From Distribution to Credit Creation to Financial Engineering: How Stablecoins Are Rewiring Finance
July 25, 2025
Cobo’s weekly take on the evolving intersection of digital assets, banking innovation, and crypto-regulatory momentum driving the next era of global payments.
This week, the GENIUS Act is embedding stablecoin functionality deeper into legacy financial systems. PNC’s Coinbase partnership marks a leap forward in using digital tokens as scalable distribution tools. Meanwhile, Goldman Sachs and BNY Mellon are moving money market funds on-chain — signaling that “dollar + Treasury” instruments are now entering programmable environments. Banks are shifting from custodianship to direct issuance of digital-native assets.
Perhaps most significant is JPMorgan’s move to accept BTC and ETH as collateral for loans — a development that folds on-chain assets into the money creation cycle, pushing crypto from the periphery into the core of credit infrastructure.Cobo's weekly analysis of stablecoin regulatory breakthroughs, traditional banking integration, and cryptocurrency infrastructure developments shaping digital payments.
Executive Summary
As stablecoins erode banking's core functions, banks rush to modularize while PayPal builds a native stack that bypasses banking entirely — marking a shift to velocity- and interface-driven finance.
The passage of the GENIUS Act marks a new phase in U.S. crypto legislation. Congressional disputes over the CLARITY Act reveal a philosophical split in regulatory approaches: one side emphasizing functional definitions and universality, the other focusing on financial nesting and the stablecoin system itself.
Facing stablecoin disruption, banking systems are responding by restructuring distribution channels, introducing on-chain credit collateral, and outsourcing interest generation to tokenized assets. Banks are evolving toward modular, interface-based architectures to adapt to an era where on-chain assets participate in liquidity generation.
PayPal has chosen to bypass banks entirely, building unified interfaces directly between digital assets and capital flows. Through PYUSD and PayPal World, it bundles clearing, exchange, user onboarding, and merchant networks, attempting to establish a native payment stack that requires no banking intermediaries.
In rapidly flowing capital formations, value is shifting from intermediary fees and scarcity toward velocity, composability, and network effects. A new financial order is reorganizing itself between interfaces.
Market Overview and Growth Highlights
Stablecoin Total Market Cap Reaches $265.217b
The total stablecoin market capitalization has reached $265.217 billion, reflecting a week-over-week growth of $4.502b. In terms of market share, USDT continues to dominate with a 61.8% share, followed by USDC, which holds the second position with a market cap of $64.807 billion (24.44% share).
Blockchain Network Distribution
Top 3 Networks by Stablecoin Market Cap:
Ethereum: $132.37B
Tron: $81.992B
Solana: $11.592B
Top 3 Fastest-Growing Networks (Weekly):
TON: +7.85% (USDT dominance: 79.49%)
Hedera: +6.96% (USDC dominance: 99.86%)
Polygon: +5.60% (USDT dominance: 43.29%)
Data Source: DefiLlama
Cobo's Take: The divergent growth patterns reveal strategic positioning battles. TON's surge reflects Telegram's massive user base converting to on-chain activity, while Hedera's USDC monopoly suggests institutional preference for regulatory-compliant chains. Polygon's balanced USDT/USDC mix positions it as the emerging payments rail for cost-sensitive markets, particularly Latin America. Watch for network effects to accelerate as stablecoins become the default medium of exchange.
From Distribution to Credit Creation to Financial Engineering: Stablecoins Are Penetrating the Banking System
The GENIUS Act is driving stablecoins deep into traditional banking architecture. PNC's Coinbase partnership legitimizes stablecoins as distribution channels, while Goldman Sachs and BNY Mellon are tokenizing money market funds, moving core "dollar + Treasury" assets on-chain. Banks are shifting from passive custodians to active native digital asset issuers.
JPMorgan's plan to accept Bitcoin and Ethereum as loan collateral is structurally significant — it integrates on-chain assets into M2 creation pathways, making crypto part of the banking credit system. Stablecoins are no longer just digital shadows of traditional finance; they're becoming part of the money creation apparatus itself.
Anchorage's USDtb showcases elegant financial engineering. Instead of directly promising yields, it outsources interest generation to BlackRock's tokenized BUIDL fund, redefining "interest" as a natural asset property rather than a legal obligation. This sidesteps SEC scrutiny while turning stablecoins into "yield-wrapping interfaces" that reconstruct functional relationships within regulatory gaps.
Cobo's Take: Banks embracing stablecoins must accept functional unbundling and layered design. The monolithic financial system is decomposing into recombinable on-chain modules for compliance, yield generation, custody, and trading. Stablecoins are forcing banking to evolve into modular, programmable financial infrastructure — a set of financial Lego blocks ready for infinite recombination. Traditional banks face a stark choice: become protocol layers in a new stack or watch their monopoly on financial services dissolve into smart contracts.
