds) might utilize it for the yield (indeed, those who allocated to it early reaped near 20% APY in a low-rate environment , attractive by any measure).

USDC and USDT face regulatory scrutiny (e.g., New York AG vs Tether, potential stablecoin legislation). USDe introduces derivatives, so it could attract scrutiny as a sort of “synthetic prime money market fund”. If regulators view it as a systemic risk or unregistered product, Ethena might face pressure, especially as it reaches scale. Ethena’s global and decentralized nature may give some buffer (the foundation is likely offshore). On the flip side, regulators concerned about stablecoin reserves might find comfort in USDe’s full transparency and non-reliance on banks , it’s crypto market risk, not banking risk. This is uncharted territory.

For institutions and protocols, these differences mean USDe is a complement, not necessarily a replacement, to USDC/USDT at present. Protocols like Maker found a role for USDe (earning yield on DAI reserves), but they wouldn’t abandon USDC entirely for stable backing yet. However, if USDe and USDtb continue to grow in track record and liquidity, one can envision protocols like Maker or Frax using USDtb as reserves (instead of USDC), or exchanges preferring USDe for collateral. Institutions might hold USDtb as a cash equivalent on their balance sheet and USDe in yield-generating strategies.

To capture institutional flows and interest, and capture market share in settlement for stablecoins, digital dollars and tokenization, Ethena has decided to develop a variety of new products. Two of these are iUSDe and USDtb, two additional stablecoin products, which are aimed at institutional flows and capital.

USDtb and iUSDe

iUSDe

iUSDe is the core sUSDe product wrapped in a compliant format with basic permissioning and KYC restrictions. This structure enables traditional financial institutions and entities to interact with the product, as it incorporates KYC restrictions and other AML/KYC specifications required for institutional adoption. While this product will likely not reach the scale of USDe, it serves as an important tool specifically tailored toward institutional participants.

USDtb

USDtb is Ethena’s second stablecoin product, a “digital dollar” fully backed by tokenized U.S. Treasury assets. In contrast to USDe’s basis trade structure, USDtb is built on the model of fiat-backed stablecoins. Each USDtb token represents a claim on a dollar invested in institutional-grade U.S. Treasury funds - similarly to USDC and USDT. At launch, Ethena partnered with BlackRock’s USD Institutional Liquidity Fund (“BUIDL”) as the primary backing asset. In essence, USDtb holders have exposure to U.S. Treasury bills and other short-term instruments via BUIDL, similar to how USDC holders rely on Circle’s T-bill and cash reserves.

USDtb functions like a traditional stablecoin from a user perspective: it maintains a 1:1 peg with USD, is transferable on blockchain networks (initially Ethereum and likely Ethena’s Converge chain), and can be used for payments, trading, or lending, similarly to USDC/USDT.

USDtb's design capitalizes on growing institutional recognition of stablecoins' infrastructure advantages.

Visa stated this perspective in a report dated April 30, 2025, stating:

Modernizing settlement infrastructure: From our lens at Visa , we see stablecoins improving the efficiency and utility of back-end financial and money movement infrastructure. While there has been significant progress digitizing and modernizing the 'front end' of money movement over the past decade, the back end of the world's settlement and money movement infrastructure needs to catch up.

Currently, cross-border payments and settlement on traditional rails follow a complex multi-step process, with many intermediaries that need to coordinate:

1. Banks debit customer accounts and send SWIFT messages containing payment details and compliance checks.

2. Messages travel through one or more correspondent banks, as most banks do not maintain accounts in every currency. Each correspondent moves money between reciprocal "nostro/vostro" accounts, updates its ledger, and charges fees. The reliance on these correspondent relationships has decreased as banks have reduced such partnerships.

3. Within each currency area, banks settle accumulated daily balances through the central bank's real-time gross settlement (RTGS) or deferred-net systems. These systems operate only during set hours, meaning payments that arrive outside operating windows must wait until reopening, extending end-to-end settlement from minutes to potentially two days.

4. While funds are in transit, intermediaries must maintain parked funds or secure intraday liquidity, adding both cost and risk to the process.

5. The recipient's bank finally records the credit and releases funds to the payee, completing the transfer.

Stablecoins can reduce the number of intermediaries required for payments and settlement. Cross-border transactions typically involve lengthy transaction chains where each additional link increases costs and complexity while introducing settlement risk. Stablecoin-based systems can simplify cross-border transactions by reducing the need to maintain numerous correspondent relationships.

The reduction in intermediary links that stablecoin systems provide decreased settlement risk, reduces pre-funding and intraday credit requirements, and limits opportunities for rent-seeking behavior, resulting in lower fees. In addition, widespread adoption can further reduce costs through network effects and economies of scale, while standardized data formats make integration with other systems more cost-effective and straightforward.

Lastly, blockchains operate continuously and settle payments end-to-end in near real-time. Current correspondent-bank routes can take anywhere from under five minutes to more than two days (depending on the banking system of the country/countries involved), which are delays that stablecoins could eliminate when used for complete payment legs.

Beyond settlement and efficiency improvements, stablecoins serve a critical function for individuals in countries with mismanaged monetary systems, such as Argentina, Lebanon, and Nigeria, where preserving purchasing power is a primary concern. Converting from domestic currency to USD-pegged stablecoins enables instant dollarization. Stablecoins inherit the relative stability and credibility of the US dollar, providing an appealing alternative in countries where trust in local currency has deteriorated.

In these jurisdictions, converting to physical dollars is often difficult and costly, while withdrawing dollars from the domestic banking system presents additional challenges. Those holding USD in banks frequently face arbitrary withdrawal limitations. Stablecoins allow users to store dollar-denominated assets on secure hardware wallets with self-custody capabilities, providing constant access to their funds.

Furthermore, traditional dollar-based services such as banks or remittance providers are subject to surveillance, censorship, and political interference. Stablecoins, particularly when transacted through peer-to-peer or decentralized platforms, can offer greater privacy and censorship resistance.

Finally, stablecoins provide access to yield opportunities. While safety remains the primary motivation, users can gain exposure to various yield options with different risk profiles based on their individual risk tolerance. Stablecoins can generate yield through integration with the broader cryptocurrency ecosystem, through their underlying backing mechanisms, or both. For example, a user in an inflationary environment might deposit, USDe into a decentralized lending protocol to earn 10-15% APY, converting their stablecoin holdings into interest-bearing assets. This capability is particularly valuable when local banks offer near-zero or negative real interest rates.

Note: Additional use cases for stablecoins exist beyond the above-mentioned, which focuses on what we consider the two primary use cases currently. We will examine additional applications and use cases in greater detail in our forthcoming report on stablecoins.

It’s important to note here that Ethena has in particular focused on offering a store of value or savings product for users in the form of their synthetic dollar, USDe. The team has not attempted to compete outright with USDT, and to a lesser extent USDC, to become a major player in payments and settlement. USDT has strong network effects and wide distribution, especially dominant amongst MENA, Africa and Asia regions. Instead, Ethena has provided a semi-complementary product, sUSDe, which shares yield with users and can act as a savings account (albeit with higher risk due to the higher yield), allowing Ethena to grow market share amongst users who are seeking yield on dollarized products. The team has only recently started offering a treasuries-backed stablecoin product, USDtb, which is positioned to complement USDe, instead of outright competing with USDT and USDC.

USDtb is 100% backed by liquid, low-risk assets, primarily shares of BlackRock’s money market fund (which holds short-duration U.S. government debt). This mitigates bank credit risk and concentrates on sovereign credit risk (considered relatively risk-free). It also means USDtb’s reserves inherently earn yield (money market yields), currently around 4.5% APR, given the interest on T-bills. Attestations for USDTb reserves are done monthly. Reserves are custodied by Zodia, Komainu and Copper.

Ethena also maintains a portion of USDtb’s backing in stablecoin reserves (like USDC) to facilitate rapid redemption and on-chain swaps. This allows USDtb to handle large withdrawals or transfers without needing to instantly redeem BUIDL shares.

Complementary Stablecoins

USDtb and USDe are fundamentally different products. Unlike sUSDe, which focuses on returns and yield to build a moat, USDtb’s main purpose is to to attract institutional capital. Institutions, treasuries, and investors might not be familiar with USDe style products, or may not be completely comfortable with USDe’s reliance on crypto derivatives. USDtb offers them a crypto-dollar with familiar backing (U.S. government debt) and strong regulatory footing ( Securitize is a regulated digital securities platform). By offering a product that meets institutional standards (KYC’d, fully collateralized, yield from liquid, low-risk Treasuries), Ethena can onboard significant new capital into its ecosystem.

In this way, USDtb also acts as a complementary product to USDe. With both USDe and USDtb, Ethena covers the entire spectrum, USDe with higher risk and higher yield, USDtb with minimal risk and base yield. This allows Ethena to capture users across different preferences and market conditions. For example, an investor might hold USDtb as a stable reserve (earning around 4.5%) and deploy USDe for more aggressive yield farming. This helps Ethena effectively become a one-stop issuer for stablecoins, reducing reliance on third-party stablecoins. It also allows Ethena to offer a product for all market conditions, where funding is low, but rates are high, USDtb can grow, and vice versa.

iUSDe represents the other end of the spectrum. Although some institutions may be interested in a tokenized basis product, they may not be able to gain exposure, primarily due to KYC/AML risks.

Institutional flow and capital cannot use permissionless finance for a variety of reasons:

• Institutions cannot transact with unknown parties due to regulatory and compliance risks.

• Institutions need to know who they're borrowing from or lending to (especially in the case of sanctioned entities).

• Institutions are legally required to comply with anti-money laundering (“AML”) and know-your-customer (“KYC”) regulations

• Large financial institutions have internal policies requiring counterparty identification. Risk management departments require full transparency of transaction counterparties

iUSDe represents Ethena's solution to the aforementioned regulatory challenges. While USDtb offers a stablecoin with a completely different risk and yield profile, iUSDe ensures that funds and investors can access the same yield and risk characteristics as USDe without the potential regulatory and compliance risks.

Converge

Ethena Labs, in partnership with Securitize, is developing Converge, a new chain focused on onboarding tokenized RWAs, traditional financial markets and instruments.

Similarly to stablecoins, over the past year, tokenization has increasingly been adopted by traditional financial institutions, for the benefits that it can bring to real world financial instruments and markets, by providing improved transparency, reducing transaction and information costs, increasing processing speed, and improving risk management capabilities.

Programmability and Composability

Traditional financial transactions involve multiple intermediaries, each maintaining separate records across the various stages of a trade, including issuance, trading, matching, settlement, custody, and corporate-action processing. Tokenization fundamentally changes this structure by enabling all these steps to be automated through smart contracts rather than handled by disparate intermediaries.

The use of a shared ledger for recording all assets creates opportunities to combine functions that typically operate in isolated systems. For instance, foreign-exchange payment rails, securities depositories, and collateral management platforms can be integrated into a unified framework. This consolidation reduces the cost of moving value and makes previously expensive or difficult swaps easier to clear.

Tokenization also introduces enhanced composability through conditional transactions. These arrangements allow transactions to be combined and their execution to be automated based on complex criteria, creating more sophisticated financial instruments and workflows.

Furthermore, the automation capabilities inherent in token arrangements can improve asset servicing by streamlining corporate actions such as dividend and interest payments, as well as facilitating shareholder voting processes.

Transparency and Auditing

The current cross-border payment system relies on chains of correspondent banks, where each institution maintains its own ledger and sends only periodic confirmation messages. This structure necessitates extensive reconciliation processes as institutions must align their separate records.

In contrast, a shared tokenization platform maintains a single, continuously synchronized ledger that remains visible to all relevant participants. This shared "source of truth" provides real-time visibility, which eliminates the need for banks to coordinate across separate systems or conduct end-of-day reconciliations. Additionally, duplicate manual processes,such as repeating AML/KYC screening at multiple points in the transaction chain,can be eliminated or handled once through smart-contract logic. These improvements result in lower operational costs and faster straight-through processing.

Standardization and Streamlining

Asset issuance processes are typically costly and time-consuming due to the involvement of numerous parties and reliance on manual procedures. Tokenization addresses these inefficiencies through standardization of asset issuance processes and reduction of required intermediaries, potentially lowering costs and reducing barriers to entry in capital markets.

These improvements could facilitate new issuances and enable shared or fractional ownership of existing assets, including those that are currently less liquid in traditional market environments. This expanded accessibility may help reach new sources of investor demand. Where legally permitted, tokenization could also enable participants to directly issue assets or negotiate contract terms for specific tokens without traditional intermediaries.

Tokenization further enables atomic settlement for multi-leg transactions. For example, when purchasing a Treasury bond token with stablecoins on a blockchain, a dealer commits cash tokens while the seller commits bond tokens, and a single smart contract releases both simultaneously. If either party lacks sufficient assets, no transfer occurs, eliminating principal risk entirely. In contrast, traditional off-chain transactions handle the two legs through separate systems, often at different times, and require clearing brokers, central counterparties, custodians, and banks, with settlement typically taking up to T+2.

Asset Class Differentiation

The benefits of tokenization vary significantly across different asset classes. Illiquid, non-standardized assets have the highest potential for efficiency improvements through tokenization. These include syndicated loans and mid-market private credit, which involve manual onboarding processes, bespoke covenants, and lack centralized market infrastructure. Commercial real estate equity slices also fall into this category, as they are typically illiquid and traded bilaterally.

Conversely, liquid and standardized assets such as US Treasury bills, large-cap equities, and ETFs are likely to experience less material improvements, given their existing well-developed infrastructure. However, even these assets benefit from tokenization through enhanced capabilities including trading and settlement outside local market hours, atomic settlement mechanisms, increased composability, programmable lifecycle events, unified record keeping, and fractional ownership opportunities.

Ethena is building out Converge, a new chain focused on onboarding tokenized RWAs, and connecting them with DeFi and cryptocurrencies (hence the name, Converge). Tokenization is still a nascent sector, but is likely to exponentially expand. As of today, many chains, both permissioned and permissionless have made bids to attract tokenization onto their network, with some providing KYC, AML and complete control of the stack (Avalanche Subnets, L2s, and other institutional chains) while others offer composability, burgeoning DeFi, and adjacency to cryptocurrency issuance and activity (Solana, Ethereum etc.). As discussed later in the report, Converge attempts to offer both control and composability to institutions looking to onboard assets.

