Stablecoin projects and their role in crypto finance
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Tether made $10 billion in profit through the first three quarters of 2025—more than Bank of America. Coinbase earns roughly $1.5 billion annually just from its revenue-sharing deal with Circle. Meanwhile, the combined market share of USDT and USDC has slipped from 88% to 82%, as a new generation of challengers chips away at the duopoly. Welcome to the most profitable corner of crypto that most people don't fully understand.
Tether made $10 billion in profit during the first three quarters of 2025. With fewer than 200 employees, that's over $65 million in gross profit per person—making it one of the most profitable companies per employee on Earth.
Circle isn't far behind. Despite sharing 50% of its reserve revenue with Coinbase, the USDC issuer generated $740 million in Q3 2025 alone, keeping 38% margins after distribution costs.
Now platforms are asking an obvious question: why are we sending this money to Circle and Tether?
Hyperliquid holds nearly $6 billion in USDC deposits—about 7.5% of all USDC in circulation. Until September 2025, every dollar of interest on those deposits flowed to Circle. Then Hyperliquid launched USDH, its own native stablecoin, with 50% of reserve yields flowing back to the protocol.
They're not alone. SoFi became the first U.S. national bank to issue a stablecoin on a public blockchain. Coinbase launched white-label stablecoin infrastructure. WSPN rolled out turnkey solutions letting enterprises deploy branded stablecoins in weeks. The great stablecoin margin recapture has begun.
Hyperliquid holds $5.97 billion in USDC deposits—nearly 10% of Circle's total circulating supply. At a conservative 4% Treasury yield, that represents $240 million in annual revenue flowing to Circle. Hyperliquid sees none of it.
So Hyperliquid launched USDH.
This isn't an isolated move. Across DeFi, the same calculation is playing out: why surrender hundreds of millions in yield to third-party stablecoin issuers when you can capture it yourself? MetaMask launched mUSD. Aave is building around GHO. A new class of white-label infrastructure from M0 and Agora is making protocol-native stablecoins viable for any platform with scale.
The stablecoin duopoly—Tether and Circle's 80%+ market share—is fracturing. And the $314 billion stablecoin market is about to get much more competitive.
In early 2024, yield-bearing stablecoins held about $1.5 billion in total supply. By mid-2025, that figure had exploded past $11 billion—a 7x increase that represents the fastest-growing segment of the entire stablecoin market.
The appeal is obvious: why hold dollars that earn nothing when you could hold dollars that earn 7%, or 15%, or even 20%? But the mechanisms generating these yields are anything but simple. They involve derivatives strategies, perpetual futures funding rates, Treasury bills, and complex smart contract systems that even experienced DeFi users struggle to fully understand.
And just as this new category gained momentum, regulators stepped in. The GENIUS Act, signed into law in July 2025, explicitly prohibits stablecoin issuers from offering yield to retail customers. Yet instead of killing yield-bearing stablecoins, the regulation triggered a flood of capital into protocols that found ways to stay compliant—or operate outside U.S. jurisdiction entirely.
This is the story of how stablecoins evolved from simple dollar pegs into sophisticated yield-generating instruments, who's winning the battle for $310 billion in stablecoin capital, and what risks investors face in this new paradigm.
Before diving into yield mechanisms, the scale of the stablecoin market deserves attention.
Stablecoin transaction volumes soared 72% to hit $33 trillion in 2025, according to Artemis Analytics. Total supply reached nearly $310 billion by mid-December—up more than 50% from $205 billion at the start of the year. Bloomberg Intelligence projects stablecoin payment flows could reach $56.6 trillion by 2030.
The market remains dominated by two giants. Tether's USDT holds about 60% market share with $186.6 billion in circulation. Circle's USDC commands roughly 25% with $75.12 billion. Together they control 85% of the market.
But here's the interesting twist: USDC led transaction volume with $18.3 trillion, beating USDT's $13.3 trillion despite having a smaller market cap. This higher velocity reflects USDC's deeper DeFi integration and regulatory compliance positioning.
Neither USDT nor USDC offers yield. They're the stable, boring bedrock of the ecosystem. The action—and the risk—lives in the next generation of stablecoins.
Ethena's USDe emerged as the dominant yield-bearing stablecoin, reaching over $9.5 billion in circulation by mid-2025. Understanding how it generates yield requires understanding a concept called delta-neutral hedging.
When you mint USDe, Ethena doesn't just hold your collateral. The protocol takes your ETH or BTC, holds it as the "long" position, and simultaneously opens a short perpetual futures position of the same size.
If ETH rises 10%, the spot holdings gain value, but the short futures position loses an equivalent amount. If ETH falls 10%, the spot holdings lose value, but the short futures position gains. The result is delta-neutral—price movements in either direction cancel out, maintaining the dollar peg.
This is clever, but it raises an obvious question: if price movements net to zero, where does the yield come from?
Perpetual futures contracts use a mechanism called funding rates to keep their prices aligned with spot markets. When the market is bullish and more traders are long than short, longs pay shorts a funding fee. When the market is bearish, shorts pay longs.
Historically, crypto markets trend bullish, meaning funding rates are positive more often than negative. Ethena's strategy collects these funding payments continuously. In 2024, sUSDe—the staked version of USDe—delivered an average APY of 18%, with peaks touching 55.9% during the March 2024 rally.
The protocol adds additional yield from staking a portion of its ETH collateral (earning Ethereum's native staking yield) and from interest on liquid stablecoin reserves held in instruments like BlackRock's BUIDL tokenized Treasury fund.
The delta-neutral strategy sounds elegant, but it carries specific risks.
Funding Rate Reversal: During sustained bear markets, funding rates can turn negative for extended periods. When this happens, Ethena's short positions pay longs instead of receiving payments. The protocol maintains a reserve fund to cover these periods, but a prolonged downturn could drain reserves and force yield rates to zero—or worse.
Exchange Risk: Ethena holds its futures positions on centralized exchanges like Binance, Bybit, and OKX. While collateral is held with off-exchange custodians, the counterparty risk of exchange insolvency remains. An exchange failure during volatile markets could leave the protocol unable to close positions or access funds.
