- Interest rate cuts threaten billions in revenue for stablecoin giants.
- Circle projects massive revenue loss as Treasury yields face decline.
- Tether’s bond dominance grows despite looming drop in interest income.
Tether and Circle could see a sharp revenue decline if US interest rates drop in the coming months. According to crypto analyst MartyParty on X, the two largest stablecoin issuers depend heavily on yield from interest-bearing US Treasurys.
He cautioned that reducing rates would cut a significant part of their profits, and Circle is expected to lose hundreds of millions of dollars per year. The analyst further said that the two companies might require issuing additional stablecoins to maintain their present profits.
Internal estimates referenced by MartyParty indicate that a 50 basis point reduction would decrease gross revenue at Circle by $309 million annually. A 100 basis point reduction would bring a twofold increase, reducing $618 million and gross profit by up to $303 millions.
Currently, Circle receives approximately $2.54 billion a year in reserve income, which is supported by holdings in the US Treasury. Any drop in yields of these assets would directly impact its financial performance.
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Circle Turns to Arc Blockchain for New Revenue
In response to revenue risks, Circle recently introduced Arc, an open Layer-1 blockchain tailored for stablecoin finance. The platform will be 100 percent compatible with the Ethereum Virtual Machine, and the native gas token will be USDC to pay transaction fees.
Arc is designed to provide sub-second settlements, an integrated stablecoin foreign exchange system, and enterprise-grade compliance. Later this year, a public testnet is planned as Circle aims to diversify beyond interest income to fee-based revenue.
Tether has also increased its exposure to US Treasuries, with $127 billion in Treasury bills as of the second quarter of 2025. This puts the company ahead of South Korea and near Saudi Arabia in international Treasury rankings.
It holds $105.5 billion and $21.3 billion directly or indirectly, an increase of $7 billion since the first quarter. Tether is currently ranked the 18th largest owner of US Treasurys in the world, overtaking Germany earlier this year.
Impending US interest rate cuts could strip billions from Tether and Circle’s revenue streams. Both issuers appear to be positioning themselves for a future with lower returns from Treasury investments.
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