Technical Design and Performance Specs

Converge is envisioned as a high-throughput, low-latency chain that is EVM-compatible. The chain will launch with a 100 ms block time, targeting a reduction to 50 ms by Q4 2025. The chain aims for at least 1 gigagas per second of throughput, i.e., the ability to process on the order of 1 billion gas units per second. For context, Ethereum processes ~15 million gas per block (~100 million gas per minute).

Architecture

Converge is built on the Arbitrum Orbit stack with Celestia as a data availability layer. It uses an optimized Arbitrum-based sequencer (Conduit G2) for execution and ordering of transactions. Converge runs the Arbitrum Nitro stack (which provides fraud-proof based security and EVM compatibility), but with a custom sequencer and configuration tailored for high throughput.

For data availability, Converge initially publishes data to Celestia, to publish data blobs at high volume, cheaply. Celestia’s architecture supports very large blobs (its recent testnet demonstrated 128 MB blobs and ~21 MB/s throughput, with a roadmap toward 1 GB blocks).Through Celestia, Converge can post large amounts of data for transactions in parallel, without being constrained by Ethereum’s current data throughput limits.

Transaction ordering on Converge is handled by a Conduit G2 sequencer, which is a high-performance sequencer implementation from Arbitrum. This sequencer is responsible for collecting transactions, executing them, and proposing blocks at a rapid cadence. The target block interval is approximately 100 ms, meaning new blocks (sometimes called mini-blocks or flash blocks) are produced 10 times per second on average. Converge plans to push block times even lower – targeting sub-50 ms block times by Q4 2025 by introducing optimizations such as continuous mini-block streaming and improved RPC handling.

Converge Validator Network (CVN) and Security

A key component of Converge is the Converge Validator Network (“CVN”), a specialized validator layer. The CVN is a permissioned set of validators, which act as a “security council” with discretionary authority. The validator set can intervene in emergencies (pause the chain, rollback in case of major hacks or bugs, etc.). Unlike a typical validator set that only handles block production or ordering, the CVN’s role is to provide secure guardrails for the network’s economic integrity and user funds.

For example, the CVN can throttle or block malicious cross-chain messages that come through bridges to prevent bridge-based exploits. It can also trigger protocol-level circuit breakers (halting or pausing certain contracts or the entire chain) if there are signs of oracle manipulation, critical smart contract bugs, or other economic anomalies that could lead to loss of funds. In extreme cases, the CVN even has the authority to dispute the chain’s finality or coordinate a network halt/fork if required to protect users. These powers are designed to be used as a last resort, providing a safety net for institutional users (who often require risk mitigation) without fundamentally compromising the chain’s decentralization or liveness.

Execution

Converge implements a multi-threaded execution pipeline that can process transactions in parallel where possible, leveraging multi-core CPUs. Unlike the traditional single-threaded EVM, this design executes independent transactions concurrently while maintaining strict determinism in results.

Instead of producing monolithic blocks at longer intervals, the sequencer emits a continuous stream of small “flash blocks” (micro-blocks) as transactions come in. Validator nodes can begin executing and verifying these mini-blocks incrementally, rather than waiting for a full block. This reduces propagation latency across the network and keeps the system highly responsive even under heavy load. Essentially, block production is more continuous, smoothing out bursts of transactions and cutting down the time for new transactions to reach validators.

To handle the rapid state growth that comes with high TPS, Converge uses a flat, path-based state storage model backed by a high-performance database. This improves the efficiency of reading and writing contract state. The storage engine supports concurrent reads and writes, meaning multiple parts of the state trie can be accessed/updated in parallel without conflicts. It also includes online state pruning capabilities to discard old state as needed. These features are crucial for a chain pushing 10× the throughput of current networks, preventing the state database from becoming a performance bottleneck or growing impractically large.

Converge itself is a permissionless chain at the base layer: anyone can bridge assets to it and any developer can deploy smart contracts freely. However, it supports an ecosystem where some applications may enforce their own permissioning at the application level (especially those dealing with regulated assets). Converge expects to host two parallel categories of apps: (1) fully permissionless protocols and (2) regulated or permissioned apps for traditional finance use cases. Crucially, both types can interact. A permissioned RWA platform can benefit from onchain liquidity and composability with DeFi primitives (e.g., a bond token could be used as collateral in a DeFi lending pool) as long as those interactions respect whatever compliance rules are needed. Converge’s design does not impose any global permissioning; decisions about access control are made at the smart contract level by the app developers or asset issuers.

Initial Ecosystem

Horizon - Aave

Horizon is a new institutional lending market built by Aave Labs as a licensed instance of the Aave protocol, purpose-designed for real world assets (“RWAs”). In essence, Horizon extends Aave’s money market architecture to let institutions borrow stablecoins against tokenized traditional assets. The first product focuses on tokenized money market funds (e.g. tokenized shares of U.S. Treasury funds) as collateral, allowing qualified investors to unlock liquidity from low-risk yield-bearing assets.

Under the hood, Horizon will initially use Aave V3 smart contracts (upgrading to Aave V4 when available) deployed in a standalone environment with institutional customizations. The protocol retains the core design of over-collateralized loans and automated risk parameters, but adds a compliance layer for restricted assets. Notably, Horizon’s design builds on lessons from Aave Arc (Aave’s earlier permissioned pool framework). Instead of gating the entire market, it enforces permissions at the token level. In practice, only whitelisted institutional players can hold the RWA collateral tokens, while the protocol’s stablecoin liquidity pool remains open and decentralized.

Horizon was introduced in March 2025 via an Aave governance proposal and Temp Check vote. Horizon will share revenues with Aave DAO (50% of profits in year one) while using Aave’s governance for oversight. Remaining revenue will go to the Labs team - which has been controversial (which is outside the scope of this report).

Unlike Aave, which focuses on crypto-native collateral, Horizon onboards traditional financial instruments (starting with tokenized money market funds) into Aave’s borrowing model. The protocol allows users and institutions with portfolios of T-bills and high-quality debt assets to tokenize these assets and borrow stablecoins against them onchain, analogous to a repo or secured line of credit in traditional markets. This unlocks capital efficiency without requiring the institution to sell the asset or engage in complex repo agreements.

For example, a money market fund manager could use Horizon to borrow iUSDe against their fund tokens. On the lender side, Horizon’s target users include stablecoin holders and cash managers who are comfortable with lower-risk yields from lending against high-quality collateral. This could be institutions looking for yield on iUSDe or USDtb who want to earn additional interest. The relationship is symbiotic: Ethena provides Horizon with a compliant stablecoin (iUSDe and USDtb) and a settlement layer (Converge), and Horizon provides a major use-case for Ethena’s USDe/iUSDe in onchain lending markets.

Morpho

Morpho is a money market protocol that provides permissionless infrastructure for onchain loans. At its core, Morpho allows anyone to create lending/borrowing markets with custom parameters; each market is defined by a collateral asset, a loan asset, and a set of risk parameters, with no restrictions on what combinations can be offered.

This design lets Morpho aggregate liquidity across many markets and act as a primitive for onchain loan origination. In practice, Morpho’s architecture comprises two main components: the Morpho Protocol, which handles market creation and continuous interest accounting, and Morpho Vaults, which sit above the base protocol to manage risk and yield for lenders. The protocol tracks lenders’ earnings and borrowers’ debts across all markets in real-time, while Vault smart contracts can automatically allocate lenders’ liquidity across a curated set of markets, offering a passive, managed yield experience. These Vaults are typically run by professional risk managers who adjust allocations based on market conditions to optimize risk/return profiles.

Similarly to Horizon, Morpho is going to provide a major use-case for Ethena’s USDe/iUSDe by allowing funds, institutions and users to tokenize real world financial instruments, and borrow against them, improving capital efficiency. Since Morpho’s design is flexible, it allows for creating permissioned markets, where a KYC-wrapped token can be used as collateral - which enables diverse credit arrangements from crypto-backed loans to real-asset-backed lending.

Maple

Maple Finance operates as a decentralized institutional credit marketplace specializing in under-collateralized and cash-flow-based lending. The platform connects borrowers and lenders through onchain lending pools managed by credit underwriters called Pool Delegates.

Each lending pool on Maple operates with specific mandates, such as lending to crypto trading firms or financing real-world assets like invoices, with defined terms including interest rates, tenors, and collateral requirements. Lenders contribute stablecoins to pools while Pool Delegates screen and approve loans, with all loans represented onchain and accruing interest transparently.

The platform's hybrid model combines onchain fund management with offchain legal contracts, enabling unsecured or lightly secured loans that pure code-based protocols cannot offer. Loan servicing, interest distribution, and default handling are automated, while Pool Delegates perform due diligence including KYC and credit analysis on borrowers.

Maple operates through two distinct products serving different user bases. Maple Institutional offers permissioned pools for large capital allocators and accredited investors, featuring curated borrowers, rigorous risk management, and often collateral requirements like Bitcoin held in custody. These pools operate under legal agreements and typically require lender KYC. Syrup.fi provides permissionless pools that tokenize or tranche portions of loans from Maple Institutional.

Pendle Finance

Pendle Finance is a decentralized protocol that enables yield trading and interest rate markets on tokenized yield-bearing assets. In simpler terms, Pendle lets users split a yield-generating asset (like a yield-bearing stablecoin or staked token) into two components: a principal token (PT) and a yield token (YT). The principal token represents the underlying asset’s principal (redeemable at a set maturity for the original asset), and the yield token represents the right to the asset’s yield (interest) generated until that maturity. By separating these, Pendle creates a marketplace where participants can either lock in a fixed yield or speculate on future interest rates. Users can sell their future yield (by selling YT) in exchange for upfront principal, effectively fixing their yield in advance, or conversely buy YT to gain leveraged exposure to yield (speculating that the underlying will pay more yield than the market expects). Pendle supports assets ranging from stablecoin yield tokens (like sUSDe, cDAI) to staking derivatives (like stETH) to other DeFi yield-bearing tokens.

Pendle creates a primitive for interest rate discovery in DeFi, similar to how bond markets set interest rate expectations in TradFi. The architecture involves locking the original asset into Pendle’s smart contract, which then issues PT and YT. These tokens are tied to a specific maturity date (e.g., a PT that matures in Dec 2025). Pendle AMMs allow trading of PT for base asset (which implies a certain discount and thus an implied fixed rate) and trading of YT for base asset (implying yield pricing). As time progresses, PT prices converge to the underlying asset value (1 PT will be redeemable for 1 underlying at maturity), and YT accumulates actual yield. Pendle is non-custodial and automated; however, it has introduced new mechanisms like Synergy (to automatically reinvest yield) and yield staking to improve capital efficiency.

Ethereal

Ethereal is a non-custodial DEX offering both spot and perpetual trading, built natively on Converge. It uses Ethena’s USDe stablecoin as the primary asset for margin and settlement. Ethereal is designed to achieve sub-20ms latency and process over a million orders per second.

As of 2025, Ethereal is in a pre-launch phase called Season Zero, which allows USDe pre-deposits to bootstrap liquidity. Participating early users earn Ethereal Points (loyalty rewards) and boosted Ethena (USDe) yield incentives, gaining priority access to the platform’s upcoming releases.

Ethereal is an offchain orderbook DEX. User orders are collected and matched offchain by Ethereal’s high-performance trading engine. The core mechanics involve an offchain order matching process to enable near-instant execution, followed by onchain settlement to finalize the trades.

• Offchain Orderbook Engine: Ethereal runs a high-performance order book and matching engine off chain to handle trades in real time. Both perpetual and spot markets are supported using this offchain order book system , enabling the platform to execute a very large number of orders with minimal latency.

• Sequencer for Batch Settlement: A specialized sequencer node is responsible for processing the offchain transactions and committing the results onchain in batches. This sequencer aggregates user orders and trade executions, then periodically posts a compressed batch of transactions on Converge. By batching updates, Ethereal minimizes onchain transaction load while still ensuring that settlement is onchain.

The exchange operates as an L3 that settles onto Converge. Ethereal has its own reserved block space and control over transaction ordering, ensuring consistent performance even during periods of heavy trading activity. By not competing with general network traffic, Ethereal can avoid congestion or delays that often affect DEXs on shared chains.

Notably, because USDe is yield-generating (via Ethena’s sUSDe rewards mechanism), traders on Ethereal benefit from continuous interest on their collateral even while it is deployed for trading. This integration of a yield-bearing stablecoin allows users to pursue various onchain trading strategies (e.g. basis trades, lending, liquidity provision) with greater capital efficiency.

All user funds on Ethereal are held by smart contracts on the Ethena network rather than by the exchange itself. This means the exchange never takes custody of deposits – users’ assets remain under their control (managed by their private keys) throughout the trading process. The smart contracts govern deposit balances, match results, and withdrawals, providing transparency and security. This non-custodial design, combined with onchain settlement, ensures that Ethereal delivers the performance of a centralized exchange without sacrificing the trustlessness and asset sovereignty of decentralized finance.

Disclaimer:

The information and services above are not intended to and shall not be used as investment advice.

You should consult with financial advisors before acting on any of the information and services. ASXN and ASXN staff are not investment advisors, do not represent or advise clients in any matter and are not bound by the professional responsibilities and duties of a financial advisor.

