Original Title: "Cobo Stablecoin Weekly Report 19 | After the Stablecoin Bill, Where Is the Next 'Battlefield'?"

Welcome to the 19th edition of the "Stablecoin Weekly Report."

Since the enactment of the "GENIUS Act," the market has reacted unexpectedly:

· The USDT supply has surged against the trend by billions of dollars, while the compliance-focused USDC has shown weak growth in the short term.

· Against the backdrop of "Stablecoin Interest Prohibition," yield-bearing stablecoins have rapidly expanded through regulatory loopholes: USDe's supply has surged, Coinbase and PayPal have packaged yield as "rewards," Coinbase has even introduced an "Embedded Reward SDK," and Anchorage and Ethena Labs have built an institution-grade compliance yield channel based on tokenized assets like BUIDL from BlackRock.

· Privacy has become a new focus: ZKP and DID can provide a solution for institutional payments that is "compliance-verified and non-disclosure," addressing the privacy pain points for enterprises entering the stablecoin space.

Market Overview and Growth Highlights

The total market value of stablecoins has reached $269.696 billion, with a weekly increase of $2.606 billion. In terms of market distribution, USDT continues to hold the dominant position with a share of 61.25%; USDC ranks second with a market value of $64.502 billion, accounting for 23.92%.

Blockchain Network Distribution

Top Three Stablecoin Market Value Networks:

· Ethereum: $135.786 billion

· Tron: $82.995 billion

· Solana: $11.431 billion

Top 3 Networks with the Fastest Weekly Growth:

· Berachain: +96.57% (USDT share 43.15%)

· XRPL: +49.84% (RLUSD share 49.11%)

· Sei: +47.95% (USDC share 85.96%)

Data source: DefiLlama

The US Bank Secrecy Act and Privacy Requirements for Stablecoin Payments

Following the enactment of the US Stablecoin Act, privacy has become the next focus of regulation and the market.

With the stablecoin market cap surpassing $270 billion and rapidly entering the mainstream payment system, the on-chain "full transparency" has started to reveal new issues. Since every transaction on public blockchains is permanently visible, for businesses, it is equivalent to exposing their complete financial history, supply chain information, and salary structure to the public. For retail users, this may only be a nuisance, but for enterprises and institutions, this is an unacceptable hard barrier. This means that your competitors can track every payment in real-time, and if this issue is not addressed, the speed of stablecoin penetration in commercial payments and institutional settlements will be severely limited.

If privacy becomes a concern, the penetration of stablecoins in commercial payments and institutional settlements will be hindered. Paul Grewal, Chief Legal Officer of Coinbase, recently pointed out in an article that for legislations like the "GENIUS Act" to be effective, the Bank Secrecy Act must be simultaneously upgraded. The current model is inefficient, and it also centralizes sensitive data, creating a "honey pot" coveted by hackers, and the effectiveness of anti-money laundering is also not ideal.

Grewal emphasized that privacy and security are not a zero-sum game. Technologies such as Zero-Knowledge Proofs (ZKPs) and Decentralized Identity (DID) can now achieve "compliance verification without exposing raw information," allowing institutions to only see the verification results rather than all the data, thus achieving a balance between data minimization and precise regulation. He called on the US Treasury Department to lead the establishment of a public-private cooperation mechanism, prioritize the transformation of compliance processes that can quickly adapt to ZKPs, focus monitoring on key data points of suspicious transactions, and enhance screening efficiency with AI risk models. This way, privacy can be protected without compromising regulatory accuracy, clearing the biggest obstacle to the institutionalization of stablecoins and giving the US a competitive edge in the institutionalization and internationalization of digital assets.

Under the US Interest Ban, the "Incentive Economics" of Stablecoins

Regulatory restrictions often spur unexpected innovations. For example, the "GENIUS Act" prohibits stablecoin issuers from paying interest to users, intending to curb high-risk behavior, but it has inadvertently led to the explosive growth of yield-bearing stablecoins. Since the enactment of the law, the supply of products like Ethena's USDe has increased by billions of dollars, and their revenue mechanism relies on exchange funding rates instead of government bonds, successfully circumventing legal restrictions.

