The Fed's rate cut has left stablecoin issuers anxious.

The stablecoin business is a proven one. Following robust policy support and media hype, stablecoins have become even more legendary. In the eyes of most, simply issuing a dollar-pegged digital currency on a blockchain, then leveraging economies of scale to infinitely reduce marginal issuance costs, allows one to earn risk-free interest rates while sitting back and doing nothing. This assertion is both true and false. Essentially, the issuer's business model mirrors the aforementioned assumption: profiting from interest rate differentials, and generating substantial profits. Take Tether, for example. With $170 billion in USDT, its profit margin could reach 99%. In 2024, Tether's net profit reached $13 billion, and in the second quarter of 2025, it saw $4.9 billion. Of this profit, approximately $7 billion came from interest on Treasury bonds and repurchase agreements, accounting for more than half of the total. Tether holds $90.87 billion in U.S. Treasury bonds, representing 82.5% of its total reserves. Looking at all USD stablecoins, 4% is the bottom line for profitability. This figure is comparable to Meituan Waimai's profit margin, and higher than Walmart's 2.39% in fiscal year 2024 and JD.com's 3.6% net profit margin in 2024. Judging by this, it's not an exaggeration to call it passive income. It's precisely for this reason that major companies are vying for the right to mint coins, and on social media, stablecoins have become a savior for low-profit businesses. However, if we only look at the business from a technical and theoretical perspective, it's nothing short of a fantasy. Beyond the most trivial technical architecture, the operation of the entire ecosystem is crucial for issuing a stablecoin. From a compliance perspective, obtaining multiple licenses is no small feat, and the ongoing costs are even more significant. Compliance fees can easily reach tens of millions of dollars, a daunting prospect for startups. Adding to the complexities of fund custody, liquidity reserves, and ongoing operational and maintenance costs, the sums reach tens of millions of dollars. Taking Hong Kong's compliant trading platforms as an example, HashKey licensing fees are rumored to be as high as HK$20-50 million. According to OSL's latest interim financial report, other operating expenses, including consulting, compliance, and insurance, reached HK$65 million. Even if the stablecoin is successfully launched after overcoming numerous difficulties, building demand remains a challenge. This requires channels, use cases, and incentives. However, everything has two sides. Over-reliance on channels can lead to revenue siphoning. While gray areas offer the fastest entry points, they also attract regulatory attention, making it even more difficult to determine the effectiveness of incentives. Incentives can also drive demand away. Overall, while the stablecoin business model is simple, it's actually a complex undertaking. However, this complex undertaking is paired with a rather fragile business model. Since its primary revenue stream is interest rate differentials, stablecoin profits are highly dependent on macroeconomic policy changes—in short, the Federal Reserve's mood. During this prolonged tightening cycle, Treasury bond yields of 4-5% are indeed attractive. However, with the Fed about to embark on a cycle of rate cuts, they face significant challenges.

From the data,the Federal Reserve’s decision to cut interest rates by 25 basis points to 4.00%-4.25% on September 17 has dealt a heavy blow to the revenue of stablecoin issuers. Citing data from Coindesk, by analyzing the collateral holdings of the five major fiat-backed stablecoins, the interest rate cut will reduce the annualized revenue of these issuers by approximately US$500 million in total, of which Tether's potential revenue loss is as high as US$325 million. The analysis assumes that cash and bank deposits accrue interest. Circle’s USDC faces the second-largest potential impact at $160 million, while the smaller USD1, FDUSD, and PYUSD could lose up to $5.53 million, $2.92 million, and $2.53 million, respectively.