Nothing in the information and service, nor any receipt or use of such information or services, shall be construed or relied on as advertising or soliciting to provide any financial services

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Market Updates

Macro, Regulation and Markets

• On 6 June 2025, 31,000 Bitcoin options (notional $3.18B) expired with a put/call ratio of 0.71 and max pain at $105,000; 241,000 Ether options (notional $590M) also expired, with a put/call ratio of 0.63 and max pain at $2,575. [source]

• Strategy priced 11,764,700 shares of 10.00% Series A Perpetual Stride Preferred Stock at $85 on 5 June 2025, targeting net proceeds of about $979.7M for general corporate purposes, including further Bitcoin purchases. [source]

• Stablecoin issuer Circle’s shares opened at $69 and closed at $83.23 on 5 June 2025—168% above the $31 offer price—raising $1.05B and valuing the company near $18B. [source]

Exchanges and Listings

• Binance US began HYPE spot trading on 6 June 2025, allowing deposits via the HyperEVM network and offering HYPE/USDT and HYPE/USD pairs. [source]

• Coinbase added Fartcoin (FARTCOIN) and Subsquid (SQD) to its public listing roadmap, signalling forthcoming support once liquidity and technical checks are complete. [source]

• Binance will list Skate (SKATE) on Binance Alpha at 10:00 UTC on 9 June 2025 and launch a SKATEUSDT perpetual contract with up to 50x leverage on Binance Futures at 10:30 UTC. [source]

Raises

• Metaplanet unveiled a ¥770.9B (~$5.4B) equity raise on 6 June 2025 via 555M moving-strike warrants, aiming to hold 100,000 BTC by end-2026 and 210,000 BTC by end-2027—about 1% of eventual supply. [source]

Bitcoin

• At the Bloomberg Tech Summit on 5 June 2025, Uber CEO Dara Khosrowshahi said the firm is evaluating Bitcoin and stablecoins for future payment options but does not plan to hold crypto on its balance sheet. [source]

Solana

• Maple Finance expanded to Solana on 5 June 2025 using Chainlink’s CCIP, seeding the launch with $500,000 in incentives and coordinating over $30M in liquidity. [source]

Hyperliquid

• Hyperliquid replaced the testnet L1Write contract with a CoreWriter system contract and introduced the eth_usingBigBlocks JSON-RPC method, according to documentation updated on 6 June 2025. [source]

Developments

• On 5 June 2025, LayerZero co-founder Bryan Pellegrino accused Hyperlane of inflating volumes with repetitive $24,000 transfers; Hyperlane said the activity came from reward chasers, while Pellegrino criticised its token-reward design. [source]

ETFs

• Truth Social registered “Truth Social Bitcoin and Ethereum ETF, B.T.” as a domestic business trust in Nevada on 5 June 2025, laying groundwork for a dual-asset crypto ETF. [source]

• The UK Financial Conduct Authority proposed on 6 June 2025 to lift its 2021 ban on crypto exchange-traded notes for retail investors, provided cETNs are listed on recognised exchanges and comply with promotion rules. [source]

Market Data

BTC ETF

BTC ETFs total net daily flow for 05 Jun 2025 is –$278.40M.

Breakdown:

• IBIT: $0.00M

• FBTC: –$80.20M

• BITB: –$36.70M

• ARKB: –$102.00M

• BTCO: –$12.20M

• EZBC: $0.00M

• BRRR: $0.00M

• HODL: –$6.50M

• BTCW: $0.00M

• GBTC: –$24.10M

• BTC: –$16.70M

Total net daily flow: –$278.40M

Total cumulative flows to date: $44,925.90M

ETH ETF

ETH ETFs total net daily flow for 05 Jun 2025 is +$11.30M.

Breakdown:

• ETHA: +$34.70M

• FETH: –$23.40M

• ETHW: $0.00M

• CETH: $0.00M

• ETHV: $0.00M

• QETH: $0.00M

• EZET: $0.00M

• ETHE: $0.00M

• ETH: $0.00M

Total net daily flow: +$11.30M

Total cumulative flows to date: $13,681.90M

Sector Returns

Worst Performing Sectors

• Hyperliquid Ecosystem sector is down -13.20% over the past 24 hours (HFUN -21.14%, PURR -11.01%).

• Bitcoin Ecosystem sector is down -9.32% over the past day (ORDI -9.41%, PUPS -8.86%, STX 0.26%).

• Solana DeFi sector has fallen -8.84% over the past 24 hours (SAVE -19.27%, JUP -12.09%).

Token Returns

Top Performing Tokens

1. FART (Memecoin) is up 9.54% in the past 24 hours.

2. VERTEX (Perps) is up 6.04% in the past 24 hours.

3. TRX (L1) is up 2.67% in the past 24 hours.

4. ARB (L2) is up 2.18% in the past 24 hours.

5. BONK (Memecoin) has risen 0.56% in the past 24 hours.

Worst Performing Tokens

1. HFUN (Hyperliquid Ecosystem) is down 21.14% in the past 24 hours.

2. SAVE (Solana DeFi) is down 19.27% in the past 24 hours.

3. RPL (Ethereum DeFi) is down 16.09% in the past 24 hours.

4. GEAR (Ethereum DeFi) is down 15.03% in the past 24 hours.

5. LDO (Ethereum DeFi) has fallen 14.59% in the past 24 hours.

Protocol Updates

Aligning Around MORPHO — The Only Asset For Morpho

Protocol: Morpho

Date: 2025-06-06 1:45:30

Link: https://x.com/PaulFrambot/status/1930971485142761909

Description: Paul Frambot posted that the Morpho community should concentrate on a single asset, MORPHO, phasing out alternative token forms to streamline incentives and governance.

Governance

[ARFC] GHO CEX Earn Incentive Program

Protocol: Aave

Date: 2025-06-05 18:58:13

Link: https://governance.aave.com/t/arfc-gho-cex-earn-incentive-program/22284

Description: sid_areta proposed an incentive program to boost GHO deposits on centralized-exchange Earn products under the ARFC framework.

Geo-Distributed Jito Stake Delegation Process

Protocol: Jito Network

Date: 2025-06-05 22:35:58

Link: https://forum.jito.network/t/geo-distributed-jito-stake-delegation-process/782

Description: Otto outlined a process for delegating Jito stake across geographically distributed validators to strengthen network resilience.

Introducing: SyrupUSDC on Kamino

Protocol: Kamino Finance

Date: 2025-06-05 14:07:30

Link: https://gov.kamino.finance/t/introducing-syrupusdc-on-kamino/762

Description: toothfairy introduced SyrupUSDC and detailed parameters for adding the yield-bearing USDC token to Kamino.

Investor Staking Notice

Protocol: Initia

Date: 2025-06-06 05:39:47

Link: https://forum.initia.xyz/t/investor-staking-notice/273

Description: Initia_Foundation notified investors about upcoming staking options and provided key dates and requirements.

Echelon VIP score contract change proposal

Protocol: Initia

Date: 2025-06-06 04:39:08

Link: https://forum.initia.xyz/t/echelon-vip-score-contract-change-proposal/272

Description: laws proposed amending the Echelon VIP score contract to update scoring criteria and enhance fairness.

Disclaimer:

The information and services above are not intended to and shall not be used as investment advice.

You should consult with financial advisors before acting on any of the information and services. ASXN and ASXN staff are not investment advisors, do not represent or advise clients in any matter and are not bound by the professional responsibilities and duties of a financial advisor.

Nothing in the information and service, nor any receipt or use of such information or services, shall be construed or relied on as advertising or soliciting to provide any financial services.

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Market Updates

Macro, Regulation and Markets

• Treasure Global will deploy a phased $100M digital-asset treasury strategy, allocating to Bitcoin, Ethereum and regulated stablecoins to support the Q3 2025 launch of its AI-driven consumer-intelligence platform. [source]

• Circle priced its upsized IPO at $31 per share on 4 June 2025, raising almost $1.1B and valuing the company at about $6.9B ($8.1B fully diluted). [source]

• The European Central Bank cut its deposit facility rate by 25bp to 2% on 4 June 2025 and lowered the main refinancing and marginal lending rates to 2.15% and 2.4%, marking a seventh straight reduction. [source]

Exchanges and Listings

• Coinbase opened deposits for Ethena (ENA) and will start phased trading of the ENA-USD pair on or after 9 AM PT on 5 June 2025, subject to liquidity and jurisdictional restrictions. [source]

• Coinbase opened deposits for Lagrange (LA) and expects phased trading of the LA-USD pair later on 5 June 2025 under its Experimental label. [source]

• Binance will introduce LAUSDT perpetual contracts with up to 50x leverage on 5 June 2025, following LA’s listing on Binance Alpha. [source]

• Upbit will list a KRW pair for Ravencoin (RVN) and add Lagrange (LA) to its BTC and USDT markets on 5 June 2025. [source]

Raises

• Hardware-wallet maker OneKey closed a Series B round led by YZi Labs, valuing the company at $150M; proceeds will fund new devices, on-chain threat detection and expansion in the US, Europe and emerging markets. [source]

• 3Jane announced their $5.2M seed round led by Paradigm, to build a credit-based money market on Ethereum. [source]

Ethereum

• On 4 June 2025, 306,438 ETH (over $800M) were queued for validator activation—the highest level in more than a year—while 347,919 ETH were already in the entry queue, implying a six-day wait. [source]

• The Ethereum Foundation has formalized its Treasury Policy, linking fiat-reserve sizing to two variables, Annual Opex (A) fixed at 15% of the treasury and a Years-of-Opex Buffer (B) of 2.5; the A×B product sets the fiat buffer and dictates the cadence of ETH sales, with quarterly re-evaluation by the Board. Crypto management adopts conservative, liquid DeFi strategies: core ETH is solo-staked or lent on major protocols, the foundation may borrow stable-coins for yield, and carefully vetted farms or tokenized RWA positions can migrate into the fiat sleeve over time. Fiat reserves are segmented into immediate-liquidity cash, liability-matched instruments, and tokenized RWAs, backed by quarterly Board reporting and a public annual report to enhance oversight. EF plans to taper annual opex to 5% over the next five years and notes 2025-26 as pivotal for ecosystem support, committing to adjust A and B as conditions evolve. [source]

ETFs

• JPMorgan will accept holdings of BlackRock’s iShares Bitcoin Trust as collateral for loans to trading and wealth-management clients and may add other spot Bitcoin ETFs; such ETF positions will also count toward clients’ liquid-asset calculations. [source]

Market Data

BTC ETF

BTC ETFs total net daily flow for 04 Jun 2025 is +$87.0M.

Breakdown:

• IBIT: +$284.0M

• FBTC: –$197.0M

• BITB: $0.0M

• ARKB: $0.0M

• BTCO: $0.0M

• EZBC: $0.0M

• BRRR: $0.0M

• HODL: $0.0M

• BTCW: $0.0M

• GBTC: $0.0M

• BTC: $0.0M

Total net daily flow: +$87.0M

Total cumulative flows to date: $45,204.3M

ETH ETF

ETH ETFs total net daily flow for 04 Jun 2025 is +$57.0M.

Breakdown:

• ETHA: +$73.2M

• FETH: –$23.6M

• ETHW: $0.0M

• CETH: $0.0M

• ETHV: $0.0M

• QETH: $0.0M

• EZET: $0.0M

• ETHE: $0.0M

• ETH: +$7.4M

Total net daily flow: +$57.0M

Total cumulative flows to date: $13,670.6M

Sector Returns

Top Performing Sectors

• L1 sector is up -0.04% over the past 24 hours (MOVE -5.28%, BERA -4.73%, AVAX -4.28%).

• Base DeFi sector is up -0.32% over the past day (WELL -4.37%, AERO -0.32%).

• Perps sector has risen -1.55% in the past 24 hours (DRIFT -3.49%, AEVO -0.87%, VERTEX -0.29%).

Worst Performing Sectors

• Privacy sector is down -8.75% over the past 24 hours (XMR -8.90%, ZEC -7.72%).

• Hyperliquid Ecosystem sector is down -7.68% over the past day (HFUN -13.09%, PURR -6.00%).

• Agent sector has fallen -7.58% over the past 24 hours (VIRTUAL -8.05%, GRIFF -7.43%, AIXBT -4.24%).

Token Returns

Top Performing Tokens

1. SAVE (Solana DeFi) is up +19.55% in the past 24 hours.

2. GRASS (AI) is up +11.18% in the past 24 hours.

3. RPL (Ethereum DeFi) is up +10.18% in the past 24 hours.

4. WLD (AI) is up +6.59% in the past 24 hours.

5. LDO (Ethereum DeFi) has risen +4.96% in the past 24 hours.

Worst Performing Tokens

1. BLAST (L2) is down -14.33% in the past 24 hours.

2. GEAR (Ethereum DeFi) is down -13.21% in the past 24 hours.

3. HFUN (Hyperliquid Ecosystem) is down -13.09% in the past 24 hours.

4. SEND (Sui DeFi) is down -10.51% in the past 24 hours.

5. WIF (Memecoin) has fallen -9.03% in the past 24 hours.

Governance

Chaos Labs Risk Stewards - Adjust USDT Interest Rate Curve on Aave V3 - 06.05.25

Protocol: Aave

Date: 2025-06-05 09:46:57

Link: https://governance.aave.com/t/chaos-labs-risk-stewards-adjust-usdt-interest-rate-curve-on-aave-v3-06-05-25/22279

Description: ChaosLabs proposed adjusting the USDT interest-rate curve on Aave V3 to better align with current market conditions.

[Gauntlet] - ezETH, tETH, and rsETH Risk Recommendations

Protocol: Compound

Date: 2025-06-04 20:15:24

Link: https://www.comp.xyz/t/gauntlet-ezeth-teth-and-rseth-risk-recommendations/6842

Description: Gauntlet provided risk-parameter recommendations for the ezETH, tETH and rsETH markets on Compound.

Deprecation of USDM vaults

Protocol: Morpho

Date: 2025-06-05 08:08:54

Link: https://forum.morpho.org/t/deprecation-of-usdm-vaults/1810

Description: Steakhouse proposed deprecating the USDM vaults on Morpho and outlined migration steps for depositors.

Disclaimer:

The information and services above are not intended to and shall not be used as investment advice.

You should consult with financial advisors before acting on any of the information and services. ASXN and ASXN staff are not investment advisors, do not represent or advise clients in any matter and are not bound by the professional responsibilities and duties of a financial advisor.

Nothing in the information and service, nor any receipt or use of such information or services, shall be construed or relied on as advertising or soliciting to provide any financial services.