PayPal Launches Global Payment Interconnect Platform PayPal World, Integrating Stablecoins and AI Agent Shopping into Strategic Blueprint
PayPal has unveiled PayPal World, a global payment interconnect platform designed to reshape cross-border payment networks and global commerce interaction paradigms. As a "payment network aggregator," PayPal World initially connects Mercado Pago, India's UPI, WeChat Pay International's Tenpay Global, alongside PayPal and Venmo, covering nearly 2 billion consumers and merchants globally. By unifying multiple "walled gardens," merchants can integrate once and reach globally, dramatically lowering payment compatibility barriers, while users can complete cross-border transactions within their local payment tools without app-switching.
The integration's key innovation lies in PayPal's first-time fusion of P2P-focused Venmo with B2C commercial payment networks, bridging personal and merchant scenarios into a synergistic closed loop. PayPal World extends this integration globally, making cross-border remittances as seamless as messaging while enabling merchants to receive real-time payments from any payment ecosystem, achieving account-to-account (A2A) settlement pathways.
This evolution leverages cloud computing and API standardization driving payment infrastructure modernization. By deconstructing high-cost intermediaries in traditional payment chains — correspondent banks, card networks, SWIFT — PayPal is transitioning from mesh interconnectivity toward lower-friction, higher-programmability A2A architecture. Looking ahead, the next phase may migrate on-chain, building more automated, 24/7, low-cost clearing and settlement channels serving new settlement entities like AI agents.
Cobo's Take: From a historical perspective, finance's value logic is shifting from arbitrage mechanisms dependent on geographic barriers and physical friction toward efficiency paradigms centered on compressing "funds-in-transit time." PayPal World represents a structural response to this trend. In this new paradigm, stablecoins become foundational infrastructure. If A2A is the starting point, stablecoins are the pathway's extension, with the ultimate goal being a high-frequency, low-latency, composable capital network.
PayPal has explicitly advanced its stablecoin strategy and AI agent payment deployment, even actively sacrificing traditional fiat float revenue to incentivize users to convert balances to PYUSD, enhancing ecosystem stickiness and capital liquidity. Its growth model is evolving from fee-driven, stock-based revenue toward high-frequency circulation and network dominance.
PayPal World's significance can be understood as an experiment in "post-friction capitalism." In this phase, value no longer derives from possessing scarce resources or charging intermediary fees, but from capital flow velocity, composability, and network effects. Traditional payment bundles — clearing, settlement, exchange, fees — are being unbundled and reconstructed around digital assets like PYUSD and unified interfaces like PayPal World.
U.S. Crypto Regulation Reaches a Fork: Regulatory Philosophy Divides Behind the CLARITY Act
With the GENIUS Act establishing stablecoin regulatory frameworks, U.S. crypto legislation is entering its next phase. The House's recently passed Digital Asset Market Structure (CLARITY) Act attempts to further clarify regulatory boundaries, establishing a "control-based" classification standard: platforms holding user assets and acting as intermediaries face strict regulation, requiring KYC, AML, and fund segregation compliance, while truly decentralized protocols where users interact directly with smart contracts receive exemptions — a structural response to FTX-style risks.
The Senate draft presents a different regulatory philosophy. This version introduces "ancillary assets" — tokens issued through investment contracts but lacking equity or revenue rights. Issuers can self-certify to the SEC as non-securities, and if the SEC doesn't object within 60 days, they're treated as commodity assets. While the House emphasizes control rights and platform roles, the Senate focuses on whether tokens possess inherent financial rights attributes, leaning toward providing operational compliance pathways for issuers.
Cobo's Take: The bicameral disagreement on definitional standards reflects fundamentally different judgments about "what should be regulated" — concentrations of power versus financial attributes. This divide affects not just philosophy but also regulatory authority distribution: the House version is CFTC-led, while the Senate preserves SEC's initial screening authority. Future regulation may not involve single-framework coverage but rather multi-layered systems based on rights structures, governance methods, and asset properties.
Both chambers will likely reach compromise language before Congress reconvenes in September. Even if final legislation doesn't pass quickly, this round of negotiations has revealed the layered trajectory of U.S. digital asset regulation. After stablecoins, core areas like DeFi, ICOs, and platform intermediaries will gradually enter institutional frameworks, with pathway choices determining America's direction and voice in the global crypto-financial order.
Market Adoption
Polygon has seen a 141% surge in small USDC transfers under $1,000 this year, overtaking Solana as the top blockchain for these transactions. The growth is primarily driven by South American users, particularly in Argentina and Brazil, seeking cheaper alternatives to the increasingly expensive Tron network. This positions Polygon as a key player in the expanding stablecoin payment market, especially for everyday transactions in developing nations. The trend could attract traditional finance partnerships as the stablecoin market continues rapid growth and demand for low-cost payment rails increases.
