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1/ Retail doesn’t understand why people are mad about USDC “rewards”
So let’s break it down:
USDC isn’t magic.
It’s a Treasury yield business model.
👇
2/ When you mint USDC, Circle takes the dollars and parks them in:
• cash
• short-term US Treasuries
Those Treasuries pay interest.
That interest is the engine.
3/ Here’s the part people miss:
Circle isn’t making billions from payments.
Circle is making billions from the interest on the reserves backing USDC.
4/ The numbers:
Circle reported about **$1.68B total revenue in 2024**…
And analysts project **~$2.5B+ of revenue in 2025**…
With the vast majority coming from reserve interest.
USDC float = the business.
5/ Their “services/API” revenue is tiny compared to reserve yield.
Circle is basically a Treasury spread company with a stablecoin wrapper.
6/ Now enter Coinbase.
Coinbase reported **~$300M–$355M per quarter** in stablecoin-related revenue…
That’s over **$1B+ annualized** from the USDC interest arrangement.
7/ Coinbase gets:
• 100% of the interest on USDC held on Coinbase
• a split of interest on USDC held elsewhere
So Coinbase is directly monetizing the same Treasury float.
8/ Then Coinbase markets it as:
“Hold USDC here and earn rewards.”
To retail, that feels like a savings account.
9/ But banks can’t do this freely without:
• capital requirements
• deposit insurance
• supervision
• lending obligations
Stablecoin rewards create deposit-like behavior without bank guardrails.
10/ That’s why policymakers call it “shadow banking.”
It’s not “crypto innovation.”
It’s:
Park money in T-bills →
Collect yield →
Share some with users →
Keep the spread
11/ And that’s exactly why Circle + Coinbase advocate so hard:
Because this model is massively profitable…
And clearer rules will likely squeeze the “stablecoin-as-yield-account” loophole.
12/ Payments stablecoins will survive.
But the reward-driven Treasury spread game is what regulators are targeting.
Casino layer fades.
Infrastructure stays.
13/ Why does this matter?
Because if stablecoins become “hold digital dollars and earn Treasury yield”…
You’ve basically rebuilt a banking system…
Outside banking rules.
That’s dangerous.
14/ Here’s the risk:
If trillions move from banks into stablecoin yield wrappers:
• banks lose deposits
• lending shrinks
• credit tightens
• economy slows
Money stops circulating.
15/ Banks don’t just “hold money.”
They fund:
• mortgages
• small business loans
• car loans
• economic growth
If deposits get sucked into Treasury-only stablecoin float…
The real economy gets starved.
16/ This is called disintermediation:
Money leaves the banking system →
Goes into safe assets →
Credit creation collapses
That’s how recessions get worse.
17/ And we’ve seen this movie before.
In 2008, a massive “shadow banking” system grew outside normal bank rules:
• money market-like products
• repo leverage
• off-balance-sheet risk
It looked safe…
Until it wasn’t.
18/ One famous example:
The Reserve Primary Fund “broke the buck” in 2008.
A product people treated like cash…
Suddenly wasn’t.
Panic followed.
19/ The lesson regulators learned:
If something walks like a deposit,
talks like a deposit,
and feels like cash…
It needs bank-level guardrails.
20/ Stablecoin yield wrappers are the same issue in new clothes.
They create:
• deposit behavior
• without deposit insurance
• without capital rules
• without lending obligations
21/ That’s why regulation isn’t “anti-crypto.”
It’s anti–shadow banking 2.0.
Payments stables survive.
But “stablecoin as a savings account loophole” won’t scale unchecked.
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