Subscribe now

Follow ASXN on Twitter

Market Updates

Macro, Regulation and Markets

• MoonPay secured New York’s BitLicense on 4 June 2025, allowing it to provide direct crypto on- and off-ramp services in all 50 US states. The firm already holds money-transmitter licences across the country and says nationwide coverage will accelerate its retail payments push. [source]

Exchanges and Listings

• Rails, a perps-only hybrid exchange backed by Kraken and Slow Ventures, went live in the United States on 4 June 2025 after raising 14M in seed funding. The venue uses an off-chain matching engine with on-chain settlement and is positioning itself as a compliant alternative to defunct FTX. [source] [source]

Raises

• Pumpfun is reportedly launching a 1B token sale at a 4B fully diluted valuation, inviting public and private investors ahead of an expected launch within two weeks. Co-founder Alon had previously denied that the platform would issue a token, and details of the distribution mechanism remain unclear. [source]

• Crypto credit protocol 3Jane raised 5M in a Paradigm-led seed round to build unsecured on-chain lending infrastructure for institutional traders. [source]

Bitcoin

• Marathon Holdings mined 950 BTC in May 2025, its largest monthly output on record, after winning a record number of blocks. The company held the entire haul, reinforcing its status as the second-largest Bitcoin treasury among listed miners. [source] [source]

• Medical-device maker Semler Scientific bought an additional 185 BTC for 20M on 4 June 2025, lifting its holdings to 4,449 BTC worth nearly 500M. The firm adopted Bitcoin as its primary treasury reserve asset in May. [source] [source]

Developments

• Donald Trump Jr said on 3 June 2025 that the Trump Organization is not involved with the TRUMP Wallet trading on markets and revealed plans for an official wallet being built with World Liberty Financial. Eric Trump added that he will pursue legal action against projects using the family name without approval, and the @trumpwalletapp account on X has since been suspended. [source] [source]

• Berachain, an EVM-compatible L1, detailed its “Bectra” upgrade on 4 June 2025, adopting elements of Ethereum’s forthcoming Pectra release to add account abstraction, smart-contract wallets and native restaking ahead of mainnet launch. [source]

Market Data

BTC ETF

BTC ETFs total net daily flow for 03 Jun 2025 is +$375.1M.

Breakdown:

• IBIT: +$58.0M

• FBTC: +$136.8M

• BITB: +$14.5M

• ARKB: +$139.9M

• BTCO: $0.0M

• EZBC: $0.0M

• BRRR: $0.0M

• HODL: +$18.8M

• BTCW: $0.0M

• GBTC: $0.0M

• BTC: +$7.1M

Total net daily flow: +$375.1M

Total cumulative flows to date: $45,117.3M

ETH ETF

ETH ETFs total net daily flow for 03 Jun 2025 is +$109.5M.

Breakdown:

• ETHA: +$77.1M

• FETH: +$21.0M

• ETHW: $0.0M

• CETH: $0.0M

• ETHV: $0.0M

• QETH: $0.0M

• EZET: +$3.0M

• ETHE: $0.0M

• ETH: +$8.4M

Total net daily flow: +$109.5M

Total cumulative flows to date: $13,613.6M

Sector Returns

Top Performing Sectors

• Ethereum DeFi sector is up +2.40% over the past 24 hours (RPL +14.62%, MKR +7.53%, AAVE +3.37%).

• Dino sector is up +1.84% over the past day (XRP +2.09%, BCH -0.59%, BSV +0.04%).

• AI sector has risen +1.69% in the past 24 hours (AKT +6.10%, FET +5.15%, AR +2.28%).

Worst Performing Sectors

• Hyperliquid Ecosystem sector is down -3.74% over the past 24 hours (PURR -5.52%, HFUN +1.51%, VIRTUAL -1.92%).

• Privacy sector is down -3.11% over the past day (XMR -3.55%, ZEC +0.10%).

• NFT sector has fallen -2.78% over the past 24 hours (CULT -5.99%, PENGU -4.14%, BLUR +0.99%).

Token Returns

Top Performing Tokens

1. ARB (L2) is up +27.55% in the past 24 hours.

2. RPL (Ethereum DeFi) is up +14.62% in the past 24 hours.

3. UMA (Oracle) is up +7.94% in the past 24 hours.

4. MKR (Ethereum DeFi) is up +7.53% in the past 24 hours.

5. AKT (AI) has risen +6.10% in the past 24 hours.

Worst Performing Tokens

1. FART (Memecoin) is down -9.81% in the past 24 hours.

2. SEND (Sui DeFi) is down -9.10% in the past 24 hours.

3. GRIFF (Agent) is down -6.69% in the past 24 hours.

4. CULT (NFT) is down -5.99% in the past 24 hours.

5. PUPS (Bitcoin Ecosystem) has fallen -5.87% in the past 24 hours.

Protocol Updates

Dual Governance 101: Explainer

Protocol: Lido

Date: 2025-06-04 13:32:50

Link: https://blog.lido.fi/dual-governance-101-explainer/

Description: Lido posted an explainer on its proposed dual governance model, outlining how stETH holders could veto or delay protocol changes and detailing the planned rollout timeline and safeguards.

SIP-3 Update: Sei Moves Toward EVM-Only Architecture

Protocol: Sei

Date: 2025-06-02 20:00:00

Link: https://blog.sei.io/sip-3-update-sei-moves-toward-evm-only-architecture/

Description: Sei posted an update on SIP-3 confirming strong community support to transition to an EVM-only architecture, phasing out CosmWasm and native Cosmos transactions to streamline developer experience and network performance.

Governance

Updating the OpCo Foundation’s Operational Capability

Protocol: Arbitrum Foundation

Date: 2025-06-03 14:31:15

Link: https://forum.arbitrum.foundation/t/updating-the-opco-foundation-s-operational-capability/29388

Description: karpatkey proposed updates to the OpCo Foundation’s operational capabilities, including revised governance processes and resource allocations.

Fund the Drift Incentive Fund

Protocol: Drift

Date: 2025-06-03 22:04:51

Link: https://driftgov.discourse.group/t/fund-the-drift-incentive-fund/223

Description: namanc proposed allocating additional funds to the Drift Incentive Fund to support user growth and liquidity rewards.

Across UMA Voting Committee – Renewal Proposal - V2

Protocol: Across

Date: 2025-06-04 05:06:22

Link: https://forum.across.to/t/across-uma-voting-committee-renewal-proposal-v2/2066

Description: mlx4 submitted version 2 of the Across UMA Voting Committee renewal proposal, detailing mandate changes and budget requirements.

CIP-Draft: Distributing COW rewards on mainnet for all chains

Protocol: CoW Protocol

Date: 2025-06-03 22:15:11

Link: https://forum.cow.fi/t/cip-draft-distributing-cow-rewards-on-mainnet-for-all-chains/3042

Description: notsoformal drafted a CIP to distribute COW rewards on mainnet across all supported chains, outlining mechanics and implementation steps.

Epoch 4 Update to Inertia VIP

Protocol: Initia

Date: 2025-06-02 08:42:39

Link: https://forum.initia.xyz/t/epoch-4-update-to-inertia-vip/258

Description: Inertia provided an Epoch 4 update to the Inertia VIP programme, covering performance metrics and forthcoming adjustments.

Epoch X [Rollup] VIP Update

Protocol: Initia

Date: 2025-06-04 06:54:55

Link: https://forum.initia.xyz/t/epoch-x-rollup-vip-update/263

Description: 0xjessie shared a VIP update for Epoch X Rollup, summarizing milestone progress and next steps for the initiative.

Disclaimer:

The information and services above are not intended to and shall not be used as investment advice.

You should consult with financial advisors before acting on any of the information and services. ASXN and ASXN staff are not investment advisors, do not represent or advise clients in any matter and are not bound by the professional responsibilities and duties of a financial advisor.

Nothing in the information and service, nor any receipt or use of such information or services, shall be construed or relied on as advertising or soliciting to provide any financial services.

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Market Updates

Macro, Regulation and Markets

• Circle has increased the size and price range of its forthcoming NYSE initial public offering, signalling strong demand ahead of the stablecoin issuer’s US listing. [source]

Exchanges and Listings

• Binance US will add spot trading for Hyperliquid’s HYPE token, with the launch date to be confirmed; Binance Futures listed a HYPEUSDT perpetual contract on 30 May 2025. [source]

• Robinhood has closed its $200M cash acquisition of Luxembourg-based exchange Bitstamp, bringing services for more than 5,000 institutional and 50,000 retail clients across Europe, the UK and Asia under its brand; the deal matches terms announced in June 2024 and follows Robinhood’s $179M takeover of Canada’s WonderFi on 13 May 2025. [source]

• Binance will list USDT-margined perpetuals for PUFFER and PORT3 with leverage up to 50x; Puffer provides Ethereum restaking and roll-up tooling, while Port3 offers an AI data layer for trading strategies. [source]

Raises

• Tether has made an undisclosed strategic investment in Chile-based exchange Orionx to accelerate its expansion across Latin America. [source]

Ethereum

• On 2 Jun 2025 the Ethereum Foundation rebadged its “Protocol Research & Development” group as a slimmer “Protocol” unit and laid off an unspecified number of staff, consolidating teams under a single core R&D banner. The reorganized unit will pursue three priorities: scaling the L1 base, expanding blobspace to cut rollup data costs, and improving wallet and general UX. Leaders say the leaner structure and tighter oversight should speed delivery of upgrades, ease L1 congestion, and lower onboarding friction for developers and users. The change is effective immediately, and the Protocol team now stewards post-Pectra roadmap work for the rest of 2025. [source]

Bitcoin

• Nasdaq-listed Reitar Logtech said it plans to buy up to $1.5B of Bitcoin for its treasury, becoming the latest public company to adopt the asset as a reserve. [source]

• Tether and affiliated exchange Bitfinex transferred 40,000 BTC (about $2.7B) to Swiss asset manager Twenty One Capital as part of treasury reallocation. [source]

• Strategy Corp. plans to issue 2.5M “Stride” preferred shares to finance further Bitcoin purchases, continuing its aggressive accumulation strategy. [source]

• Norway-based K33 Group executed its first Bitcoin purchase under a new treasury policy adopted on 3 June 2025. [source]

Solana

• Education platform Classover, listed on Nasdaq, is seeking to raise up to $500M to build a Solana-denominated treasury for future operations. [source]

Developments

• Sonic Labs has opened all seasons of its 200M S token airdrop to US residents, positioning itself among the first projects to structure a nationwide compliant distribution. [source]

• Paradigm introduced Orbital, an AMM that extends concentrated-liquidity concepts from two-asset pools to n-asset stablecoin pools of up to roughly 10K tokens by drawing nested spherical “tick” orbits around the $1 price point. The design uses an n-dimensional sphere invariant so trades stay path-independent and LPs can choose bespoke risk/return profiles while still covering de-peg scenarios, and simulations in the paper show higher capital efficiency near $1 than both Uniswap V3 and Curve. The authors note that total stablecoin capitalization has just passed $250B, underlining demand for deeper multi-stable liquidity, and invite feedback and implementation collaboration; no deployment timeline is specified yet. A comparative efficiency chart versus existing AMMs would add value. [source]

Market Data

BTC ETF

BTC ETFs total net daily flow for 02 Jun 2025 is –$267.5M.

Breakdown:

• IBIT: –$130.4M

• FBTC: –$50.1M

• BITB: +$3.4M

• ARKB: –$73.9M

• BTCO: $0.0M

• EZBC: $0.0M

• BRRR: $0.0M

• HODL: $0.0M

• BTCW: $0.0M

• GBTC: –$16.5M

• BTC: $0.0M

Total net daily flow: –$267.5M

Total cumulative flows to date: $44,742.2M

ETH ETF

ETH ETFs total net daily flow for 02 Jun 2025 is +$78.2M.

Breakdown:

• ETHA: +$48.4M

• FETH: +$29.8M

• ETHW: $0.0M

• CETH: $0.0M

• ETHV: $0.0M

• QETH: $0.0M

• EZET: $0.0M

• ETHE: $0.0M

• ETH: $0.0M

Total net daily flow: +$78.2M

Total cumulative flows to date: $13,504.1M

Sector Returns

Top Performing Sectors

• Hyperliquid Ecosystem sector is up 13.65% over the past 24 hours (PURR 16.04%, HFUN 6.09%).

• Ethereum DeFi sector is up 3.66% over the past day (EIGEN 9.58%, MKR 8.50%).

• Memecoin sector has risen 3.65% in the past 24 hours (SPX 10.39%, WIF 8.53%).

Worst Performing Sectors

• Agent sector is down 4.54% over the past 24 hours (VIRTUAL -4.92%, AIXBT -2.55%).

• Sui DeFi sector is down 1.57% over the past day (SEND -7.62%, DEEP -1.28%).

• Oracle sector has fallen 0.08% over the past 24 hours (LINK 0.07%, PYTH 0.10%).

Token Returns

Top Performing Tokens

1. MPL (RWA) is up 17.21% in the past 24 hours.

2. STX (Bitcoin Ecosystem) is up 16.57% in the past 24 hours.

3. PURR (Hyperliquid Ecosystem) is up 16.04% in the past 24 hours.

4. SPX (Memecoin) is up 10.39% in the past 24 hours.

5. EIGEN (Ethereum DeFi) has risen 9.58% in the past 24 hours.

Worst Performing Tokens

1. BONK (Memecoin) is down 9.74% in the past 24 hours.

2. SEND (Sui DeFi) is down 7.62% in the past 24 hours.

3. PUPS (Bitcoin Ecosystem) is down 7.32% in the past 24 hours.

4. RAY (Solana DeFi) is down 5.28% in the past 24 hours.

5. VIRTUAL (Agent) has fallen 4.92% in the past 24 hours.

Protocol Updates

RWAs on Arbitrum

Protocol: Arbitrum

Date: 2025-06-02 15:49:00

Link: https://blog.arbitrum.io/rwas-on-arbitrum-2/

Description: Bessie Liu posted about how real-world assets are being deployed on Arbitrum, highlighting existing integrations and future development opportunities.

Gearbox on BNB: Lending, Leverage and Loans

Protocol: Gearbox

Date: 2025-06-02 16:50:08

Link: https://blog.gearbox.fi/gearbox-on-bnb-lending-leverage-and-loans/

Description: Mugglesect posted about Gearbox’s deployment on BNB Chain, outlining its lending pools, leverage mechanics, and loan features.

