Why We’ll See 1000 Stablecoins (and Why Most Will Fail)
In open systems, liquidity rules. In closed systems, custody and UI control decide.
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Introduction: My users, my yield
The recent USDH ticker vote on Hyperliquid grabbed outsized attention. At first glance it looked like the winner would become the enshrined stablecoin, with $5B+ of supply up for grabs. In reality, that’s not how Hyperliquid works. It’s open and permissionless. Anyone can deploy a stablecoin and create trading pairs. Plenty already have and USDC remains dominant. The vote was symbolic.
But symbolism matters. Issuers lined up to pitch why they deserved the slot. That scramble underscored a broader shift: platforms are waking up to the economics of stablecoin float, and starting to bargain for a better deal.
You see it elsewhere too. Solana ecosystem advocates have called out the ~$450M in annualized value from the +$10B of stablecoins leaking to Circle and Tether each year. Revenue that indirectly funds a competitor chain (Base). MetaMask just launched mUSD, leveraging its role as the largest crypto wallet and MegaETH, a new L2, is doing the same. The logic is clear: if you have users, why give yield away to someone else?
The harder truth is that unseating incumbents in open ecosystems is brutally difficult. Liquidity and convenience dominate, and Circle and Tether already have both. Closed systems look more straightforward. Custodial platforms like exchanges or wallets can direct user balances into their own coin. But when custody or governance is decentralized, users often retain a say in how balances are held, which makes imposing a new coin far less straightforward than it appears.
The good thing is that you don’t have to win globally on day one. You can start inside a walled garden, monetize balances, build recognition and volume, and only later test whether your coin has legs beyond your own platform. Which is why it makes sense for so many teams to try.
Why Everyone Will Try
The incentives are well understood: Stablecoin balances generate yield. The more balances you hold, the more income you earn. For financial services platforms, that’s a brand-new revenue line. The revenue you capture can be passed back to users directly as rewards, or used to subsidize other features.
There are two levels of “success” to think about here:
On-platform yield: monetizing balances sitting in your own app, wallet, exchange, or fintech product. This is the low-hanging fruit. You already control those balances; issuing your own coin is just one way to keep the yield in-house.
Off-platform adoption: the holy grail, where your stablecoin circulates beyond your own product and earns income from balances you don’t directly control. Today, only USDT and USDC achieve this, and even then it’s Tether that captures most of the upside. Circle passes a large share of off-platform income back to Coinbase.
But here’s the catch: even monetizing your own balances depends on how much control you actually have over your platform and your users’ funds. And off-platform adoption is another level entirely — far more difficult than most people expect. So while we should expect many attempts, most will succeed only inside their walled gardens. Very few will reach the holy grail.
To understand why we need to break down the levers of adoption.
Why Attempts ≠ Success
Issuing a stablecoin is trivial. Getting people to actually use it (especially outside your own platform) is not.
Platforms without full custody can try to nudge users toward their coin through UX design or incentives, but that often introduces friction. Push too hard and you risk degrading the user experience. For centralized exchanges, a few extra basis points of yield rarely outweigh the revenue impact of maximizing wallet share and trading activity. And for decentralized exchanges like Hyperliquid, it is even harder to displace USDC, which already has deep liquidity across multiple trading pairs and benefits from ingrained user behavior: traders can simply fund their accounts with the USDC they already hold on other chains.
Beyond the walled garden, adoption depends on four pillars that are nearly impossible to shortcut:
Liquidity: How easily can users move in and out of other assets (BTC, ETH, SOL, other stables) in size, with low slippage? For trading especially, liquidity begets liquidity.
Ramps: How many entry and exit points exist between fiat and your stablecoin? Without bank onramps, wallets, and exchanges supporting it, users default to what’s easiest.
Utility: What can you actually do with the coin? Can you trade, lend, send to a friend, pay a merchant, off-ramp to fiat? Utility multiplies with each integration.
Interoperability: How portable is the coin across chains and platforms? Users are increasingly multi-chain. A dollar stuck in one walled garden is less useful than one that flows freely.
USDC and USDT dominate across these pillars to varying degrees. They’ve built global liquidity, deep fiat rails, broad cross-chain coverage, and near-universal availability. That’s why they continue to entrench, even if the economics flow to issuers like Circle and Tether more than to the platforms that use them.
This creates a harsh tradeoff for challengers. You can drive adoption inside your own platform, but as soon as customers want to do something elsewhere they’ll convert back into what’s liquid. Ironically, giving them that option is often the best way to win deposits. Making it easier to move assets off is what makes it easier for them to move assets on. But every time you do, you reinforce the incumbents’ network effects.
Bottom line: users stick with what’s liquid, convenient, and widely available. Unless a new stablecoin can compete across multiple pillars (or sidestep them entirely in a new niche market) adoption beyond a walled garden will stall.
The Leverage Spectrum: Who Can Impose Their Own Coin
So let’s flip the question. Forget open ecosystems for a moment — those are dominated by liquidity and network effects. What if you’re starting inside your own walls? You’ve got a wallet, an exchange, or a consumer app. Can you actually grow your own stablecoin from there? Who really has the leverage to impose one inside their own system?
The answer depends on custody and control. The more influence you have over user balances and behavior, the more freedom you have to direct them into your own coin.
Think of it as a spectrum:
Least leverage: Non-custodial apps and DEXs: They don’t hold user funds. At best, they can influence behavior by surfacing their preferred stablecoin in the UI, subsidizing swaps, or running incentive programs. But they can’t force adoption. Arguably it’s harder for Dexes vs wallets because incumbent liquidity is harder to overcome.
Middle ground: Centralized exchanges (CEXs): They custody balances, but order books remain market-driven. Users may deposit whatever they like, and liquidity pools around the most popular assets. Exchanges can improve the odds by subsidizing liquidity on preferred pairs, or running unified order books where they show the user “USD” while managing stablecoin balances behind the scenes (see Binance, OKX).
Most leverage: Custodial wallets and apps: Here, the operator holds the keys. They can simply show a USD balance in the app, while deciding what sits behind it.
The pattern is clear: the closer you are to custody and the user interface, the more leverage you have. And the more leverage you have, the less you need to fight on liquidity’s terms. In open, market-driven ecosystems like Hyperliquid or Solana, unseating incumbents is brutally hard. In closed or custodial environments, the operator can impose their coin almost overnight.
Expect 1000 Stablecoins. But Most Will Be Walled Gardens
Stablecoin success is not about who can issue. It is about who has the leverage to impose. In open ecosystems, liquidity favors incumbents. In closed systems, custody and user interface control decide the outcome.
Given the upside, we should expect a flood of stablecoin launches. Wallets, exchanges, L2s, and consumer apps will all take a swing.
Most of these coins will fail to go beyond walled gardens: useful and profitable inside their own platforms, but rarely circulating beyond.
The few that break through will not succeed by challenging USDC or USDT directly. They will succeed by finding new markets where network effects are weak enough to overcome, making each attempt a useful experiment.
That is how progress happens. But let us not underestimate what it takes.
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