In a regulatory vacuum, Coinbase and PayPal have restructured stablecoin rewards into "incentives," bypassing the restrictions limited to issuers in regulations. Coinbase, as a USDC distributor, refunds Circle's earnings to users; PayPal isolates issuer risk through Paxos, providing a continuous 4.5% annualized return. Anchorage and Ethena Labs have even linked stablecoin earnings to tokenized assets such as BUIDL from BlackRock, building institutional-grade compliant revenue channels.

Paying interest to hodlers has become a key method for attracting funds in both mature and emerging markets. Coinbase has even API-fied "Interest Rewards" through an embedded wallet SDK, lowering the barrier for developers to integrate annual percentage yield (APY) functionality; while in high-inflation markets like Latin America, Slash's USDSL offers a 4.5% APY reward, combined with the depreciation resistance of a USD asset, quickly attracting capital inflow. Stablecoins are employing more complex and compliant financial engineering to efficiently transmit underlying asset returns and reshape user relationships and value distribution patterns.

Key Words of the Hong Kong Stablecoin Regulation — Transparency and End-to-End Supervision

The Hong Kong Stablecoin Regulation has officially come into effect, sparking widespread discussions on mandatory KYC, offshore stablecoin policies, and DeFi compatibility. In fact, the core of this regulatory framework is not "total banishment," but rather the control of stablecoins "issued in Hong Kong" or "pegged to the Hong Kong dollar," especially targeting tokenized assets related to the Renminbi. Offshore stablecoins such as USDT and USDC are not directly restricted in their circulation on the secondary market. Hong Kong's strategy is clear: grasp the issuance source, regulate with high thresholds focusing on high-value scenarios, such as Renminbi asset tokenization and offshore Renminbi stablecoins, shaping a "quasi-sovereign-level settlement tool" that differentiates itself from the US market-driven model and EU unified standards.

The key words of this regulation are Transparency and End-to-End Supervision. From issuance, custody, clearing to distribution, strict standards are set for the entire lifecycle, with a very high licensing threshold, and downstream custody, distribution, and clearing processes must also meet compliance requirements. Banks, payment institutions, and on-chain infrastructure providers will be brought into a unified framework, shifting the distribution ecosystem from "open access" to "licensed access." In this landscape, infrastructure providers with MPC wallets, on-chain compliance, and fund risk control capabilities will become core partners of banks and tech giants.

The strict regulation has also brought new challenges to the industry. It means that issuers must bear ultimate compliance responsibility for the downstream ecosystem (including third parties such as custody, distribution, clearing, etc.). Any participant looking to enter this ecosystem must meet both technical and institutional compliance requirements. This forces the industry towards specialization and also presents significant opportunities for infrastructure providers. For example, technical infrastructure providers need to leverage multi-signature, MPC, HSM, and other decentralized mechanisms, as well as MPC wallet technology, to help issuers elevate private key security as a cornerstone of trust, striking a balance between asset sovereignty and traceable legal responsibility. This technological solution elevates wallets from simple backend tools to gateways of compliant security systems.

Market Adoption

JPMorgan: DeFi and Asset Tokenization Growth Still 'Disappointing'

Key Takeaways:

· DeFi Total Value Locked (TVL) has not recovered to the 2021 peak, with the main participants still being retail investors and crypto-native companies, while traditional institutions are almost absent

· The global tokenized asset market is only about $250 billion, which analysts have called "quite insignificant," with over 60 tokenized bonds issued totaling $8 billion, and almost zero trading in the secondary market

· Institutional adoption faces three major obstacles: lack of coordinated cross-border regulation, unclear legal framework for on-chain investment, and lack of security guarantees in smart contract execution and protocol security

Why It Matters:

· This report reveals a disconnect between the practical applications and market hype of DeFi and tokenization. Despite the continuous improvement of infrastructure and the emergence of KYC-compliant vaults and permissioned lending pools, traditional financial institutions remain skeptical. The report points out that the traditional financial system is evolving towards faster and lower-cost settlement and payment under the drive of financial technology, which may undermine the necessity of blockchain systems, indicating that the crypto industry needs to develop more compelling institutional-grade use cases.

