How Stablecoin Issuers Make Money: Tether's $10B Year vs Circle

Hand a stablecoin issuer one dollar and it hands you back one token. It then buys a US Treasury bill with your dollar and keeps the interest. You get nothing extra, by design and, in the United States, by law. Multiply that by a few hundred billion dollars and you have one of the most profitable business models in finance. Yet the two biggest issuers, running nearly identical models, end up with very different results.

The basic model: borrow at zero, lend to the government

A fully reserved stablecoin is economically a deposit that pays no interest. The issuer holds cash, short-dated Treasury bills and overnight repurchase agreements against every token. When short-term rates sit around 3.5%, each billion dollars of tokens in circulation earns tens of millions a year in interest.

Holders cannot claim a share. America's GENIUS Act bars licensed issuers from paying interest or yield to holders simply for holding the coin, a point we cover in our piece on yield-bearing stablecoins. That leaves the issuer with two levers: grow the float, and decide how much of the interest to share with whoever helps it grow.

That second lever is the whole story of how Tether and Circle diverged.

Tether: the money machine that keeps most of it

Tether reported more than $10 billion of net profit for 2025, according to its year-end attestation prepared by BDO. That was down about 23% from roughly $13 billion in 2024 as interest rates fell, but it remains an extraordinary sum for a company of its size. At the end of 2025 it held more than $122 billion of US Treasuries directly and over $141 billion including indirect exposure such as reverse repos, against about $186 billion of USDT in circulation.

The quarterly figures for 2026 show the same engine running a little cooler. According to its second-quarter attestation, released on 31 July 2026, Tether earned about $1.5 billion in the quarter and held about $115 billion of Treasury bills. Its reserves also include more than 146 tonnes of gold, valued near $18.8 billion, and roughly $5.8 billion of bitcoin. Falling prices for those two assets helped cut its excess reserve buffer from $8.2 billion in March to about $4.1 billion in June, as reported by Stablecoin Insider.

Why does Tether keep so much? Because it does not pay for distribution. USDT became the default dollar on Tron and on many offshore exchanges years ago, and that position renews itself. Nobody needs to be paid to list it.

The trade-off is risk appetite. Gold and bitcoin in the reserve mix add upside but also volatility, which is part of why S&P Global cut its assessment of USDT's ability to hold its peg to "weak" in November 2025. Tether disputed the rating. Investors have also been cautious about pricing the business: reports in early 2026 said Tether had scaled back fundraising talks from as much as $20 billion at a $500 billion valuation to about $5 billion after pushback, according to The Block.

Circle: a great business that rents its shelf space

Circle's model starts the same way. In 2024 it booked about $1.68 billion of revenue, more than 99% of it from interest on USDC reserves. The difference is what happened next: it paid Coinbase about $908 million that year.

The arrangement, disclosed in Circle's IPO filing, gives Coinbase all the reserve income on USDC held on its own platform plus half of the residual income on USDC held elsewhere. Circle confirmed in August 2026 that the agreement had renewed on existing terms through 2029. Payments to distributors took about 40% of Circle's revenue in 2022, about half in 2023 and more than 60% in 2024.

Scale has not changed the ratio much. For the second quarter of 2026, Circle reported $701 million of total revenue and reserve income, of which $668 million came from reserves. Distribution, transaction and other costs were $412 million, or about 59% of revenue, and net income from continuing operations was $48 million. For the full year 2025, revenue reached $2.7 billion according to Circle's results release.

A stablecoin issuer is a bank with no interest bill, until it has to pay someone to put its coin on the shelf.

The rate problem

Both businesses are leveraged to one variable they do not control: the short-term interest rate. Circle's reserve return rate fell to 3.48% in the second quarter of 2026, down 66 basis points from a year earlier.

Some rough arithmetic makes the exposure concrete. On about $73 billion of reserves, every quarter-point cut in rates removes roughly $180 million of annual interest income before any distribution payments. On Tether's larger Treasury book the hit is bigger in dollars, although its lower payout ratio means it keeps a larger share of what remains.

That is why both companies talk constantly about other revenue. Circle reported $34 million of other revenue in the second quarter of 2026 from subscriptions, services and transaction fees, and it launched its own Arc blockchain in September. Tether holds more than $20 billion of proprietary investments outside the USDT reserves. Neither has yet built a second engine anywhere near the size of the first.

The new entrants are copying Coinbase, not Tether

The most telling development of 2026 is that newcomers are designing around Circle's problem by giving distributors equity instead of a revenue cut. Open USD, which launched on 30 September 2026, is owned in equal stakes by Visa, Mastercard, Stripe, Shopify and Coinbase, with partners sharing most of the reserve income and the issuer keeping a small management fee. Bank consortia planning their own tokens are following similar logic.

The lesson is that reserve income is a commodity. Any regulated issuer can buy Treasury bills. What is scarce is the place where people actually hold and spend the dollar token, whether that is an exchange, a wallet, a checkout page or a payroll platform. Whoever controls that spot will capture most of the interest, whatever name is on the token. We look at how public investors are valuing this in our analysis of Circle's first 16 months as a listed company, and at the two leading coins in USDT vs USDC.

What it means for everyday users

For someone sending money from Kuwait City to Kollam, none of this shows up as a line item. But it explains three things. First, why issuers fight so hard for listings and partnerships. Second, why some apps offer "rewards" on stablecoin balances: they are often passing on part of a distribution payment, which regulators are now scrutinising. Third, why fees on the user side can fall toward zero: when the float itself earns 3% to 4%, the transfer can be priced as a loss leader.

Company figures are taken from issuer attestations, results releases and press reports cited above. This article is not investment advice.

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