Liquidity and Depeg Risk: If confidence in USDe falters, a wave of redemptions could force the protocol to unwind positions rapidly in illiquid markets, potentially breaking the peg.
During August 2024, when funding rates compressed, sUSDe yields dropped to about 4.3%—still positive, but far from the double-digit returns that attracted initial capital. Recent yields have ranged between 7% and 30% depending on market conditions.
While Ethena bet on derivatives, MakerDAO (now rebranded as Sky) took a different path for its yield-bearing stablecoin.
In May 2025, MakerDAO completed its "Endgame" transformation, retiring the MKR governance token, launching SKY at a 24,000:1 conversion ratio, and introducing USDS as the successor to DAI.
USDS supply surged from 98.5 million to 2.32 billion in just five months—a 135% increase. The Sky Savings Rate platform reached $4 billion in TVL, growing 60% in 30 days.
Unlike Ethena's derivatives strategy, Sky generates yield through more traditional means: lending revenue from the protocol's credit facilities, fees from the stablecoin operations, and interest from real-world asset investments.
When you hold sUSDS (the yield-bearing wrapped version), you automatically earn the Sky Savings Rate—currently around 4.5% APY. Your balance increases over time without needing to lock, stake, or take any action.
This is lower than Ethena's typical yields, but it's also more predictable. Sky's yield comes from lending activity and Treasury exposure rather than volatile funding rates.
Sky activated USDS rewards for SKY stakers in May 2025, distributing over $1.6 million in the first week. The protocol now allocates 50% of revenue to stakers, and spent $96 million in 2025 on buybacks that reduced SKY's circulating supply by 5.55%.
In a significant move, Sky approved a $2.5 billion USDS allocation to Obex, an incubator led by Framework Ventures targeting institutional-grade DeFi yield projects. This signals Sky's ambition to compete for institutional capital—the largest untapped pool of potential stablecoin demand.
Frax Finance represents perhaps the most ambitious regulatory strategy in yield-bearing stablecoins.
Frax's sFRAX and sfrxUSD stablecoins are backed by short-term U.S. Treasuries, purchased through a lead bank brokerage relationship with a Kansas City bank. The yield tracks the Federal Reserve's rates, currently delivering around 4.8% APY.
Over 60 million sFRAX are currently staked. While yields are lower than Ethena's peaks, they're backed by the U.S. government's credit rather than crypto derivatives—a fundamentally different risk profile.
Frax is actively pursuing a Federal Reserve master account—the same type of account that banks use for direct access to Fed payment systems. If successful, this would represent unprecedented integration between DeFi and traditional banking infrastructure.
The strategy positions Frax as the most regulation-compliant yield-bearing stablecoin, potentially appealing to institutional investors who can't touch Ethena's derivatives exposure.
The Guiding and Establishing National Innovation for US Stablecoins Act (GENIUS Act), signed in July 2025, brought the first comprehensive federal framework for stablecoins—and immediate controversy.
The act explicitly prohibits stablecoin issuers from paying interest or yield to holders. The intent is clear: prevent stablecoins from competing with bank deposits and FDIC-insured accounts.
Banks lobbied hard for this provision, warning that yield-bearing stablecoins could drain $6.6 trillion from the traditional banking system. The concern isn't abstract: when you can earn 7% on a stablecoin versus 0.5% in a savings account, the incentive to move money is overwhelming.
However, the act doesn't explicitly prohibit affiliated third parties or exchanges from offering yield-bearing products. This loophole allows protocols to restructure so that the stablecoin issuer doesn't directly pay yield, but an affiliated entity does.
Banking groups are now lobbying to close this loophole before implementation deadlines in January 2027. The Bank Policy Institute and 52 state banking associations sent a letter to Congress arguing that exchange-offered yield programs create "high-yield shadow banks" without consumer protections.
Rather than fight regulators, Ethena launched USDtb—a U.S.-regulated variant backed by tokenized money-market funds rather than crypto derivatives. This makes USDtb compliant with GENIUS Act requirements while preserving Ethena's infrastructure for institutional customers.
The strategy reflects a broader pattern: yield-bearing protocols are forking into compliant (lower yield) and non-compliant (higher yield) versions, with the latter increasingly serving non-U.S. markets.
For investors navigating this landscape, here's how the major yield-bearing stablecoins stack up:
sUSDe (Ethena): Highest potential yields (7-30% depending on market conditions), but exposed to funding rate reversals and exchange counterparty risk. Largest market cap among yield-bearing options. Best for crypto-native users comfortable with derivatives exposure.
sUSDS (Sky): Lower but more stable yields (~4.5%), backed by lending revenue and RWAs. Strong institutional positioning with the $2.5B Obex allocation. Best for users seeking predictable returns with lower volatility.
sFRAX/sfrxUSD (Frax): Treasury-backed yields (~4.8%), most regulatory compliant approach. Pursuing Fed master account. Best for users prioritizing regulatory safety and traditional finance integration.
sDAI (Sky/Maker): The original yield-bearing stablecoin, still functional alongside USDS with 4-8% yields through the Dynamic Savings Rate. Best for users already in the Maker ecosystem.
Every yield-bearing stablecoin carries risks beyond what their marketing materials suggest.
Smart Contract Risk: Every yield mechanism involves complex smart contracts that could contain undiscovered vulnerabilities. The more sophisticated the strategy, the larger the attack surface.
Regulatory Risk: The GENIUS Act loophole may close. International regulators may follow the U.S. lead. Protocols may be forced to restructure or cease operations entirely.
Systemic Risk: If multiple yield-bearing stablecoins face redemption pressure simultaneously—during a market crash, regulatory crackdown, or confidence crisis—the resulting liquidations could cascade across DeFi.
Yield Sustainability: High yields attract capital until competition compresses returns. What happens to USDe's TVL when yields drop to 3% and stay there?
The yield-bearing stablecoin category has grown from novelty to $11 billion in assets remarkably quickly. Several trends will shape its evolution.
Institutional Entry: As Sky's Obex allocation demonstrates, protocols are positioning for institutional capital. This will likely drive more conservative, Treasury-backed products rather than derivatives-based high yields.
Regulatory Arbitrage: Expect continued geographic fragmentation, with higher-yield products serving non-U.S. markets while compliant versions target regulated institutions.