Remitly Enables Stablecoin Technology to Optimize Cross-Border Payment Business, Will Launch Multi-Currency Digital Wallet Service

Key Takeaways:

· Remitly will launch the multi-currency "Remitly Wallet" in September, supporting fiat and stablecoin storage, especially targeting users in high inflation or currency fluctuation countries

· The company has partnered with Stripe's Bridge to offer stablecoin receiving options for users in more than 170 countries, expanding the existing fiat payment network

· Remitly has integrated USD stablecoins like USDC into its internal financial operations to achieve round-the-clock fund flow, reduce pre-funding requirements, and improve capital efficiency

Why It Matters:

· This marks the mainstream cross-border payment company's beginning of large-scale application of stablecoin technology. By integrating stablecoins into its core business, Remitly not only provides a store of value solution for users in high inflation areas but also addresses the liquidity challenges faced by traditional remittance systems. This innovative model will accelerate the use of stablecoins in practical payment scenarios, providing a more efficient and low-cost solution for hundreds of millions of people globally who rely on cross-border financial services, especially in markets with limited financial infrastructure.

Tether CEO: 40% of Blockchain Transaction Fees Come from USDT Transfers

Key Takeaways:

· Tether CEO Paolo Ardoino tweeted that 40% of the total network's blockchain transaction fees are used for USDT transfers, covering 9 major blockchains

· Hundreds of millions of users in emerging markets use USDT daily to hedge against their national currency devaluation and inflation risks, making it one of the most active blockchain applications globally

· In the crypto context, "transactions" usually refer to activities such as trading, swapping, and arbitrage on exchanges. These activities typically occur within an exchange's internal system or liquidity pool, not requiring a separate on-chain transfer fee each time. When a USDT transfer occurs on-chain and incurs a fee, it usually indicates funds are being moved between different addresses or wallets. Such scenarios can be classified as "real-world use" rather than pure speculation.

Why It Matters:

· This data highlights how USDT has become the dominant application in the blockchain ecosystem, far surpassing other use cases. Paolo predicts that the future blockchain landscape will revolve around Gas fee optimization and USDT fee payments, reflecting how stablecoins have evolved from a mere transaction medium to a key solution for real-world financial needs, especially in economically unstable regions. This phenomenon also demonstrates blockchain technology's substantial role in financial inclusivity.

Macro Trends

Mizuho Bank: Coinbase Q2 Report Shows Circle USDC Profit Margin Shrinking

Key Takeaways:

· Mizuho analysts estimate that Circle derived approximately $625 million in interest income from the USDC reserve in Q2, with $332.5 million paid to Coinbase

· As new distribution partners like Binance join, analysts believe Circle's net reserve yield will face increased pressure, with high and growing distribution costs

· After the GENIUS Act's passage, JPMorgan and Bank of America are set to launch their own stablecoins, intensifying the USD stablecoin market competition

Why It Matters:

Despite Circle's strong IPO performance, Mizuho maintains an "Underperform" rating and an $85 price target, believing that the market has underestimated the risks facing USDC. As Circle expands its distribution network, the stablecoin revenue model, which was previously exclusive to Coinbase, is being disrupted, potentially weakening Circle's profitability. With expected interest rate cuts and traditional banks entering the space, USDC's competitive advantage is being challenged, impacting the overall stablecoin market landscape significantly.

US Treasury's Record Expansion of Short-Term Bond Issuance Attracts Stablecoins as New Buyers

Key Takeaways:

· The US Treasury will auction $100 billion in four-week Treasury bills, a historical high, increasing by $5 billion from the previous auction, while maintaining the sizes of eight-week and seventeen-week Treasury bills

· Short-term bond yields exceeding 4% are attracting a significant number of investors, with inflows into short-term bond ETF funds reaching $16.7 billion in the second quarter, doubling year-over-year

· The Treasury Borrowing Advisory Committee highlights the "rise in stablecoin issuance" as a new source of demand for Treasury bills. The "GENIUS Act" requires stablecoin issuers to hold secure assets such as Treasury bills

Why It Matters:

· The Trump administration expressly prefers a short-term financing strategy, with Treasury Secretary Benson stating that issuing long-term debt is too costly in the current interest rate environment. The demand for stablecoins has become a significant variable in the Treasury bill market, with regulatory requirements for stablecoin issuers to hold secure assets creating a new structural demand. Meanwhile, global central banks are reducing their USD asset allocations in favor of gold, and Bank of America predicts that the price of gold is set to surpass $4,000, reflecting increasing market concerns about the sustainability of US debt.