Bi-weekly update, 03 June 2025

Protocol: Rocket Pool

Date: 2025-06-02 15:11:12

Link: https://medium.com/rocket-pool/bi-weekly-update-03-june-2025-a24fb2738615

Description: Maverick posted Rocket Pool’s bi-weekly progress report, summarising recent development milestones, community updates, and node-operator statistics.

Governance

[Non Constitutional] Proposal to direct the Arbitrum Foundation to implement an extended version of EIP-7907. And for the DAO to ratify its deployment on Arbitrum One

Protocol: Arbitrum Foundation

Date: 2025-06-02 14:55:00

Link: https://forum.arbitrum.foundation/t/non-constitutional-proposal-to-direct-the-arbitrum-foundation-to-implement-an-extended-version-of-eip-7907-and-for-the-dao-to-ratify-its-deployment-on-arbitrum-one/29375

Description: cp0x proposed directing the Arbitrum Foundation to deploy an extended version of EIP-7907 on Arbitrum One and seek DAO ratification.

Increase caps on Euler Unichain vaults

Protocol: Euler Finance

Date: 2025-06-03 12:22:53

Link: https://forum.euler.finance/t/increase-caps-on-euler-unichain-vaults/1424

Description: Objective proposed raising caps on several Euler Unichain vaults to accommodate higher demand.

Accelerate CRS to meet elastic demand efficiently in Euler DAO markets

Protocol: Euler Finance

Date: 2025-06-02 14:01:42

Link: https://forum.euler.finance/t/accelerate-crs-to-meet-elastic-demand-efficiently-in-euler-dao-markets/1422

Description: Gauntlet proposed accelerating the CRS mechanism to better match elastic demand in Euler DAO markets.

Disclaimer:

The information and services above are not intended to and shall not be used as investment advice.

You should consult with financial advisors before acting on any of the information and services. ASXN and ASXN staff are not investment advisors, do not represent or advise clients in any matter and are not bound by the professional responsibilities and duties of a financial advisor.

Nothing in the information and service, nor any receipt or use of such information or services, shall be construed or relied on as advertising or soliciting to provide any financial services.

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Market Updates

Macro, Regulation and Markets

• CoinShares reported $286M net inflows into digital-asset investment products during the week ending 1 Jun 2025, lifting the seven-week total to $10.9B. Ethereum products attracted $321M, while Bitcoin saw an $8M outflow. [source]

• The GENIUS stablecoin bill could reach a US Senate vote by 8 Jun 2025 as negotiators finalize amendments; a recent poll found 74% of voters support dedicated crypto legislation. [source]

• Over the next 7 days, major one-time token unlocks (over $5 million) will include ENA (cliff: 3.72%), TAIKO (cliff: 71.23%), and NEON (cliff: 6.48%). Significant linear unlocks (daily unlocks over $1 million) are expected for SOL (linear: 0.09%), WLD (linear: 2.69%), TIA (linear: 1.06%), DOGE (linear: 0.06%), TAO (linear: 0.59%), AVAX (linear: 0.17%), SUI (linear: 0.10%), DOT (linear: 0.15%), IP (linear: 0.86%), MORPHO (linear: 2.57%), NEAR (linear: 0.24%), ETHFI (linear: 3.53%), JTO (linear: 1.29%), and others. The total value of tokens to be unlocked exceeds $369 million.[source]

• Crypto liquidations totaled approximately $152.06M in the past 24h, impacting 73,083 traders, with $71.26M from longs and $80.80M from shorts. BTC liquidations amounted to $42.54M, ETH $32.62M, SOL $6.92M, and FLOCK $6.31M. The largest single liquidation was a $2.02M BTCUSDT order on Bybit [source].

Exchanges and Listings

• Binance Alpha listed the Taiko token on 31 May 2025; users with at least 205 Alpha Points can claim an airdrop of 130 TAIKO via the exchange’s Alpha event page. Taiko is an open-source ZK-rollup that mirrors Ethereum’s execution environment. [source]

Bitcoin

• Metaplanet purchased 1,088 BTC for $117M at an average $108,072 per coin, bringing its holdings to 8,888 BTC acquired for $851M. [source]

• Strategy acquired 705 BTC for $75.1M at $106,495 per coin and now holds 580,955 BTC bought for $40.68B; the firm reports a 16.9% BTC yield YTD 2025. [source]

Ethereum

• Wintermute said malicious contracts deployed after the Pectra upgrade on 2 Jun 2025 attempted to drain wallets but were blocked by existing safeguards. [source]

Hyperliquid

• A 1 June 2025 upgrade cut HyperEVM small blocks block time from 2s to 1s. [source]

Developments

• Ethena integrated its USDe stablecoin and staked tsUSDe with the TON blockchain; the assets are live in TON Space, MyTonWallet, TonHub and TonKeeper, broadening access for Telegram users to dollar savings and DeFi tools. [source]

• ETHGlobal Prague named finalists including Wrld Map, Karma Proof, Detox-Hook, 0xCollateral, MCPay.fun and Pomodoki, covering ZK-proof travel rewards, soulbound NFTs, Uniswap V4 hooks, uncollateralized loans, stablecoin pay-per-use APIs and gamified productivity tools. [source]

Market Data

BTC ETF

BTC ETFs total net daily flow for 30 May 2025 is –$616.10M.

Breakdown:

• IBIT: –$430.80M

• FBTC: –$13.70M

• BITB: –$35.30M

• ARKB: –$120.10M

• BTCO: $0.00M

• EZBC: $0.00M

• BRRR: $0.00M

• HODL: $0.00M

• BTCW: $0.00M

• GBTC: $0.00M

• BTC: –$16.20M

Total net daily flow: –$616.10M

Total cumulative flows to date: $45,009.70M

ETH ETF

ETH ETFs total net daily flow for 30 May 2025 is +$70.20M.

Breakdown:

• ETHA: +$70.20M

• FETH: $0.00M

• ETHW: $0.00M

• CETH: $0.00M

• ETHV: $0.00M

• QETH: $0.00M

• EZET: $0.00M

• ETHE: $0.00M

• ETH: $0.00M

Total net daily flow: +$70.20M

Total cumulative flows to date: $13,425.90M

Sector Returns

Top Performing Sectors

• Privacy sector is up 7.05% over the past 24 hours (XMR, ZEC, DVPN).

• Hyperliquid Ecosystem sector is up 6.18% over the past day (PURR, HFUN).

• NFT sector has risen 5.04% over the past day (PENGU, BLUR, CULT).

Worst Performing Sectors

• Modularity sector is down 1.02% over the past 24 hours (DYM, ALT, TIA).

• Gaming sector is down 1.25% over the past day (PIXEL, ILV, RONIN).

• AI sector has fallen 0.95% in the past 24 hours (FET, AR, IO).

Token Returns

Top Performing Tokens

1. BONK (Memecoin) is up 13.22% in the past 24 hours.

2. PENGU (NFT) is up 6.97% in the past 24 hours.

3. XMR (Privacy) is up 7.21% in the past 24 hours.

4. MOBILE (DePIN) is up 6.16% in the past 24 hours.

5. IOT (DePIN) has risen 6.94% in the past 24 hours.

Worst Performing Tokens

1. ARB (L2) is down 10.99% in the past 24 hours.

2. HFUN (Hyperliquid Ecosystem) is down 4.66% in the past 24 hours.

3. CFG (RWA) is down 4.99% in the past 24 hours.

4. MPL (RWA) is down 4.45% in the past 24 hours.

5. WTAO (AI) has fallen 3.57% in the past 24 hours.

Governance

Chaos Labs Risk Stewards - Adjustment of Supply Caps on Aave V3 - 05.31.25

Protocol: Aave

Date: 2025-05-31 10:34:22

Link: https://governance.aave.com/t/chaos-labs-risk-stewards-adjustment-of-supply-caps-on-aave-v3-05-31-25/22231

Description: ChaosLabs proposed adjusting Aave V3 supply caps for selected assets based on updated risk parameters.

[ARFC] Onboard tBTC to Aave v3 on Base

Protocol: Aave

Date: 2025-05-30 18:15:46

Link: https://governance.aave.com/t/arfc-onboard-tbtc-to-aave-v3-on-base/22226

Description: FREDY proposed adding tBTC as a supported asset on Aave v3 deployed on the Base network.

Ethena’s May 2025 Governance Update

Protocol: Ethena Foundation

Date: 2025-06-02 08:05:52

Link: https://gov.ethenafoundation.com/t/ethena-s-may-2025-governance-update/587

Description: steakhouse posted Ethena’s monthly governance update summarizing protocol changes and ongoing initiatives.

AGV Monthly Update (May 2025)

Protocol: Arbitrum Foundation

Date: 2025-05-30 18:09:21

Link: https://forum.arbitrum.foundation/t/agv-monthly-update-may-2025/29353

Description: GozmanGonzalez shared the May 2025 report on activities and budget updates from the Arbitrum Grants and Ventures (AGV) program.

dYdX Surge Season 3

Protocol: dYdX

Date: 2025-06-01 16:58:05

Link: https://dydx.forum/t/dydx-surge-season-3/3629

Description: chaoslabs introduced Surge Season 3, a new reward cycle for dYdX traders with adjusted parameters and timelines.

Updates to Inertia VIP Criteria

Protocol: Initia

Date: 2025-06-02 08:42:39

Link: https://forum.initia.xyz//t/updates-to-inertia-vip-criteria/258

Description: Inertia proposed revised eligibility conditions for its VIP program under the Inertia track.

Updating Inertia VIP Criteria

Protocol: Initia

Date: 2025-06-02 08:00:14

Link: https://forum.initia.xyz//t/updating-inertia-vip-criteria/256

Description: Inertia shared updates to Inertia’s VIP qualification framework, including refined metrics and participation benchmarks.

Updating Embr VIP Criteria

Protocol: Initia

Date: 2025-06-02 03:19:05

Link: https://forum.initia.xyz//t/updating-embr-vip-criteria/252

Description: stan proposed changes to the VIP qualification rules for Embr participants within the Initia ecosystem.

Disclaimer:

The information and services above are not intended to and shall not be used as investment advice.

You should consult with financial advisors before acting on any of the information and services. ASXN and ASXN staff are not investment advisors, do not represent or advise clients in any matter and are not bound by the professional responsibilities and duties of a financial advisor.

Nothing in the information and service, nor any receipt or use of such information or services, shall be construed or relied on as advertising or soliciting to provide any financial services.

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Market Updates

Macro, Regulation and Markets

• On 29 May 2025 House Republicans introduced the Digital Asset Market Clarity Act, giving the CFTC exclusive oversight of digital-commodity spot markets and creating a dual registration path with the SEC or CFTC according to asset type. The bill states that payment stablecoins are not securities, bars regulators from forcing custodians to recognise client assets on their own balance sheets, and exempts certain DeFi projects and wallet providers from SEC rules. [source]

• The SEC’s Division of Corporation Finance said on 29 May 2025 that protocol staking on public PoS networks generally does not constitute a securities transaction. It added that features such as slashing protection, early unstaking, reward distribution and asset aggregation do not, by themselves, amount to an offer or sale of securities. [source]

• The SEC voluntarily dismissed its civil enforcement action against Binance, BAM entities and Changpeng Zhao with prejudice on 29 May 2025, formally ending the case filed in 2023. [source]

Exchanges and Listings

• South Korea’s Upbit exchange will list FLOCK/BTC and FLOCK/USDT at 06:00 UTC and FORT/BTC and FORT/USDT at 08:00 UTC on 30 May 2025. It will also add LPT/KRW, LPT/USDT and POKT/KRW pairs later the same day. [source]

Bitcoin

• Cantor Fitzgerald Asset Management plans to launch a five-year Gold-Hedged Bitcoin Fund offering uncapped BTC upside with 1:1 downside protection via gold, following its earlier 2B bitcoin-collateralised loan programme. [source]

Hyperliquid

• Coinbase International Exchange and Coinbase Advanced will list the HYPE-PERP perpetual futures contract at or after 09:30 UTC on 5 June 2025. [source]

• Binance Futures will launch a USDⓈ-margined HYPEUSDT perpetual contract with up to 75x leverage at 10:30 UTC on 30 May 2025. [source]

Developments

• A Sui onchain vote concluded on 30 May 2025 with 90% approval to unlock the assets frozen after the 223M Cetus exploit; the protocol aims to restart operations by 6 June 2025 using recovered and treasury funds to reimburse users. [source]

• OpenSea has made its rebuilt OS2 platform the default interface, enabling NFT and fungible-token trading across 19 blockchains and launching the “Voyages” XP rewards programme; early beta users receive three Treasures and the SEA token launch date remains unannounced. [source]

Market Data

BTC ETF

BTC ETFs total net daily flow for 29 May 2025 is –$346.8M.

Breakdown:

• IBIT: +$125.1M

• FBTC: –$166.3M

• BITB: –$70.8M

• ARKB: –$89.2M

• BTCO: –$20.0M

• EZBC: –$6.1M

• BRRR: $0.0M

• HODL: –$12.0M

• BTCW: $0.0M

• GBTC: –$107.5M

• BTC: $0.0M

Total net daily flow: –$346.8M

Total cumulative flows to date: $45625.8M

ETH ETF

ETH ETFs total net daily flow for 29 May 2025 is +$91.9M.

Breakdown:

• ETHA: +$50.4M

• FETH: +$38.3M

• ETHW: +$4.6M

• CETH: $0.0M

• ETHV: $0.0M

• QETH: $0.0M

• EZET: $0.0M

• ETHE: –$4.6M

• ETH: +$3.2M

Total net daily flow: +$91.9M

Total cumulative flows to date: $13355.7M

Sector Returns

Top Performing Sectors

• Cosmos Ecosystem sector is up 0.65% over the past 24 hours (STRD 17.11%, ATOM -4.22%, OSMO -3.40%).

• Perps sector is up -0.69% over the past day (DRIFT 2.01%, GMX -1.31%, VERTEX -0.96%).

• Bitcoin Ecosystem sector has risen -0.91% in the past 24 hours (PUPS 3.88%, ORDI -4.06%).

Worst Performing Sectors

• Hyperliquid Ecosystem sector is down 11.07% over the past 24 hours (PURR -11.83%, HFUN -9.11%).

• AI sector is down 5.70% over the past day (FET -6.85%, RENDER -5.12%, GRASS -5.50%).