Competition Compression: As more protocols enter the yield-bearing space, yields will compress toward traditional money market rates plus a DeFi risk premium. The 20%+ yields of early 2024 are unlikely to return sustainably.
Infrastructure Integration: Yield-bearing stablecoins will increasingly become the default settlement layer for DeFi, replacing traditional stablecoins in lending protocols, DEX pairs, and collateral systems.
Yield-bearing stablecoins represent a genuine innovation in how digital dollars work. Instead of idle capital, stablecoin holdings can now earn returns that range from Treasury-rate equivalents to double-digit yields.
But these yields come from somewhere. Ethena's returns come from derivatives funding rates that can reverse. Sky's yields come from lending activity that carries credit risk. Frax's yields come from Treasuries, but require trusting the protocol's banking relationships.
The GENIUS Act's yield prohibition reflects regulators' understanding that yield-bearing stablecoins compete directly with bank deposits. Whether current loopholes survive through 2027 implementation remains uncertain.
For users, the calculus is straightforward: higher yields mean higher risks. sUSDe's 15%+ returns during bull markets require accepting exchange counterparty risk and funding rate volatility. sUSDS's 4.5% offers more stability but less upside. Treasury-backed options like sFRAX provide government-backed yield but minimal premium over traditional finance.
The yield stablecoin wars have just begun. With $310 billion in stablecoin capital up for grabs, protocols that find the right balance of yield, risk, and regulatory compliance will capture enormous value. Those that miscalculate will join the crypto graveyard.
Choose your risks accordingly.
This article is for educational purposes only and should not be considered financial advice. Yield-bearing stablecoins carry risks including but not limited to smart contract vulnerabilities, regulatory changes, and collateral devaluation.
There's no such thing as free yield. Yet yield-bearing stablecoins now command $11 billion in supply—up from $1.5 billion in early 2024—with JPMorgan predicting they could capture 50% of the entire stablecoin market. In a world where USDT and USDC offer 0% returns, protocols promising 6-20% APY on dollar-pegged assets are rewriting the rules of what stablecoins can be.
But here's the uncomfortable truth: every percentage point of yield comes with corresponding risk. The recent USDO depeg to $0.87 reminded markets that even "stable" coins can break. Understanding how these next-generation stablecoins actually work—and what can go wrong—has become essential for anyone allocating capital in DeFi.
When the world's largest crypto-focused venture capital firm publishes its annual predictions, the industry listens. But should you believe everything Andreessen Horowitz tells you about 2026?
a16z crypto recently released "17 things we're excited about for crypto in 2026"—a sweeping manifesto covering AI agents, stablecoins, privacy, prediction markets, and the future of internet payments. With $7.6 billion in crypto assets under management and a portfolio that includes Coinbase, Uniswap, and Solana, a16z isn't just predicting the future. They're betting billions on it.
That creates an interesting tension. When a VC firm managing 18% of all U.S. venture capital points to specific trends, capital flows follow. So are these predictions genuine foresight, or sophisticated marketing for their portfolio companies? Let's dissect each major theme—what's genuinely insightful, what's self-serving, and what they're getting wrong.
a16z's biggest bet is that stablecoins will continue their explosive trajectory. The numbers they cite are impressive: $46 trillion in transaction volume last year—more than 20x PayPal's volume, approaching Visa's territory, and rapidly catching up to ACH.
What they got right: Stablecoins genuinely crossed into mainstream finance in 2025. Visa expanded its USDC settlement program on Solana. Mastercard joined Paxos' Global Dollar Network. Circle has over 100 financial institutions in its pipeline. Bloomberg Intelligence projects stablecoin payment flows will hit $5.3 trillion by year-end 2026—an 82.7% increase.
The regulatory tailwind is real too. The GENIUS Act, expected to pass in early 2026, would establish clear rules for stablecoin issuance under FDIC supervision, giving banks a regulated path to issue dollar-backed stablecoins.
The counterpoint: a16z is deeply invested in the stablecoin ecosystem through portfolio companies like Coinbase (which issues USDC through its partnership with Circle). When they predict "the internet becomes the bank" through programmable stablecoin settlement, they're describing a future where their investments become infrastructure.
The $46 trillion figure also deserves scrutiny. Much of stablecoin transaction volume is circular—traders moving funds between exchanges, DeFi protocols churning liquidity, arbitrageurs cycling positions. The Treasury identifies $5.7 trillion in "at-risk" deposits that could migrate to stablecoins, but actual consumer and business adoption remains a fraction of headline numbers.
Reality check: Stablecoins will grow significantly, but "the internet becomes the bank" is a decade away, not a 2026 reality. Banks move slowly for good reasons—compliance, fraud prevention, consumer protection. Stripe adding stablecoin rails doesn't mean your grandmother will pay rent in USDC next year.
a16z's most forward-looking prediction introduces "KYA"—Know Your Agent—a cryptographic identity system for AI agents that would let autonomous systems make payments, sign contracts, and transact without human intervention.
Sean Neville, who wrote this prediction, argues the bottleneck has shifted from AI intelligence to AI identity. Financial services now have "non-human identities" outnumbering human employees 96-to-1, yet these systems remain "unbanked ghosts" that can't autonomously transact.
What they got right: The agentic economy is real and growing. Fetch.ai is launching what it calls the world's first autonomous AI payment system in January 2026. Visa's Trusted Agent Protocol provides cryptographic standards for verifying AI agents. PayPal and OpenAI partnered to enable agentic commerce in ChatGPT. The x402 protocol for machine-to-machine payments has been adopted by Google Cloud, AWS, and Anthropic.
The counterpoint: The DeFAI hype cycle of early 2025 already crashed once. Teams experimented with AI agents for automated trading, wallet management, and token sniping. Most delivered nothing of real-world value.
The fundamental challenge isn't technical—it's liability. When an AI agent makes a bad trade or gets tricked into a malicious transaction, who's responsible? Current legal frameworks have no answer. KYA solves the identity problem but not the accountability problem.
There's also the systemic risk nobody wants to discuss: what happens when thousands of AI agents running similar strategies interact? "Highly reactive agents may trigger chain reactions," admits one industry analysis. "Strategy collisions will cause short-term chaos."