Significant Increase in Yield-Bearing Stablecoin Supply Since the Passage of the GENIUS Act

Key Takeaways:

· Since the signing of the "GENIUS Act" on July 18th, the supply of the yield-bearing stablecoin Ethena's USDe has grown by 70% to $9.49 billion, making it the third-largest stablecoin by market capitalization

· Sky's USDS saw a simultaneous 23% increase in supply to $4.81 billion, ranking as the fourth-largest by market capitalization. These stablecoins provide income to holders through a staking mechanism

· The current annual staking yield for USDe is 10.86%, and for USDS it is 4.75%. Taking into account a 2.7% inflation rate in the US for June, the real yields are 8.16% and 2.05%, respectively

Why it matters:

· The "Genius Act" prohibits stablecoin issuers from directly providing yield to holders, inadvertently leading to explosive growth in yield-bearing stablecoins backed by collateral. Investors are turning to stablecoins that provide yield through protocol-native staking mechanisms to circumvent regulatory restrictions. The overall stablecoin market has grown from $205 billion to $268 billion this year, with analysts predicting it could reach close to $300 billion by the end of the year. This phenomenon demonstrates that despite regulatory tightening, the market demand for high-yield US dollar alternatives remains strong and is driving a new wave of innovation and adoption in DeFi applications.

New Product Spotlight

Former Apple Engineer Launches Privacy-Preserving Encrypted Visa Card Payy

Key Highlights:

· Payy Visa Card enables privacy payments through zero-knowledge proofs (ZKPs) and a proprietary blockchain, ensuring that user stablecoin transaction amounts are not publicly visible on-chain

· The card was developed by Polybase Labs, founded by former Apple iOS engineer Sid Gandhi, and took three years to build while ensuring transaction privacy and compliance

· Payy is designed for mainstream users, focusing on a simple onboarding experience and user-friendliness, allowing users to self-custody stablecoin storage and usage without understanding blockchain technology

Why it matters:

· Payy addresses a key pain point in the encrypted payment space—transaction privacy and usability. Traditional blockchain payment solutions expose user transaction records on the public chain, while Payy achieves transaction privacy protection while maintaining regulatory compliance. This represents an important step toward mainstream adoption of encrypted payments, providing a viable daily payment solution for self-custodied stablecoins and potentially serving as a true alternative to the traditional banking system.

MetaMask and Stripe Reportedly Planning to Launch mmUSD Stablecoin

Key Highlights:

· An accidentally leaked Aave governance proposal revealed that MetaMask is collaborating with the payment giant Stripe to launch the USD-pegged stablecoin mmUSD, with support from the M^0 platform

· The proposal shows that mmUSD will become the "cornerstone asset" of the MetaMask ecosystem, natively integrated into all its services such as wallet, transactions, trading, and yield

· The proposal was swiftly removed, with Aave Chan Initiative founder Marc Zeller stating that the timing of the disclosure was "premature," but confirming the authenticity of the proposal

Why It Matters:

· This is another tech giant's foray into the stablecoin market following PayPal and Robinhood, with MetaMask, as one of the largest crypto wallets, partnering with top payment processor Stripe to launch a stablecoin. This move could accelerate the integration and application of stablecoins in Web3 and traditional payment spaces.