• NFT sector has fallen 5.56% over the past 24 hours (TNSR -6.44%, PENGU -6.63%, BLUR -3.05%).

Token Returns

Top Performing Tokens

1. STX (Bitcoin Ecosystem) is up 1078.79% in the past 24 hours.

2. CLOUD (Solana DeFi) is up 68.22% in the past 24 hours.

3. GEAR (Ethereum DeFi) is up 49.01% in the past 24 hours.

4. STRD (Cosmos Ecosystem) is up 17.11% in the past 24 hours.

5. BITCOIN (Memecoin) has risen 16.83% in the past 24 hours.

Worst Performing Tokens

1. SAVE (Solana DeFi) is down 20.86% in the past 24 hours.

2. PURR (Hyperliquid Ecosystem) is down 11.83% in the past 24 hours.

3. GRIFF (Agent) is down 11.07% in the past 24 hours.

4. HFUN (Hyperliquid Ecosystem) is down 9.11% in the past 24 hours.

5. SHIB (Memecoin) has fallen 8.79% in the past 24 hours.

Protocol Updates

Lido Validator and Node Operator Metrics: Q1 2025

Protocol: Lido

Date: 2025-05-27 15:41:06

Link: https://blog.lido.fi/lido-validator-node-operator-metrics-q1-2025/

Description: Lido posted Q1 2025 validator and node-operator statistics, outlining performance, stake distribution, and decentralisation targets.

The Repeggening

Protocol: Synthetix

Date: 2025-05-30 05:36:14

Link: https://blog.synthetix.io/the-repeggening/

Description: Synthetix posted an update on mechanisms to restore and maintain price parity across its synthetic assets after recent market volatility.

SNXweave Weekly Recap

Protocol: Synthetix

Date: 2025-05-28 17:48:46

Link: https://blog.synthetix.io/snxweave-weekly-recap-183/

Description: SNXweave posted its weekly recap summarising new protocol releases, governance proposals, and community highlights.

Onchain Forex Markets for Euros & GBP Launch on Injective

Protocol: Injective

Date: 2025-05-29 16:20:56

Link: https://blog.injective.com/onchain-forex-markets-for-euros-gbp-launch-on-injective/

Description: Injective posted the launch of on-chain forex markets for euro and pound trading pairs, enabling decentralised foreign-exchange trading on its network.

Injective Launches Validator Rebate Campaign to Strengthen Network Participation

Protocol: Injective

Date: 2025-05-27 15:01:42

Link: https://blog.injective.com/injective-launches-validator-rebate-campaign-to-strengthen-network-participation/

Description: Injective posted a validator rebate campaign that refunds gas fees to validators to boost participation and fortify network security.

The SDF Manifesto: Innovation on the Endless Frontier

Protocol: Sei

Date: 2025-05-29 18:30:19

Link: https://blog.sei.io/the-sdf-manifesto-innovation-on-the-endless-frontier-2/

Description: Sei posted the Sei Developer Foundation manifesto outlining its commitment to open-source innovation, grants, and long-term ecosystem development.

Response to the Cetus Incident – Onchain Community Vote

Protocol: Sui

Date: 2025-05-27 19:51:38

Link: https://blog.sui.io/cetus-incident-response-onchain-community-vote/

Description: Sui Foundation posted details of an on-chain community vote proposing restitution and security measures following the Cetus incident.

Succinct Powers ZK on Flagship Katana Network

Protocol: Succinct

Date: 2025-05-28 15:44:54

Link: https://blog.succinct.xyz/katana/

Description: Edward Li posted that Succinct’s proof system now powers zero-knowledge functionality on the Katana network, enhancing scalability and privacy.

FPGA Acceleration of SP1 with AntChain OpenLabs

Protocol: Succinct

Date: 2025-05-28 02:12:01

Link: https://blog.succinct.xyz/sp1-fpga-antchain-openlabs/

Description: John Guibas posted a collaboration with AntChain OpenLabs to accelerate the SP1 prover using FPGA hardware, reducing proof generation times.

The Succinct Network Explorer is Live

Protocol: Succinct

Date: 2025-05-27 19:02:51

Link: https://blog.succinct.xyz/the-succinct-network-explorer-is-live/

Description: Kshitij Kulkarni posted the launch of the Succinct Network Explorer, which provides real-time insights into proofs, nodes, and network performance.

Governance

Chaos Labs Risk Stewards - USDe Interest Rate and Borrow Cap Adjustments - 05.28.25

Protocol: Aave

Date: 2025-05-28 21:10:00

Link: https://governance.aave.com/t/chaos-labs-risk-stewards-usde-interest-rate-and-borrow-cap-adjustments-05-28-25/22205

Description: ChaosLabs proposed modifying USDe interest-rate curves and borrow caps on Aave V3 under its Risk Steward remit.

Staking Penalties on Babylon’s Bitcoin Staking Protocol

Protocol: Aave

Date: 2025-05-28 12:42:13

Link: https://governance.aave.com/t/staking-penalties-on-babylon-s-bitcoin-staking-protocol/22198

Description: AMD18 asked how staking penalties in Babylon’s Bitcoin Staking Protocol might affect Aave users and risk parameters.

Chaos Labs Risk Stewards - Increase Supply Caps and Borrow Caps on Aave V3 - 05.28.25

Protocol: Aave

Date: 2025-05-28 09:50:11

Link: https://governance.aave.com/t/chaos-labs-risk-stewards-increase-supply-caps-and-borrow-caps-on-aave-v3-05-28-25/22197

Description: ChaosLabs recommended raising supply and borrow caps for multiple Aave V3 markets based on updated utilisation data.

Hoodi Testnet is Live

Protocol: EigenLayer

Date: 2025-05-29 16:07:19

Link: https://forum.eigenlayer.xyz/t/hoodi-testnet-is-live/14579

Description: Graceh announced the launch of the Hoodi testnet and invited users to participate.

Ether.Fi Member Rewards

Protocol: Ether.fi

Date: 2025-05-29 03:43:01

Link: https://governance.ether.fi/t/ether-fi-member-rewards/2974

Description: Ether.fi outlined details of its upcoming member rewards program.

[Chaos Labs] Cap - Risk Analysis

Protocol: Ether.fi

Date: 2025-05-27 20:51:31

Link: https://governance.ether.fi/t/chaos-labs-cap-risk-analysis/2971

Description: Chaoslabs provided a risk analysis of cap parameters for Ether.fi assets.

Kamino: Season 4 Introduction & Season 3 Claim

Protocol: Kamino Finance

Date: 2025-05-29 13:40:43

Link: https://gov.kamino.finance/t/kamino-season-4-introduction-season-3-claim/726

Description: _why7 introduced Kamino Season 4 and provided instructions for claiming Season 3 rewards.

MIP XXX - Katana Coincentives

Protocol: Morpho

Date: 2025-05-29 23:37:04

Link: https://forum.morpho.org/t/mip-xxx-katana-coincentives/1801

Description: MorphoAssociation proposed MIP XXX to launch Katana coincentives aimed at boosting protocol usage.

Increasing Pull Oracle Resiliency

Protocol: Morpho

Date: 2025-05-27 19:00:05

Link: https://forum.morpho.org/t/increasing-pull-oracle-resiliency/1795

Description: TRiLeZ proposed improvements to enhance the resiliency of Morpho’s pull oracle mechanism.

Arbitrum Treasury Management Council - Consolidating Efforts

Protocol: Arbitrum Foundation

Date: 2025-05-29 23:22:32

Link: https://forum.arbitrum.foundation/t/arbitrum-treasury-management-council-consolidating-efforts/29334

Description: JoJo proposed consolidating Treasury Management Council initiatives to streamline Arbitrum’s financial oversight.

Reallocate Redeemed USDM Funds to STEP 2 Budget

Protocol: Arbitrum Foundation

Date: 2025-05-29 23:22:46

Link: https://forum.arbitrum.foundation/t/reallocate-redeemed-usdm-funds-to-step-2-budget/29335

Description: Camelot proposed moving redeemed USDM funds into the STEP 2 budget to support upcoming initiatives.

[Constitutional] AIP: Remove Cost Cap on Arbitrum Nova

Protocol: Arbitrum Foundation

Date: 2025-05-29 15:19:47

Link: https://forum.arbitrum.foundation/t/constitutional-aip-remove-cost-cap-on-arbitrum-nova/29332

Description: Paulofonseca filed a constitutional AIP to eliminate the transaction cost cap on Arbitrum Nova.

[Chaos Labs] Cap - Risk Briefing

Protocol: Renzo Protocol

Date: 2025-05-28 16:05:08

Link: https://gov.renzoprotocol.com/t/chaos-labs-cap-risk-briefing/232

Description: Chaoslabs delivered a risk briefing on cap parameters for Renzo Protocol assets.

dYdX VIP tier Affiliate Program - New VIP Admissions - May 29, 2025

Protocol: dYdX

Date: 2025-05-29 13:24:26

Link: https://dydx.forum/t/dydx-vip-tier-affiliate-program-new-vip-admissions-may-29-2025/3625

Description: KuyenLabs listed newly admitted VIP affiliates under the dYdX program for 29 May 2025.

[DRC] Cease support for the wethDYDX Smart Contract (i.e., the Bridge) on the dYdX Chain side

Protocol: dYdX

Date: 2025-05-27 15:51:30

Link: https://dydx.forum/t/drc-cease-support-for-the-wethdydx-smart-contract-i-e-the-bridge-on-the-dydx-chain-side/3619

Description: Nethermind proposed discontinuing support for the wethDYDX bridge contract on the dYdX Chain.

Integrate PT-USDS on Euler Yield Market

Protocol: Euler Finance

Date: 2025-05-30 10:28:07

Link: https://forum.euler.finance/t/integrate-pt-usds-on-euler-yield-market/1421

Description: Objective proposed listing PT-USDS on the Euler Yield Market.

[Gauntlet] - Monthly Risk Parameter Recommendations (2025-05-28)

Protocol: Euler Finance

Date: 2025-05-28 21:23:31

Link: https://forum.euler.finance/t/gauntlet-monthly-risk-parameter-recommendations-2025-05-28/1420

Description: Objective shared Gauntlet’s monthly risk parameter recommendations for Euler Finance.

Integrate Spark sUSDC on Euler Unichain Market

Protocol: Euler Finance

Date: 2025-05-28 21:12:51

Link: https://forum.euler.finance/t/integrate-spark-susdc-on-euler-unichain-market/1419

Description: Objective proposed adding Spark sUSDC to the Euler Unichain Market.

Expanding Safe Earn: Onboarding New Yield Protocols

Protocol: Safe

Date: 2025-05-28 17:19:25

Link: https://forum.safe.global/t/expanding-safe-earn-onboarding-new-yield-protocols/6566

Description: Lukas proposed adding additional yield protocols to expand Safe Earn offerings.

xSILO Tokenomics and Revenue Distribution Proposal

Protocol: Silo Finance

Date: 2025-05-29 15:14:21

Link: https://gov.silo.finance/t/xsilo-tokenomics-and-revenue-distribution-proposal/560

Description: Ayham.eth proposed xSILO tokenomics and a revenue distribution model for Silo Finance.

[Discussion] PeerLend – Oracle-Free P2P Lending Design (Open Concept for the Community)

Protocol: StarkNet

Date: 2025-05-30 11:22:03

Link: https://community.starknet.io/t/discussion-peerlend-oracle-free-p2p-lending-design-open-concept-for-the-community/115585

Description: Pyhodll opened a discussion on an oracle-free peer-to-peer lending design called PeerLend for StarkNet.

[GIP-242] Improve liquidity in DOLA pool, fix rsETH limit

Protocol: Gearbox

Date: 2025-05-30 09:33:35

Link:

https://snapshot.org/#/gearbox.eth/proposal/0xe368b609a325b20834cc079acd1ba501a8105424c73a04dd7361a11b3b9d6745

Description: A Snapshot proposal seeks to boost DOLA pool liquidity and adjust the rsETH limit within Gearbox.

Disclaimer:

The information and services above are not intended to and shall not be used as investment advice.

You should consult with financial advisors before acting on any of the information and services. ASXN and ASXN staff are not investment advisors, do not represent or advise clients in any matter and are not bound by the professional responsibilities and duties of a financial advisor.

Nothing in the information and service, nor any receipt or use of such information or services, shall be construed or relied on as advertising or soliciting to provide any financial services.

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Market Updates

Macro, Regulation and Markets

• U.S. President Donald Trump announced on 25 May 2025 that the implementation date for a 50% tariff on EU goods will be extended from 1 June to 9 July 2025, following a call with European Commission President Ursula von der Leyen. Negotiations between the parties are expected to begin shortly. [source]

Exchanges and Listings

• Upbit announced listings for Hyperlane (HYPER) and RedStone (RED) trading pairs with BTC and USDT. Hyperlane is an open-source protocol for blockchain interoperability, while RedStone provides oracle infrastructure for decentralized finance. [source]

• Upbit will also list Sophon (SOPH) trading pairs with KRW, BTC, and USDT. Sophon is a consumer-oriented blockchain built on the ZK Stack using zkSync’s Elastic Chain. [source]

• Bybit launched support for native USDC on the Aptos network. Deposits opened on 26 May 2025, and withdrawals will begin on 29 May 2025 at 10:00 UTC. [source]

Liquid and Venture Funds

• BNP Paribas Asset Management introduced tokenized money market fund shares using distributed ledger technology for cross-border transaction testing. The project is being implemented through the Allfunds Blockchain platform. [source]

Raises

• Cobie’s Echo launched Sonar, a new ICO platform for public token sales, with Plasma as its first project. Plasma will offer 10% of its XPL token supply and aims to raise $50 million. [source]

Bitcoin

• Semler Scientific purchased 455 BTC for $50 million at an average price of $109,801, bringing its total holdings to 4,264 BTC with a cumulative acquisition cost of $390 million. The current estimated value of its holdings is $450 million. [source]

• Strategy acquired 4,020 BTC for $427.1 million at $106,237 per coin. As of 25 May 2025, the firm holds 580,250 BTC purchased at a total cost of $40.61 billion, with a year-to-date BTC yield of 16.8%. [source]

• Trump Media announced a $2.5 billion Bitcoin treasury strategy, making it one of the largest BTC holdings among public companies. Crypto.com and Anchorage Digital will provide custody services. [source]

• Digital asset investment products saw $3.3 billion in weekly inflows, bringing 2025 year-to-date inflows to $10.8 billion. Bitcoin accounted for $2.9 billion of the total, while Ethereum had $326 million in inflows. [source]

Ethereum

• Ethereum investment products recorded $326 million in inflows last week, according to CoinShares. This contributed to a record-breaking $10.8 billion in digital asset inflows so far in 2025. [source]

Solana

• Kraken, in partnership with Backed and the Solana Foundation, launched xStocks, a platform offering tokenized U.S. stocks and ETFs on Solana. Assets use the SPL token standard and will be accessible to select non-U.S. users through the Kraken app. [source]

• Kalshi has added Solana as a supported asset alongside Bitcoin, USDC, and WLD. [source]

Developments

• HSBC launched Hong Kong’s first blockchain-based settlement service using tokenized deposits. Ant International completed the first transaction through the system. [source]

• Sui clarified that the recent incident involving Cetus was due to a bug in Cetus’s own math library, not a protocol vulnerability. Sui will allocate $10 million to audits, bug bounties, and other security enhancements. [source]

ETFs

• Nasdaq submitted a 19b-4 filing to the U.S. SEC for approval of the 21Shares SUI ETF. [source]

• Circle filed for an IPO on the NYSE, offering 24 million Class A shares—9.6 million from the company and 14.4 million from existing shareholders. Shares are expected to price between $24 and $26, trading under the ticker CRCL. [source]

Market Data

BTC ETF

BTC ETFs total net daily flow for 23 May 2025 is +$211.70M.