Reality check: AI agents making autonomous crypto payments will remain experimental in 2026. The infrastructure is being built, but regulatory clarity and liability frameworks are years behind the technology.
Ali Yahya's prediction that privacy will define blockchain winners in 2026 is the most technically sophisticated argument in the collection. His thesis: the throughput wars are over. Every major chain now handles thousands of transactions per second. The new differentiator is privacy, and "bridging secrets is hard"—meaning users who commit to a privacy-preserving chain face real friction leaving.
What they got right: Privacy demand is surging. Google searches for crypto privacy reached new highs in 2025. Zcash's shielded pool grew to nearly 4 million ZEC. Railgun's transaction flows exceeded $200 million monthly. Arthur Hayes echoed this sentiment: "Large institutions don't want their information public or at risk of going public."
The technical argument is sound. Privacy creates network effects that throughput doesn't. You can bridge tokens between chains trivially. You can't bridge transaction history without exposing it.
The counterpoint: a16z has significant investments in Ethereum L2s and projects that would benefit from privacy upgrades. When they predict privacy becomes essential, they're partly lobbying for features their portfolio companies need.
More importantly, there's a regulatory elephant in the room. The same governments that recently sanctioned Tornado Cash aren't going to embrace privacy chains overnight. The tension between institutional adoption (which requires KYC/AML) and genuine privacy (which undermines it) hasn't been resolved.
Reality check: Privacy will matter more in 2026, but "winner-take-most" dynamics are overstated. Regulatory pressure will fragment the market into compliant quasi-privacy solutions for institutions and genuinely private chains for everyone else.
Andrew Hall's prediction that prediction markets will "go bigger, broader, smarter" is perhaps the least controversial item on the list—and one where a16z might be underselling the opportunity.
What they got right: Polymarket proved prediction markets can go mainstream during the 2024 U.S. election. The platform generated more accurate forecasts than traditional polling in several races. Now the question is whether that success translates beyond political events.
Hall predicts LLM oracles resolving disputed markets, AI agents trading to surface novel predictive signals, and contracts on everything from corporate earnings to weather events.
The counterpoint: Prediction markets face fundamental liquidity challenges outside major events. A market predicting the outcome of the Super Bowl attracts millions in volume. A market predicting next quarter's iPhone sales struggles to find counterparties.
Regulatory uncertainty also looms. The CFTC has been increasingly aggressive about treating prediction markets as derivatives, which would require burdensome compliance for retail participants.
Reality check: Prediction markets will expand significantly, but the "markets on everything" vision requires solving liquidity bootstrapping and regulatory clarity. Both are harder than the technology.
Beyond the headline themes, several quieter predictions deserve attention:
"From 'Code is Law' to 'Spec is Law'" — Daejun Park describes moving DeFi security from bug-hunting to proving global invariants through AI-assisted specification writing. This is unglamorous infrastructure work, but could dramatically reduce the $3.4 billion lost to hacks annually.
"The Invisible Tax on the Open Web" — Elizabeth Harkavy's warning that AI agents extracting content without compensating creators could break the internet's economic model is genuinely important. If AI strips the monetization layer from content while bypassing ads, something has to replace it.
"Trading as Way Station, Not Destination" — Arianna Simpson's advice that founders chasing immediate trading revenue miss defensible opportunities is probably the most honest prediction in the collection—and a tacit admission that much of crypto's current activity is speculation masquerading as utility.
Conspicuously absent from the 17 predictions: any acknowledgment of the risks their bullish outlook ignores.
Memecoin fatigue is real. Over 13 million memecoins launched last year, but launches dropped 56% from January to September. The speculation engine that drove retail interest is sputtering.
Macro headwinds could derail everything. The predictions assume continued institutional adoption, regulatory clarity, and technology deployment. A recession, a major exchange collapse, or aggressive regulatory action could reset the timeline by years.
The a16z portfolio effect is distorting. When a firm managing $46 billion in total AUM and $7.6 billion in crypto publishes predictions that benefit their investments, the market responds—creating self-fulfilling prophecies that don't reflect organic demand.
a16z's 17 predictions are best understood as a strategic document, not neutral analysis. They're telling you where they've placed their bets and why you should believe those bets will pay off.
That doesn't make them wrong. Many of these predictions—stablecoin growth, AI agent infrastructure, privacy upgrades—reflect genuine trends. The firm employs some of the smartest people in crypto and has a track record of identifying winning narratives early.
But sophisticated readers should apply a discount rate. Ask who benefits from each prediction. Consider which portfolio companies are positioned to capture value. Notice what's conspicuously absent.
The most valuable insight might be the implicit thesis underneath all 17 predictions: crypto's speculation era is ending, and infrastructure era is beginning. Whether that's hopeful thinking or accurate forecasting will be tested against reality in the coming year.
The 17 a16z Crypto Predictions for 2026 at a Glance:
This article is for educational purposes only and should not be considered financial advice. The author holds no positions in a16z portfolio companies discussed in this article.
Andreessen Horowitz's crypto team has been remarkably prescient in the past—they called the NFT boom, the DeFi summer, and the modular blockchain thesis before most. Now they've released their 17 big ideas for 2026, and the predictions range from the obvious (stablecoins will keep growing) to the controversial (AI agents will need their own identity systems). Here's our analysis of each prediction, where we agree, and where we think they've missed the mark.
a16z Prediction: Stablecoins will continue their explosive growth trajectory.
The numbers are staggering. In 2024, stablecoins processed $15.6 trillion in transaction volume. By 2025, that figure reached $46 trillion—more than 20 times PayPal's volume and triple Visa's. USDT alone accounts for over $190 billion in circulation, while USDC has rebounded to $45 billion after its Silicon Valley Bank scare.
Our take: This is less a prediction and more a statement of fact. The real question isn't whether stablecoins will grow, but whether new entrants like PayPal's PYUSD, Ripple's RLUSD, or yield-bearing alternatives like Ethena's USDe will capture meaningful market share from the Tether-Circle duopoly.