Coinbase Launches Embedded Wallet Toolkit to Simplify Web3 User Onboarding for Developers

Key Highlights:

· Coinbase has introduced the Embedded Wallets SDK tool in its Coinbase Developer Platform (CDP), allowing developers to seamlessly integrate self-custody wallet capabilities into their applications

· This SDK includes features such as cryptocurrency deposit channels, token swaps, and a 4.1% APY on USDC, aiming to eliminate the trade-off between user experience and self-custody risks

· Unlike traditional wallets, users can directly log in using their email, SMS, or OAuth, without the need for a browser extension or mnemonic phrase memorization, greatly simplifying the onboarding experience

Why It's Important:

· This move reflects Coinbase's key positioning in the Web3 infrastructure strategy by lowering the development barriers to foster widespread application adoption. The new tool operates on the same system that supports Coinbase DEX, providing enterprise-grade security while addressing one of the biggest pain points in the crypto space: the complex user onboarding process. This aligns with Coinbase's overall strategy of reshaping wallets into super apps, further solidifying its role as a bridge between crypto and the traditional internet

US Digital Bank Slash Launches Stablecoin Issued via Stripe Bridge, Facilitating USD and Stablecoin Transactions for Non-US Enterprises

Key Highlights:

· San Francisco digital bank Slash launches USD stablecoin USDSL issued by Stripe's Bridge platform

· The stablecoin is designed to provide businesses with USD payment capabilities, enabling global payments without the need for a U.S. bank account, reducing settlement times and forex fees

· This move comes as the GENIUS Act is signed into law, providing a regulatory framework for the U.S. stablecoin industry and issuers

Why It Matters:

· With the clarification of stablecoin regulatory frameworks, fintech companies are rapidly entering the space. Slash's issuance of a stablecoin using Stripe's Bridge platform represents a new trend of blending traditional finance with crypto technology, aiming to address efficiency and cost issues in cross-border payments. This also indicates that, with a clear regulatory environment, stablecoins are transitioning from concept to practical use in the realm of commercial payments.

Trump-Affiliated Project World Liberty Introduces USD1 Stablecoin Loyalty Program

Key Takeaways:

· Trump-affiliated DeFi project World Liberty Financial has announced the launch of the USD1 points program, similar to an airline miles model, with initial partnerships with exchanges like Gate

· Users can earn points by trading USD1 pairs, holding a USD1 balance, staking USD1 for yield, using in approved DeFi protocols, and interacting with the WLFI mobile app

· Introduced in April, the USD1 stablecoin from World Liberty Financial claims to be fully backed by short-term U.S. treasuries, USD deposits, and other cash equivalents, issued by BitGo Trust Company

Why It's Important:

· Former President Trump and his three sons serve as ambassadors or advocates for World Liberty Financial, raising concerns about potential conflicts of interest. The USD1 points program combines stablecoins with loyalty rewards in an innovative model, representing stablecoin projects seeking user stickiness in an increasingly competitive environment and reflecting a trend of closer government interaction with the crypto industry.

JPMorgan Chase Launches On-Chain Intraday Repo Solution Based on Kinexys Blockchain

Key Highlights:

· JPMorgan Chase collaborates with HQLA-X and Ownera to launch a "cross-ledger solution" that allows repo traders to exchange funds and securities using blockchain deposit accounts on the Kinexys network

· The tool supports full lifecycle management of repo transactions, from execution to collateral management to settlement, with precise minute-level settlement and maturity times

· The solution's first phase is capable of handling daily transaction volumes of up to $1 billion, designed as an industry-grade platform to support future expansion to multiple trading venues, collateral sources, and digital cash instruments

Why It Matters:

· JPMorgan Chase is leading blockchain innovation in traditional banking, with Kinexys (formerly Onyx) at the core of its digital asset strategy. The platform is expected to support various digital assets such as deposit tokens, stablecoins, and central bank digital currencies, reducing market fragmentation. With JPMorgan Chase launching JPMD, a quasi-stablecoin asset, and partnering with Coinbase, this move signifies Wall Street's recognition of blockchain technology transitioning from experimentation to real-world application, setting a new standard for institutional-grade digital asset infrastructure.