Breakdown:

• IBIT: +$430.80M

• FBTC: –$73.70M

• BITB: $0.00M

• ARKB: –$73.90M

• BTCO: $0.00M

• EZBC: $0.00M

• BRRR: $0.00M

• HODL: +$17.70M

• BTCW: $0.00M

• GBTC: –$89.20M

• BTC: $0.00M

Total net daily flow: +$211.70M

Total cumulative flows to date: $45,154.50M

ETH ETF

ETH ETFs total net daily flow for 23 May 2025 is +$58.60M.

Breakdown:

• ETHA: +$52.80M

• FETH: $0.00M

• ETHW: $0.00M

• CETH: $0.00M

• ETHV: $0.00M

• QETH: $0.00M

• EZET: $0.00M

• ETHE: $0.00M

• ETH: +$5.80M

Total net daily flow: +$58.60M

Total cumulative flows to date: $13,140.10

Sector Returns

Top Performing Sectors

• Solana DeFi sector is up 4.96% over the past 24 hours (JTO, RAY, MNDE).

• Agent sector is up 4.52% over the past day (VIRTUAL, AIXBT, GRIFF).

• Ethereum DeFi sector has risen 1.58% in the past 24 hours (UNI, AAVE, CRV).

Worst Performing Sectors

• Hyperliquid Ecosystem sector is down 5.70% over the past 24 hours (PURR, HFUN).

• Privacy sector is down 3.09% over the past day (XMR, ZEC).

• NFT sector has fallen 2.89% in the past 24 hours (BLUR, PENGU, TNSR).

Token Returns

Top Performing Tokens

1. SEND (Sui DeFi) is up 15.35% in the past 24 hours.

2. BLUE (Sui DeFi) is up 12.40% in the past 24 hours.

3. JUP (Solana DeFi) is up 11.15% in the past 24 hours.

4. AIXBT (Agent) is up 6.96% in the past 24 hours.

5. PIXEL (Gaming) has risen 5.68% in the past 24 hours.

Worst Performing Tokens

1. CLOUD (Solana DeFi) is down 8.21% in the past 24 hours.

2. MPL (RWA) is down 7.87% in the past 24 hours.

3. HFUN (Hyperliquid Ecosystem) is down 7.87% in the past 24 hours.

4. CETUS (Sui DeFi) is down 6.90% in the past 24 hours.

5. STX (Bitcoin Ecosystem) has fallen 6.33% in the past 24 hours.

Protocol Updates

Start Yapping on Arbitrum Everywhere

Protocol: Arbitrum

Date: 2025-05-27 14:00:25

Link: https://blog.arbitrum.io/start-yapping-on-arbitrum-everywhere

Description: Arbitrum announced that the Yapping meme coin is now live across all major Arbitrum chains, including Nova and Orbit, enabling cross-rollup access and experimentation.

Komainu Supports stETH Enabling Institutional Access to Ethereum Liquid Staking

Protocol: Lido

Date: 2025-05-27 13:39:21

Link: https://blog.lido.fi/komainu-supports-steth-enabling-institutional-access-to-ethereum-liquid-staking

Description: Lido posted that Komainu has added support for stETH, aiming to give institutional investors compliant access to Ethereum liquid staking products.

Governance

[ARFC] Asset Parameters Optimization

Protocol: Aave

Date: 2025-05-26 19:34:15

Link: https://governance.aave.com/t/arfc-asset-parameters-optimization/22178

Description: ACI proposed optimizing asset parameters in the Aave protocol, targeting risk and capital efficiency improvements.

[Direct to AIP] Onboard rsETH to Aave V3 Linea Instance

Protocol: Aave

Date: 2025-05-26 12:47:22

Link: https://governance.aave.com/t/direct-to-aip-onboard-rseth-to-aave-v3-linea-instance/22172

Description: ACI proposed onboarding rsETH to the Aave V3 Linea deployment via a direct-to-AIP process.

[ARFC] Onboard wstLINK to Aave V3 Core Instance

Protocol: Aave

Date: 2025-05-26 05:32:48

Link: https://governance.aave.com/t/arfc-onboard-wstlink-to-aave-v3-core-instance/22169

Description: ACI proposed adding wstLINK to the Aave V3 Core market, initiating a risk assessment and onboarding discussion.

Incident Report: CodeOracle memory page divergence

Protocol: ZKSync

Date: 2025-05-27 11:57:12

Link: https://forum.zknation.io/t/incident-report-codeoracle-memory-page-divergence/690

Description: the_matter_labs posted a report detailing a memory page divergence in CodeOracle and its resolution steps.

Trigger Mod: Building Permissionless Pathways by Extending the Capped Minter Framework

Protocol: ZKSync

Date: 2025-05-26 12:41:27

Link: https://forum.zknation.io/t/trigger-mod-building-permissionless-pathways-by-extending-the-capped-minter-framework/689

Description: Matt_FactoryLabs proposed extending the capped minter framework to support broader permissionless token issuance.

Post Mortem - Aerodrome cUSDO/USDC AMM LP Oracle Manipulation on Morpho Lending Market

Protocol: Morpho

Date: 2025-05-26 20:48:39

Link: https://forum.morpho.org/t/post-mortem-aerodrome-cusdo-usdc-amm-lp-oracle-manipulation-on-morpho-lending-market/1794

Description: ClearstarLabs published a post-mortem on an oracle manipulation incident affecting cUSDO/USDC LPs on the Morpho Lending Market.

3m Fee Waiver as Incentive. Increased Fee to Follow

Protocol: Euler Finance

Date: 2025-05-24 22:40:25

Link: https://forum.euler.finance/t/3m-fee-waiver-as-incentive-increased-fee-to-follow/1415

Description: KeyringNetwork proposed a three-month fee waiver to attract users, followed by an increase to standard fee levels.

ATOM-Backed Stablecoin and Lending Protocol Proposal (Built on Elys Network)

Protocol: Cosmos

Date: 2025-05-27 08:18:47

Link: https://forum.cosmos.network/t/atom-backed-stablecoin-and-lending-protocol-proposal-built-on-elys-network/15659

Description: Govmos proposed a new lending protocol using an ATOM-backed stablecoin built on the Elys Network.

[GIP-241] Activate 23 new instances, enable rsETH

Protocol: Gearbox

Date: 2025-05-26 17:53:40

Link: https://snapshot.org/#/gearbox.eth/proposal/0x37a18d542a3a126d5660e5a465ec403061278e6cbd6fa5b237ec605f38e0088e

Description: Gearbox posted a Snapshot vote to activate 23 new instances and enable rsETH support across deployments.

Disclaimer:

The information and services above are not intended to and shall not be used as investment advice.

You should consult with financial advisors before acting on any of the information and services. ASXN and ASXN staff are not investment advisors, do not represent or advise clients in any matter and are not bound by the professional responsibilities and duties of a financial advisor.

Nothing in the information and service, nor any receipt or use of such information or services, shall be construed or relied on as advertising or soliciting to provide any financial services.

Subscribe now

Follow ASXN on Twitter

Market Updates

Macro, Regulation and Markets

• Major U.S. banks including JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo are in talks to jointly issue a stablecoin. Discussions involve Early Warning Services, which operates the Zelle payment system, and The Clearing House, a real-time payments network. [source]

• Donald Trump proposed a 50% tariff on all EU imports beginning 1 June 2025, unless the goods are produced in the U.S., citing stalled trade talks and accusing the EU of unfair trade practices including VAT and currency manipulation. [source]

• In the past 24 hours, approximately 162,795 trades were liquidated, totaling $550.26M. BTC and ETH accounted for $144.13M and $139.81M respectively, with the largest single liquidation order valued at $9.53M on OKX (BTC-USDT-SWAP). [source]

Exchanges and Listings

• Robinhood has listed spot trading for MEW and Moo Deng, two meme coins developed on Solana. [source]

• South Korea’s Upbit will list SOON and KERNEL trading pairs with BTC and USDT. SOON focuses on liquidity and interoperability through the Super Adoption Stack, while KernelDAO supports a restaking protocol including Kernel, Kelp, and Gain. [source]

• Binance will list SOON USDT perpetual contracts with up to 50x leverage. [source]

Developments

• Mysten Labs submitted and then closed a pull request for a whitelist feature aimed at pre-constructing recovery transactions to retrieve or return hacked funds. The feature would require a separate module with system-level privileges to be effective. [source]

ETFs

• The first U.S. XRP futures ETF has begun trading on Nasdaq. [source]

• The SEC acknowledged a filing from Canary Capital for a staked Tron ETF. [source]

Solana

• Kraken plans to launch tokenized stock trading for Apple, Nvidia, and other companies on Solana for customers outside the U.S. [source] [source]

• Solana DEX aggregator Jupiter has unveiled a lending protocol designed to increase capital efficiency across its ecosystem. [source]

Market Data

BTC ETF

BTC ETFs total net daily flow for 22 May 2025 is +$934.80M.

Breakdown:

• IBIT: +$877.20M

• FBTC: +$48.70M

• BITB: $0.00M

• ARKB: +$8.90M

• BTCO: $0.00M

• EZBC: $0.00M

• BRRR: $0.00M

• HODL: $0.00M

• BTCW: $0.00M

• GBTC: $0.00M

• BTC: $0.00M

Total net daily flow: +$934.80M

Total cumulative flows to date: $44,942.80M

ETH ETF

ETH ETFs total net daily flow for 22 May 2025 is +$110.50M.

Breakdown:

• ETHA: $0.00M

• FETH: +$42.20M

• ETHW: +$5.70M

• CETH: $0.00M

• ETHV: $0.00M

• QETH: $0.00M

• EZET: $0.00M

• ETHE: +$43.70M

• ETH: +$18.90M

Total net daily flow: +$110.50

Total cumulative flows to date: $13,081.50M

Sector Returns

Top Performing Sectors

• Hyperliquid Ecosystem sector is up 39.80% over the past 24 hours (PURR, HFUN).

• Memecoin sector has risen 8.27% over the past day (PEPE, WIF, FLOKI).

• AI sector is up 7.54% in the past 24 hours (RENDER, FET, IO).

Worst Performing Sectors

• Privacy sector is down 2.93% over the past 24 hours (XMR).

• Sui DeFi sector is down 0.87% over the past day (CETUS, BLUE, DEEP).

• L1 sector has fallen 1.90% in the past 24 hours (SUI, MOVE, INJ).

Token Returns

Top Performing Tokens

1. PURR (Hyperliquid Ecosystem) is up 44.75% in the past 24 hours.

2. HFUN (Hyperliquid Ecosystem) is up 28.90% in the past 24 hours.

3. BLUE (Sui DeFi) is up 23.79% in the past 24 hours.

4. HYPE (L1) has risen 18.34% in the past 24 hours.

5. GFI (RWA) is up 17.24% in the past 24 hours.

Worst Performing Tokens

1. MPL (RWA) is down 24.43% in the past 24 hours.

2. CETUS (Sui DeFi) is down 22.27% in the past 24 hours.

3. STRK (L2) is down 12.15% in the past 24 hours.

4. WLD (AI) is down 0.06% in the past 24 hours.

5. SUI (L1) is down 1.90% in the past 24 hours.

Protocol Updates

SNX Staking is Here

Protocol: Synthetix

Date: 2025-05-23 06:53:24

Link: https://blog.synthetix.io/snx-staking-is-here

Description: Synthetix CC announced the launch of SNX staking, enabling users to participate directly in protocol rewards and governance through the new interface.

Rewards Extended for sUSD Deposits on Infinex

Protocol: Synthetix

Date: 2025-05-23 02:31:27

Link: https://blog.synthetix.io/rewards-extended-for-susd-deposits-on-infinex

Description: Synthetix posted that the sUSD deposit rewards program on Infinex has been extended, allowing users continued access to incentives for providing liquidity.

Governance

Uniswap Foundation: Summary Q1’2025 Financials

Protocol: Uniswap

Date: 2025-05-23 01:53:10

Link: https://gov.uniswap.org/t/uniswap-foundation-summary-q1-2025-financials/25622

Description: Doo_StableLab posted Q1 2025 financial results for the Uniswap Foundation and invited community review of income and spending.

Proposal: Tally as a Dedicated Governance Service Provider to the Compound DAO

Protocol: Compound

Date: 2025-05-22 16:45:41

Link: https://www.comp.xyz/t/proposal-tally-as-a-dedicated-governance-service-provider-to-the-compound-dao/6789

Description: coolhorsegirl proposed engaging Tally as Compound DAO’s governance service provider to streamline proposal management and voting.