The more interesting dynamic is regulatory. The US GENIUS Act and CLARITY Act are reshaping the stablecoin landscape, potentially creating a two-tier system: compliant, US-regulated stablecoins for institutional use, and offshore alternatives for the rest of the world.
a16z Prediction: AI agents will become major users of crypto infrastructure, requiring their own wallets and identity credentials through a "Know Your Agent" (KYA) system.
This is one of a16z's more forward-looking predictions. As AI agents proliferate—booking travel, managing investments, executing trades—they'll need to transact autonomously. Traditional payment rails require human identity verification, creating a fundamental incompatibility.
Our take: The premise is sound, but the timeline is aggressive. Most current AI agents operate in sandboxed environments with human approval for financial actions. The jump to fully autonomous agents with their own crypto wallets faces significant hurdles:
The KYA concept is clever—essentially a cryptographic attestation that an agent was created by a verified entity and operates within certain parameters. But implementation will lag the vision by at least 2-3 years.
a16z Prediction: Privacy-preserving technologies will become essential infrastructure, not optional features.
The timing is notable. Just as blockchain analytics firms have achieved near-total surveillance of public chains, a16z is betting that privacy will swing back as a priority. Technologies like FHE (Fully Homomorphic Encryption), ZK proofs, and confidential computing are maturing from academic curiosities to production-ready infrastructure.
Our take: Strongly agree, but with nuance. Privacy will bifurcate into two tracks:
The projects that thread this needle—providing privacy while maintaining regulatory compatibility—will capture enormous value.
a16z Prediction: Zero-knowledge proofs will extend beyond blockchain to verify any computation, enabling "trustless" cloud computing.
This is perhaps the most technically significant prediction. Today's SNARKs (Succinct Non-interactive Arguments of Knowledge) are primarily used for blockchain scaling (zkEVMs, rollups) and privacy. But the same technology can verify that any computation was performed correctly.
Imagine: you send data to a cloud provider, they return a result plus a proof that the computation was done correctly. No need to trust AWS or Google—the math guarantees correctness.
Our take: The vision is compelling, but overhead remains prohibitive for most use cases. Generating ZK proofs for general computation still costs 100-1000x the original computation. Projects like RISC Zero's Boundless and Modulus Labs' zkML are making progress, but mainstream adoption is years away.
The near-term wins will be specific, high-value use cases: verifiable AI inference, auditable financial calculations, and provable compliance checks.
a16z Prediction: The success of Polymarket during the 2024 election will spark a broader prediction market boom.
Polymarket processed over $3 billion in trading volume around the 2024 US election, often proving more accurate than traditional polls. This wasn't just crypto natives gambling—mainstream media outlets cited Polymarket odds as legitimate forecasting data.
Our take: The regulatory arbitrage won't last forever. Polymarket operates offshore specifically to avoid US gambling and derivatives regulations. As prediction markets gain legitimacy, they'll face increasing regulatory scrutiny.
The more sustainable path is through regulated venues. Kalshi has SEC approval to offer certain event contracts. The question is whether regulated prediction markets can offer the same breadth and liquidity as offshore alternatives.
a16z Prediction: Value will increasingly accrue to applications rather than infrastructure.
For years, crypto's "fat protocol thesis" suggested that base layers (Ethereum, Solana) would capture most value while applications remained commoditized. a16z is now calling this into question.
The evidence: Hyperliquid captured 53% of on-chain perpetuals revenue in 2025, exceeding the fees of many L1s. Uniswap generates more revenue than most chains it deploys on. Friend.tech briefly made more money than Ethereum.
Our take: The pendulum is swinging, but infrastructure isn't going away. The nuance is that differentiated infrastructure still commands premiums—generic L1s and L2s are indeed commoditizing, but specialized chains (Hyperliquid for trading, Story Protocol for IP) can capture value.
The winners will be applications that own their stack: either by building app-specific chains or by capturing enough volume to extract favorable terms from infrastructure providers.
a16z Prediction: Blockchain-based identity and reputation systems will find use cases beyond financial applications.
We've heard this prediction for years, and it's consistently underdelivered. The difference now is that AI-generated content has created a genuine demand for proof of humanity. When anyone can generate convincing text, images, or videos, cryptographic attestations of human creation become valuable.
Our take: Cautiously optimistic. The technical pieces exist—Worldcoin's iris scanning, Ethereum Attestation Service, various soul-bound token implementations. The challenge is creating systems that are both privacy-preserving and widely adopted.
The killer app might not be "identity" per se, but specific credentials: proof of professional qualification, verified reviews, or attestations of content authenticity.
a16z Prediction: Real-world asset tokenization will accelerate, driven by institutional adoption.
BlackRock's BUIDL fund crossed $500 million in assets. Franklin Templeton, WisdomTree, and Hamilton Lane have all launched tokenized products. The total RWA market (excluding stablecoins) reached $16 billion in 2025.
Our take: The growth is real, but context matters. $16 billion is a rounding error compared to traditional asset markets. The more meaningful metric is velocity—how quickly are new assets being tokenized, and are they finding secondary market liquidity?
The bottleneck isn't technology; it's legal infrastructure. Tokenizing a Treasury bill is straightforward. Tokenizing real estate with clear title, foreclosure rights, and regulatory compliance across jurisdictions is enormously complex.
a16z Prediction: The "walled garden" era of blockchains will end as cross-chain infrastructure improves.
Chainlink's CCIP, LayerZero, Wormhole, and others are making cross-chain transfers increasingly seamless. The user experience of bridging assets has improved dramatically from the clunky, risky processes of 2021.
Our take: Infrastructure is maturing, but security concerns linger. Bridge exploits accounted for billions in losses over the past few years. Each interoperability solution introduces new trust assumptions and attack surfaces.
The winning approach will likely be native interoperability—chains built from the ground up to communicate, rather than bolted-on bridge solutions.
a16z Prediction: 2026 will see the first crypto applications with 100+ million users that don't feel like "crypto apps."
The argument: infrastructure improvements (lower fees, better wallets, account abstraction) have removed the friction that previously blocked mainstream adoption. The missing piece was compelling applications.
Our take: This has been predicted every year since 2017. The difference now is that the infrastructure genuinely is better. Transaction costs on L2s are measured in fractions of a cent. Smart wallets can abstract away seed phrases. Fiat on-ramps are integrated.