Regulatory Compliance

Paxos Fined $48.5M by NY Regulators Due to Binance BUSD Collaboration

Key Highlights:

· Paxos Trust Company will pay a $26.5 million fine to the New York Department of Financial Services (NYDFS) and invest an additional $22 million to enhance its compliance program

· Regulators found that Paxos, in its 2018 collaboration with Binance to issue BUSD stablecoin, did not conduct sufficient due diligence on the partner and had deficiencies in its anti-money laundering procedures

· Paxos accepted Binance's claim of having "fully restricted U.S. users" without independent verification, leading NYDFS to order Paxos to cease minting BUSD in 2023

Why It Matters:

· This penalty demonstrates the regulator's strict scrutiny of stablecoin issuers' partner relationships, especially those with overseas exchanges. Although Paxos stated that these issues were discovered and fully remediated two and a half years ago, this case serves as a wake-up call for the entire stablecoin industry, reminding issuers that they must conduct thorough due diligence on partners and establish a robust compliance framework. With the implementation of the "Genius Act" and the expansion of the stablecoin market, regulatory scrutiny of stablecoin issuers will become more stringent, potentially exposing stablecoin issuers collaborating with problematic exchanges to greater legal risks.

Trump Signs Executive Order to Stop Banks' "Unfair Practices" Against Cryptocurrency Companies

Key Points at a Glance:

· President Trump signs an executive order prohibiting federal regulatory agencies from imposing additional oversight on banks serving cryptocurrency firms based on "reputation risk"

· The order aims to end "Operation Choke Point 2.0" and prevent banks from refusing services to crypto companies based on political reasons or subjective concerns about high-risk industries

· The Federal Reserve, OCC, and FDIC have committed to no longer consider "reputation risk" factors when assessing bank customer relationships, with support expressed by House Financial Services Committee Chair Hill and Senator Lummis

Why It Matters:

· This executive order fundamentally eliminates the subjective tools used by regulatory agencies, forcing banks to make decisions based on actual legal and financial risks rather than vague reputation considerations. It explicitly establishes the legitimacy of the crypto industry, ensuring its equal right to bank services like any other industry. In the context of active government adjustments to the regulatory framework, this action will reshape the relationship between banks and crypto firms, driving deeper integration between traditional finance and the digital asset industry.

Capital Deployment

Tether Acquires Stake in MiCA-Licensed Exchange Bit2Me, Leads $32.7 Million Funding Round

Key Points at a Glance:

· Stablecoin issuer Tether acquires a minority stake in the Spanish cryptocurrency exchange Bit2Me and leads a €30 million ($32.7 million) funding round, with the transaction set to complete in the coming weeks

· Bit2Me is the first Spanish-language exchange to receive approval under the EU's MiCA framework, and its Crypto Asset Service Provider (CASP) license allows it to operate in 27 EU member states

· This investment will provide funding for Bit2Me's expansion in the European Union and Latin America (starting with Argentina). The exchange was founded in 2014 and currently serves 1.2 million users

Why It Matters:

· This is Tether's strategic move to reaffirm its position in the European market after the tightening regulation under MiCA. With multiple exchanges delisting or lowering the priority of USDT over the past year, Tether is creating compliant market channels for its stablecoin through investments in licensed exchanges. This move demonstrates how Tether leverages its significant profits (a record $4.9 billion last quarter) for strategic investments to expand its business in varying regulatory environments globally.

Ripple to Invest $200 Million to Acquire Stablecoin Payment Platform Rail

Key Highlights:

· Ripple has announced the acquisition of the stablecoin payment platform Rail, in a deal worth $200 million, expected to be completed in Q4 2025

· Rail is projected to handle over 10% of global stablecoin payments by 2025, with the global market size estimated at around $36 billion

· This acquisition will enable Ripple to offer enterprise-grade stablecoin payment solutions, supporting various digital asset payments such as RLUSD and XRP, allowing customers to use deposit and withdrawal services without holding cryptocurrency

Why It Matters:

· Following Ripple's significant investment in April this year when it acquired the crypto-friendly brokerage firm Hidden Road for $1.25 billion, this is another major investment signaling the company's accelerated expansion into the stablecoin market. With Ripple actively applying for MiCA licensing in the EU and regulatory approval for RLUSD in the Dubai International Financial Centre, the company is expanding its stablecoin business globally. This move will transition Ripple from a leading cross-border payment solution provider to a comprehensive financial services platform, reflecting the increasing competition in the institutional-grade stablecoin service market.

Original Article Link

Welcome to join the official BlockBeats community:

Telegram Subscription Group: https://t.me/theblockbeats

Telegram Discussion Group: https://t.me/BlockBeats_App

Official Twitter Account: https://twitter.com/BlockBeatsAsia