Wind Down the MSS + Transfer Payment Responsibilities to the Arbitrum Foundation

Protocol: Arbitrum Foundation

Date: 2025-05-22 22:54:25

Link: https://forum.arbitrum.foundation/t/wind-down-the-mss-transfer-payment-responsibilities-to-the-arbitrum-foundation/29279

Description: MinistroDolar proposed ending the Mission Support Syndicate and moving its payment duties to the Arbitrum Foundation.

Leveraging Orbit Subchains & $ARB Gas for On-Chain Film Finance — A Strategic Opportunity for Arbitrum DAO

Protocol: Arbitrum Foundation

Date: 2025-05-22 22:55:48

Link: https://forum.arbitrum.foundation/t/leveraging-orbit-subchains-arb-gas-for-on-chain-film-finance-a-strategic-opportunity-for-arbitrum-dao/29281

Description: brandonBVP posted a proposal to fund on-chain film financing using Orbit subchains and ARB gas, seeking DAO support.

Incentive Program Assessments & Recommendations

Protocol: Arbitrum Foundation

Date: 2025-05-22 15:48:32

Link: https://forum.arbitrum.foundation/t/incentive-program-assessments-recommendations/29276

Description: CastleCapital presented evaluations of Arbitrum’s incentive programs and recommended changes to improve effectiveness.

The Future of the Anticapture Commission

Protocol: Optimism

Date: 2025-05-22 19:23:48

Link: https://gov.optimism.io/t/the-future-of-the-anticapture-commission/9934

Description: ACC opened a discussion on extending or redefining Optimism’s Anticapture Commission and invited community input.

Optimism as Venture Studio: Mission Updates

Protocol: Optimism

Date: 2025-05-22 18:31:31

Link: https://gov.optimism.io/t/optimism-as-venture-studio-mission-updates/9933

Description: WakeUp_Labs posted mission updates for the “Optimism as Venture Studio” initiative, outlining progress and next steps.

[BIP-XXX] Balancer DAO Governance Process Guidelines

Protocol: Balancer

Date: 2025-05-22 14:20:22

Link: https://forum.balancer.fi/t/bip-xxx-balancer-dao-governance-process-guidelines/6542

Description: Xeonus drafted governance process guidelines for Balancer DAO under BIP-XXX and requested feedback.

[BIP-835] Enable Gauge for Base Macro QuantAMM BTF

Protocol: Balancer

Date: 2025-05-22 12:51:59

Link: https://forum.balancer.fi/t/bip-835-enable-gauge-for-base-macro-quantamm-btf/6541

Description: Xeonus proposed BIP-835 to add a liquidity gauge for the Base Macro QuantAMM BTF pool.

[RFC] Signals Protocol

Protocol: ENS

Date: 2025-05-23 10:56:25

Link: https://discuss.ens.domains/t/rfc-signals-protocol/20836

Description: Arnold introduced an RFC for a Signals Protocol to let ENS users broadcast on-chain signals.

[PROPOSAL][DRAFT] Acquisition of Stargaze by Cosmos Hub

Protocol: Cosmos

Date: 2025-05-23 02:05:54

Link: https://forum.cosmos.network/t/proposal-draft-acquisition-of-stargaze-by-cosmos-hub/15564

Description: blockshane separately drafted a proposal for Cosmos Hub to acquire Stargaze and detailed proposed terms.

Celestia as TCP/IP for Financial Internet.

Protocol: Celestia

Date: 2025-05-23 10:57:49

Link: https://forum.celestia.org/t/celestia-as-tcp-ip-for-financial-internet/2005

Description: Rakesh-Jag proposed framing Celestia as the TCP/IP layer for a financial internet, highlighting scalability benefits.

Making Celestia fully real-time verifiable (and, in turn, scale nearly for free)

Protocol: Celestia

Date: 2025-05-22 18:25:36

Link: https://forum.celestia.org/t/making-celestia-fully-real-time-verifiable-and-in-turn-scale-nearly-for-free/2002

Description: lmao suggested improvements for real-time verification to allow near-free scaling of Celestia.

Inflation Correction and Unstaking Subsidy Plan

Protocol: Initia

Date: 2025-05-23 06:00:03

Link: https://forum.initia.xyz/t/inflation-correction-and-unstaking-subsidy-plan/201

Description: f5nodes outlined a plan to correct Initia’s inflation parameters and subsidise unstaking, seeking DAO approval.

Initia Chain Upgrade Proposal #1.5

Protocol: Initia

Date: 2025-05-23 07:49:18

Link: https://forum.initia.xyz/t/initia-chain-upgrade-proposal-1-5/205

Description: sawit proposed Chain Upgrade #1.5 for Initia, detailing technical changes and timelines.

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Market Updates

Macro, Regulation and Markets

• The Texas House passed SB21 on 21 May 2025 by 101-42, advancing a Texas Strategic Bitcoin Reserve that would let the state comptroller invest only in cryptocurrencies with market caps above $500B; the bill now awaits the governor’s signature. [source]

• Over the last 24h exchanges recorded $523.12M of liquidations, affecting 132,463 traders; shorts accounted for $330.47M and longs $192.65M. BTC contributed $224.61M, ETH $131.80M and SOL $15.56M, and the largest single liquidation was a $6.36M BTCUSD order on Bybit. [source]

Exchanges and Listings

• Binance Launchpool will open staking in BNB, FDUSD and USDC for its 70th project, Huma Finance (HUMA), ahead of Binance Alpha listing the token on 26 May 2025. [source]

• Binance will list World Liberty Financial USD (USD1) and open the USD1/USDT spot pair at 12:00 UTC on 22 May 2025. [source]

Liquid and Venture Funds

• VanEck will launch PurposeBuilt, a private digital-assets fund in June 2025 that will back Avalanche projects at the token-generation stage across gaming, financial services, payments and AI, while parking idle capital in Avalanche RWA products to stay on-chain. [source]

Raises

• World Assets sold $135M of WLD tokens to Andreessen Horowitz and Bain Capital Crypto to fund the World network’s expansion; earlier backers include Selini Capital, Mirana Ventures and Arctic Digital. [source]

Bitcoin

• Bitcoin mining profitability declined in April 2025 as rising network hashrate continued to compress margins despite more efficient rigs coming online. [source]

• Strategy (formerly MicroStrategy) filed a prospectus on 22 May 2025 to issue up to $2.1B of 10.00% Series A perpetual preferred stock (STRF) to finance additional Bitcoin purchases. [source]

Hyperliquid

• Hyperliquid set fresh ATHs on 22 May 2025 with $8.9B open interest, $5.4M 24h fees and $3.2B USDC TVL. [source]

• Hyperliquid’s AF repurchased $4.49M of HYPE (0.05% of supply) on 21 May 2025, marking its largest daily buyback of the year. [source]

Developments

• FIFA will build “FIFA Blockchain”, an Avalanche-based L1 that will host soccer NFT collectibles and other crypto products. [source]

• An attacker drained about $11M of SUI from Cetus DEX pools on 22 May 2025, sending many Sui-based token prices down more than 75% before moving the proceeds across chains into ETH. [source]

Market Data

BTC ETFs total net daily flow for 21 May 2025 is +$607.1M.

Breakdown:

• IBIT: +$530.6M

• FBTC: +$23.5M

• BITB: +$20.5M

• ARKB: +$4.3M

• BTCO: $0.0M

• EZBC: $0.0M

• BRRR: $0.0M

• HODL: +$6.1M

• BTCW: $0.0M

• GBTC: $0.0M

• BTC: +$22.1M

Total net daily flow: +$607.1M

Total cumulative flows to date: $44,008.0M

ETH ETF

ETH ETFs total net daily flow for 21 May 2025 is +$0.6M.

Breakdown:

• ETHA: +$24.9M

• FETH: –$24.3M

• ETHW: $0.0M

• CETH: $0.0M

• ETHV: $0.0M

• QETH: $0.0M

• EZET: $0.0M

• ETHE: $0.0M

• ETH: $0.0M

Total net daily flow: +$0.6M

Total cumulative flows to date: $12,971.0M

Sector Returns

Top Performing Sectors

• Privacy sector is up 12.12% over the past 24 hours (XMR 12.94%, ZEC 3.41%).

• Bitcoin Ecosystem sector is up 8.58% over the past day (PUPS 19.12%, ORDI 6.84%, STX -3.69%).

• NFT sector has risen 8.02% in the past 24 hours (PENGU 10.65%, TNSR 2.56%, CULT -2.76%).

Worst Performing Sectors

• Modularity sector is down 0.65% over the past 24 hours (ALT 3.24%, TIA -0.94%, DYM -0.19%).

• Perps sector has fallen 0.45% over the past 24 hours (VERTEX -4.11%, GMX 1.67%, AEVO 0.91%).

• Cosmos Ecosystem sector is down 0.72% over the past day (STRD 3.92%, OSMO 0.25%).

Token Returns

Top Performing Tokens

1. PUPS (Bitcoin Ecosystem) is up 19.12% in the past 24 hours.

2. MNDE (Solana DeFi) is up 17.65% in the past 24 hours.

3. SAVE (Solana DeFi) has risen 15.60% in the past 24 hours.

4. WIF (Memecoin) is up 15.12% in the past 24 hours.

5. XMR (Privacy) is up 12.94% in the past 24 hours.

Worst Performing Tokens

1. MPL (RWA) is down 41.09% in the past 24 hours.

2. PRIME (Gaming) is down 6.66% in the past 24 hours.

3. VERTEX (Perps) has fallen 4.11% in the past 24 hours.

4. AAVE (Ethereum DeFi) is down 4.10% in the past 24 hours.

5. STX (Bitcoin Ecosystem) is down 3.69% in the past 24 hours.

Protocol Updates

The Withdrawal of the Derive Acquisition Proposal

Protocol: Synthetix

Date: 2025-05-21 22:57:31

Link: https://blog.synthetix.io/the-withdrawal-of-the-derive-acquisition-proposal/

Description: Synthetix posted that it has withdrawn its proposal to acquire Derive. The update explains the factors behind the decision and outlines potential future collaboration paths.

SNXweave Weekly Recap 182

Protocol: Synthetix

Date: 2025-05-21 19:52:54

Link: https://blog.synthetix.io/snxweave-weekly-recap-182/

Description: SNXweave posted its 182nd weekly recap, summarising recent governance votes, product updates, and key ecosystem metrics for the Synthetix protocol.

OKX Launches xBTC in Sui’s Thriving Bitcoin DeFi Ecosystem

Protocol: Sui

Date: 2025-05-22 04:03:08

Link: https://blog.sui.io/okx-xbtc-launch/

Description: Sui Foundation posted that exchange OKX has launched xBTC, a Bitcoin-backed token on Sui, aiming to expand Bitcoin liquidity and DeFi use cases on the network.

Open Market Group’s Real-World Asset Opportunities Land on Sui

Protocol: Sui

Date: 2025-05-21 12:55:12

Link: https://blog.sui.io/open-market-group-rwa/

Description: Sui Foundation posted that Open Market Group is bringing tokenised real-world asset investment opportunities to Sui, broadening the network’s institutional offering.

Using Lean to Formally Verify the Correctness of SP1

Protocol: Succinct

Date: 2025-05-21 17:57:10

Link: https://blog.succinct.xyz/formal-verification-of-sp1-with-lean/

Description: John Guibas posted about employing the Lean proof assistant to formally verify SP1’s cryptographic circuits, detailing the methodology and its implications for Succinct’s security guarantees.

Governance

Request for Proposal (RFP): Oracle Extractable Value (OEV) Solution for Compound Protocol

Protocol: Compound

Date: 2025-05-22 01:33:58

Link: https://www.comp.xyz/t/request-for-proposal-rfp-oracle-extractable-value-oev-solution-for-compound-protocol/6786

Description: AranaDigital posted an RFP seeking an Oracle Extractable Value solution for Compound, outlining requirements and inviting teams to submit bids.

MIP XX - Incentives Distribution on Unichain

Protocol: Morpho

Date: 2025-05-22 03:34:14

Link: https://forum.morpho.org/t/mip-xx-incentives-distribution-on-unichain/1789

Description: MorphoAssociation proposed MIP XX to distribute incentives on Unichain, defining reward parameters and eligibility rules.

MIP XX - Spark USDC Deposit Rewards 2

Protocol: Morpho

Date: 2025-05-22 03:10:54

Link: https://forum.morpho.org/t/mip-xx-spark-usdc-deposit-rewards-2/1788

Description: MorphoAssociation posted a follow-up Spark USDC deposit-rewards proposal under MIP XX, updating rates and timelines.

[DRC] Reduce Active Validator Set to 50

Protocol: dYdX

Date: 2025-05-21 16:11:20

Link: https://dydx.forum/t/drc-reduce-active-validator-set-to-50/3605

Description: Winfred proposed cutting the dYdX chain’s active validator set from 60 to 50 to improve performance and align incentives.

Delist EOS BTRUMP SKITTEN Markets

Protocol: dYdX

Date: 2025-05-21 13:42:54

Link: https://dydx.forum/t/delist-eos-btrump-skitten-markets/3603

Description: Winfred proposed delisting the EOS, BTRUMP and SKITTEN markets on dYdX due to low liquidity and heightened risk.

[BIP-833] USP/aUSDC Gauge proposal

Protocol: Balancer

Date: 2025-05-21 09:13:09

Link: https://forum.balancer.fi/t/bip-833-usp-ausdc-gauge-proposal/6538

Description: Xeonus proposed BIP-833 to create a gauge for the USP/aUSDC pool, allowing liquidity providers to earn BAL emissions.

Frame by Frame: Unpacking Celestia’s Windows and Parameters

Protocol: Celestia

Date: 2025-05-21 15:35:18

Link: https://forum.celestia.org/t/frame-by-frame-unpacking-celestia-s-windows-and-parameters/2001

Description: musalbas published a detailed analysis of Celestia’s window mechanics and parameter settings and sought community feedback.

[GIP-240] Enable GEAR on CAs, Raise stkcvxRLUSDUSDC and rstETH limits

Protocol: Gearbox

Date: 2025-05-21 17:37:57