But "compelling applications" is the hard part. The crypto apps that have achieved scale (Coinbase, Binance) are fundamentally financial products. Non-financial killer apps remain elusive.
a16z's predictions are notably silent on security. In 2025, crypto lost over $3.5 billion to hacks and exploits. The ByBit $1.5 billion hack demonstrated that even major exchanges remain vulnerable. State-sponsored actors (North Korea's Lazarus Group) are increasingly sophisticated.
Until the industry addresses fundamental security issues, mainstream adoption will remain limited.
The US is moving toward clearer crypto regulation, but the global picture is fragmenting. The EU's MiCA, Singapore's licensing regime, and Hong Kong's virtual asset framework create a patchwork that projects must navigate.
This fragmentation will benefit some (regulatory arbitrage opportunities) and hurt others (compliance costs for global operations).
Over 70 public companies now hold Bitcoin on their balance sheets. MicroStrategy's playbook—leveraging corporate treasuries into Bitcoin exposure—is being copied worldwide. This institutional adoption is arguably more significant than any technical development.
a16z's predictions are worth taking seriously—they have the portfolio exposure and technical depth to see around corners. Their stablecoin, AI agent, and privacy theses are particularly compelling.
Where we diverge is on timelines. The crypto industry has consistently overestimated how quickly transformative technologies would reach mainstream adoption. SNARKs for general computation, AI agents with crypto wallets, and 100-million-user consumer apps are all plausible—just not necessarily in 2026.
The safer bet: incremental progress on proven use cases (stablecoins, DeFi, tokenized assets) while more speculative applications continue incubating.
For builders, the message is clear: focus on real utility over narrative hype. The projects that survived 2025's carnage were those generating actual revenue and serving genuine user needs. That lesson applies regardless of which a16z predictions prove accurate.
BlockEden.xyz provides enterprise-grade blockchain infrastructure for builders focused on long-term value creation. Whether you're building the next stablecoin application, AI agent platform, or RWA tokenization service, our APIs and infrastructure are designed to scale with your vision. Explore our services to build on foundations designed to last.
In July 2022, stablecoins represented about 60% of crypto transfer volume on Latin American exchanges. By July 2025, that figure had soared to over 90%. This isn't just adoption—it's a fundamental rewiring of how 650 million people interact with money.
Latin America has become ground zero for stablecoin utility. While Western markets debate whether stablecoins are securities or payment instruments, Latin Americans are using them to protect savings from 100%+ inflation, send remittances at 1% fees instead of 10%, and conduct cross-border business without the friction of traditional banking. The region received $415 billion in crypto value between July 2023 and June 2024—9.1% of global flows—with year-over-year growth of 42.5%.
This isn't speculation-driven adoption. It's survival-driven innovation.
The scale of Latin America's stablecoin adoption is staggering when you look at the data.
Brazil dominates the region with $318.8 billion in crypto value received, accounting for nearly one-third of all LATAM crypto activity. Over 90% of Brazilian crypto flows are now stablecoin-related. The country's crypto transaction volumes rose 43% in 2025, with average investment per user surpassing $1,000.
Argentina ranks second with $93.9 billion in transaction volume. Stablecoins account for 61.8% of transaction volume—well above the global average. On Bitso, Argentina's leading exchange, USDT and USDC together represent 72% of all cryptocurrency purchases. As the country enters 2026, 20% of its population now uses crypto.
Mexico recorded $71.2 billion in crypto transaction volume. The country is projected to reach 27.1 million cryptocurrency users by 2025, representing a penetration rate exceeding 20% of the population. Bitso alone processed $6.5 billion in U.S.-Mexico crypto remittances in 2024—roughly 10% of the entire corridor.
The regional crypto market is projected to grow from $162 billion in 2024 to over $442 billion by 2033. This isn't fringe adoption anymore.
Three forces converged to make stablecoins indispensable across the region: inflation, remittances, and capital controls.
Argentina's story is the most dramatic. In 2023, inflation hit 161%. By 2024, it reached 219.89%. While President Milei's reforms have brought it down to 35.91% in 2025, Argentines had already discovered a workaround: digital dollars.
The peso's collapse pushed households toward USDT and USDC as direct substitutes for cash savings. Local platforms like Ripio, Lemon Cash, and Belo reported 40-50% surges in stablecoin-to-peso transactions following government-imposed currency controls. More than 100 businesses in Buenos Aires now accept stablecoins for payments through Binance Pay and Lemon Cash.
This isn't just savings protection—it's de facto digital dollarization. The province of Mendoza even accepts tax payments in stablecoins. While Argentina's government debates launching a CBDC, its citizens have already adopted the digital dollar via USDT and USDC.
Mexico offers a different angle. Traditional remittance and cross-border bank fees to Mexico can range from 5% to 10%, with settlement times of several days. Stablecoin-based transactions have reduced these costs to under 1%, with funds settling in minutes.
Bitso processed $43 billion in cross-border remittances between the U.S. and Mexico in 2024. This isn't a pilot program—it's mainstream infrastructure. In crypto rails are now part of Mexico's remittance ecosystem alongside traditional providers.
The efficiency gains are transforming business payments too. Brazilian companies use crypto to avoid high bank fees for payments to suppliers in Asia. Mexican SMEs are discovering that global stablecoin accounts can cut cross-border transaction costs dramatically.
Beyond inflation, currency volatility drives stablecoin demand across the region. Businesses operating cross-border need predictable values. When local currencies swing 5-10% in weeks, dollar-pegged stablecoins become essential for financial planning.
The trifecta of persistent inflation, currency volatility, and restrictive capital controls across several countries continues to drive demand for stablecoins as a safe store of value and hedge against local macroeconomic risk.
While USDT and USDC dominate, local currency stablecoins are emerging as a significant trend.
In Brazil, trading volume for BRL-pegged coins reached $906 million in the first half of 2025—approaching 2024's entire annual total. The BRL1 stablecoin, launched by a consortium including Mercado Bitcoin, Foxbit, and Bitso, is fully backed 1:1 by BRL reserves. The volumes of BRL-linked stablecoins grew from $20.9 million in 2021 to around $900 million in July 2025.
Mexico's peso-linked stablecoins have grown more than tenfold in the past year. The MXNB and MXNe tokens reached $34 million in July 2025, up from less than $55,000 just one year prior. These tokens are expanding use beyond remittances into local payments.
This dual-track system—dollar stablecoins for savings and cross-border transfers, local stablecoins for domestic commerce—represents a maturing market that serves multiple use cases simultaneously.
2025 marked a turning point for Latin American crypto regulation. The region shifted from reactive, AML-only oversight toward more structured frameworks that reflect actual adoption patterns.
Brazil's regulatory regime for Virtual Asset Service Providers (VASPs) finally went live in November 2025. The Central Bank of Brazil (BCB), designated as lead supervisor in 2023, published three resolutions operationalizing its regulatory powers.
Key provisions include:
Brazil also introduced DeCripto, replacing existing crypto reporting rules. Based on the OECD's Crypto-Asset Reporting Framework (CARF), DeCripto aligns Brazil with international standards adopted by 60+ countries.
Argentina raised requirements under its VASP registration regime in 2025. General Resolution 1058, effective May 2025, introduced requirements for AML compliance, segregation of customer assets, cybersecurity, audit, and corporate governance.
More significantly, General Resolutions 1069 and 1081 introduced a formal legal framework for tokenized assets, to be piloted in a regulatory sandbox. Crypto capital gains are taxed up to 15%, with additional income tax on business and mining activities.
Mexico's approach remains more conservative. Under the 2018 Fintech Law, crypto is classified as a virtual asset. Banks and fintechs need licenses for crypto services, though non-bank VASPs can operate by reporting to financial intelligence and tax authorities.
The Bank of Mexico has maintained what it calls "a healthy distance" from crypto, warning that "stablecoins pose significant potential risks to financial stability." The central bank cites heavy reliance on short-term U.S. Treasuries, market concentration (two issuers control 86% of supply), and past depegging episodes.
Despite regulatory caution, Mexico hosted Latin America's first large-scale stablecoin conference in 2025—a sign that the industry is maturing regardless of official sentiment.
Several platforms have emerged as dominant forces in Latin American crypto:
Bitso has become the region's infrastructure backbone. It holds licenses in Mexico, Brazil, and Argentina, plus authorization in Gibraltar. Processing $6.5 billion in U.S.-Mexico remittances and facilitating the majority of exchange-based stablecoin trades across multiple countries, Bitso has proven that regulatory compliance and scale can coexist.
Binance leads retail app activity, capturing 34.2% of sessions in Argentina. Its Binance Pay product enables merchant adoption across urban centers.
Lemon Cash holds 30% of retail sessions in Argentina, focusing on the local market's specific needs around peso-stablecoin conversion.
New entrants like Chipi Pay are targeting the unbanked with self-custodial stablecoin wallets accessible via email—no bank account required.
Brazil's fastest-growing crypto cohort in 2025 was users under 24. Participation among that age group increased 56% from the previous year. Many young investors are opting for low-volatility assets like stablecoins rather than speculative tokens.
This generational shift suggests stablecoin adoption will accelerate as younger users enter their peak earning years. They've grown up with currency instability and see stablecoins not as crypto speculation but as practical financial tools.
Several trends will shape Latin America's stablecoin future:
B2B adoption is accelerating. In Brazil, B2B stablecoin volumes hit $3 billion monthly, as businesses discover that crypto rails reduce FX risks in cross-border deals.
Regulatory frameworks will spread. With Brazil and Argentina establishing clear rules, pressure mounts on Colombia, Peru, and Uruguay to follow. The Coinchange 2025 LATAM Crypto Regulation Report notes that the region is "entering a new phase of crypto regulation—shifting from isolated initiatives to a coordinated effort."
Local stablecoins will multiply. The success of BRL1 and MXN-pegged tokens demonstrates demand for locally denominated digital assets. Expect more launches as the infrastructure matures.
CBDC competition may emerge. Several Latin American central banks are exploring digital currencies. How CBDCs interact with—or compete against—private stablecoins will define the next chapter.
Latin America's stablecoin revolution reveals something important about how crypto adoption actually happens. It doesn't come from speculation or institutional mandates. It comes from utility—from people solving real problems with available tools.
When your savings lose 100% of their value annually, USDT isn't a speculative asset. It's a lifeline. When remittance fees eat 10% of your family's income, USDC isn't fintech innovation. It's basic financial fairness.
The region has become a proving ground for stablecoin utility at scale. With over $415 billion in annual crypto flows, regulatory frameworks taking shape, and 90% stablecoin dominance, Latin America demonstrates what happens when digital dollars meet genuine economic need.
The rest of the world is watching. And increasingly, it's copying.
This article is for educational purposes only and should not be considered financial advice. Always conduct your own research before interacting with any cryptocurrency or stablecoin.
AllScale.io is a legitimate, venture-backed stablecoin payment platform—not a token project—targeting freelancers and small businesses in emerging markets. Founded in February 2025 and backed by $6.5M from reputable crypto VCs including YZi Labs, Draper Dragon, and KuCoin Ventures, the company shows positive signals: a publicly doxxed team with verifiable experience at Kraken, Capital One, and Block, plus institutional backing from Hong Kong's Cyberport incubator. However, the absence of public security audits and the platform's extreme youth (under one year old) warrant careful due diligence before significant engagement.
AllScale positions itself as the "world's first self-custody stablecoin neobank," specifically designed for the 600+ million global microbusinesses—freelancers, content creators, SMBs, and remote contractors—who struggle with traditional cross-border payments. The core problem: international freelancers face bank account barriers, high wire fees, currency conversion losses, and settlement delays often exceeding 5 business days.
The platform enables businesses to create invoices, receive payments in USDT or USDC regardless of how clients pay (credit card, wire, or crypto), and access funds instantly through a non-custodial wallet. Key products include AllScale Invoice (live since September 2025), AllScale Pay (social commerce via Telegram, WhatsApp, Line), and AllScale Payroll (cross-border contractor payments). The company emphasizes "invisible crypto"—clients may not know they're using blockchain rails while merchants receive stablecoins.
Current development stage: The platform is in public beta with a working product live on BNB Chain mainnet. Users can access the dashboard at dashboard.allscale.io, though a waitlist may apply.
AllScale builds on existing blockchain infrastructure rather than operating its own chain. The primary technology stack includes:
| Component | Implementation |
|---|---|
| Primary blockchain | BNB Chain (official ecosystem partner) |
| Secondary networks | Undisclosed "high-efficiency Layer 2 networks" |
| Wallet type | Non-custodial, self-custody smart contract wallets |
| Authentication | Passkey-based (FaceID/TouchID)—no seed phrases |
| Gas handling | EIP-7702 paymaster architecture—zero user gas costs |
| Account model | Account Abstraction (likely ERC-4337) |
| AI features | LLM-enabled "financial copilots" |
The passkey-based approach eliminates the notorious UX friction of seed phrase management, lowering the barrier for mainstream adoption. The multi-chain paymaster sponsorship architecture handles transaction costs behind the scenes.
What's missing: AllScale maintains no public GitHub repositories—the infrastructure is proprietary and closed-source. No smart contract addresses have been published, no public APIs or SDKs are available, and technical documentation at docs.allscale.io focuses on user guides rather than architecture specifications. This opacity prevents independent technical verification of their claims.
AllScale does not have a native cryptocurrency token. This is a critical distinction from many Web3 projects: there is no ICO, IDO, token sale, or speculative asset involved. The company operates as a traditional Delaware C-corp raising equity funding.
The platform uses third-party stablecoins—primarily USDT and USDC—as the payment medium. Users receive payments in stablecoins, with automatic conversion from fiat or card payments. Integration with BNB Chain also provides access to USD1 (the Binance-affiliated stablecoin).
Revenue model (estimated, not publicly disclosed):
The absence of a token eliminates certain risks (speculative volatility, tokenomics manipulation, regulatory securities concerns) but also means there's no token-based exposure for investors beyond equity participation.
AllScale's team demonstrates strong transparency—all founders are publicly identified with verifiable professional histories:
Shawn Pang (CEO & Co-Founder): Computer Science and Business from Western University. Former Product Manager for payment fraud at Capital One; first PM in Canada at TikTok; co-founded HashMatrix, a growth marketing agency for AI products.
Ruoyang "Leo" Wang (COO & Co-Founder): Computer Engineering from University of Toronto. Background at PingCAP (distributed databases), IBM, AMD, and Scotiabank. Previous startup experience with CP Clickme.
Jun Li & Khalil Lin (Co-Founders): Additional co-founders with legal/compliance expertise, reportedly including OKX background. LinkedIn profiles available.
Avrilyn Li (Founding Product Manager): AI-to-Web3 entrepreneur from Ivey Business School, leading the payroll product.
The team claims collective experience from Binance, OKX, Kraken, Block (Square), Amazon, Dell, and HP. Total team size is approximately 7-11 employees.
| Round | Date | Amount | Lead Investors |
|---|---|---|---|
| Pre-Seed | June 30, 2025 | $1.5M | Draper Dragon, Amber Group, Y2Z Capital |
| Seed | December 8, 2025 | $5M | YZi Labs, Informed Ventures, Generative Ventures |
| Total | $6.5M |
Notable participating investors include KuCoin Ventures, Oak Grove Ventures, BlockBooster, Aptos, GSR Ventures, and V3V Ventures. Angel investors include Gracy Chen and Jedi Lu. The company is a member of the Hong Kong Cyberport Incubation Program, a government-backed tech accelerator.
This is the most significant red flag in the research. Despite handling user funds through smart contract wallets:
AllScale claims security features including self-custody architecture, automated KYC/KYB/KYT compliance, hardware security module (HSM) integration for passkeys, and 2FA support. The self-custody model does reduce platform counterparty risk—if AllScale were compromised, users' funds in their own wallets would theoretically be safer than in a custodial service.
On the positive side: No security incidents, hacks, or exploits have been reported for AllScale. However, given the platform's youth, this absence of incidents may simply reflect limited exposure rather than robust security.
AllScale competes in the rapidly evolving stablecoin payments space:
| Competitor | Positioning | Key Difference |
|---|---|---|
| Bitpace | UK-based crypto payment gateway | B2B merchant focus vs. AllScale's SMB focus |
| Loop Crypto | Stablecoin payment processor | More developer/API-oriented |
| Swapin | European stablecoin processor | Fiat settlement focus |
| Bridge (Stripe acquired for $1.1B) | Stablecoin API infrastructure | Enterprise-focused, acquired |
| PayPal/Stripe | PYUSD, USDC integration | Massive distribution, established trust |
AllScale's differentiation factors:
Disadvantages: Extreme youth, small team, limited track record, competing against well-funded incumbents with established distribution channels.
AllScale maintains standard Web3 social channels:
The community is early-stage, with engagement primarily through AMA sessions, X Spaces, and partnership announcements. AllScale hosted the Scale Stablecoin Summit in Hong Kong (June 2025) with HashKey Group and Amber Group.
No traditional DeFi metrics apply: AllScale is a payments platform, not a DeFi protocol, so TVL (Total Value Locked) metrics are not applicable. The platform is not listed on DeFiLlama or Dune Analytics. User count and retention metrics are mentioned by investors but not publicly disclosed.
Notable partnerships include BNB Chain (official ecosystem partner), Skill Afrika (African freelancer communities), Ethscriptions (L1 permanence), and Asseto (RWA tokenization for yield products).
Recent milestones (2025):
Upcoming:
AllScale.io emerges as a legitimate early-stage startup rather than a scam concern, backed by credible investors and a transparent, verifiable team. The project addresses a real market problem—cross-border payment friction for emerging market freelancers—with a thoughtful technical approach leveraging account abstraction and stablecoins.
However, two significant gaps demand attention before meaningful engagement: the complete absence of public security audits and the closed-source infrastructure that prevents independent verification. For a platform handling user funds, these omissions are material concerns regardless of the team's credentials.
Overall risk rating: Moderate. The venture shows strong legitimacy signals but carries inherent early-stage risks. Potential users should start with small amounts until security audits are published. Potential partners should request direct access to technical specifications and audit reports. The project is worth monitoring as it matures, particularly for any security audit announcements in Q1 2026.