PNC Bank, the seventh-largest U.S. bank with $557 billion in assets, has partnered with Coinbase to offer crypto services directly through PNC's banking interface. Customers will soon buy, hold, and sell cryptocurrencies using Coinbase's institutional-grade "Crypto-as-a-Service" platform, while PNC provides banking services to Coinbase in return. This follows JPMorgan's crypto exploration and signals accelerating digital asset adoption across major U.S. banks. The partnership creates a more accessible gateway for both retail and institutional investors, potentially broadening crypto's user base significantly.
Western Union is exploring stablecoin integration into its digital wallet infrastructure, with CEO Devin McGranahan announcing plans for stablecoin on-ramps and off-ramps through strategic partnerships. The 175-year-old remittance giant sees three key opportunities: faster cross-border transfers, fiat-to-stablecoin conversions, and providing stable value storage for customers in volatile economies. This move comes after the GENIUS Act established federal stablecoin regulations and signals major institutional adoption. Western Union views stablecoins as an opportunity rather than a threat, potentially transforming the cross-border payments market with its global reach.
Big Picture
Latin America is experiencing a quiet crypto revolution as hyperinflation and capital controls drive citizens toward digital wallets and stablecoins for dollar access. With over 50% unbanked in Mexico and 43% in Peru, crypto offers crucial financial services to excluded populations, while countries like Argentina and Venezuela see widespread stablecoin adoption amid 100%+ inflation. Brazil and Colombia have established licensing frameworks for crypto service providers, signaling regulatory progress despite ongoing challenges. This shift could dramatically reduce remittance costs from the current 6.4% and boost financial inclusion across underserved rural and minority communities.
Bank of America predicts the stablecoin market will surge by $25-75 billion following Trump's GENIUS Act signing, representing a 9-28% jump from the current $270 billion market. Major banks are prepping their own stablecoins through consortium models, with BofA's CEO confirming readiness to enter when timing aligns. The regulatory clarity is triggering a financial system transformation as traditional institutions reshape the stablecoin landscape. Industry consolidation is expected over the next 2-3 years alongside broader tokenized asset adoption.
New Launches
Circle's USYC can now serve as collateral for Binance's institutional OTC derivatives trading, mirroring traditional finance practices. The yield-bearing Treasury token will be held via Binance Banking Triparty or custody partner Ceffu, with native issuance on BNB Chain for easier on-chain access. USYC offers near-instant interchangeability with USDC, boosting capital efficiency as users can convert between tokenized cash and Treasuries in real-time. This partnership accelerates real-world asset tokenization as demand for tokenized Treasuries has doubled since 2025.
Square is rolling out Bitcoin payments for merchants via the Lightning Network, with initial businesses already accepting BTC through near-instant settlements while Square handles Bitcoin-to-fiat conversion. The company plans full deployment across all point-of-sale systems by 2026, following a successful pilot at Bitcoin 2025 conference in Las Vegas. This leverages Lightning's off-chain micro-payments to solve Bitcoin's speed and fee issues, potentially bringing crypto payments to millions of businesses. As a major payment processor, Square's move could significantly accelerate mainstream Bitcoin adoption by lowering technical barriers for merchants.
Circle just launched Gateway, an infrastructure that provides instant access to unified USDC balances across different blockchains without traditional bridges or pre-deployed funds. Currently live on Avalanche, Base, and Ethereum testnets, it promises sub-500ms cross-chain access while staying non-custodial. Circle plans mainnet rollout soon with support for more networks on the roadmap. This tackles major DeFi pain points by letting users manage liquidity from a single integration, boosting capital efficiency and reducing cross-chain risks while advancing Web3 interoperability.
Goldman Sachs and BNY Mellon just launched a tokenized money market fund using Goldman's blockchain platform, with BNY Mellon ($53 trillion under management) handling custody and token operations. BlackRock and Fidelity are already participating as investors in this institutional-grade product. While the tokenized Treasury market has tripled to $7 billion this year, it's still tiny compared to the $7 trillion total money market space. This partnership signals major institutional adoption of blockchain tech and could dramatically expand tokenized asset credibility and liquidity management efficiency.
JPMorgan Chase is planning to launch crypto-backed dollar loans by 2025, accepting Bitcoin and Ethereum as collateral after already allowing loans against Bitcoin ETFs. The $36.5 billion crypto lending market is currently dominated by Tether, Galaxy Digital, and Ledn at rates above 12.5%, but JPMorgan's entry could drive rates down significantly. This marks a major shift for CEO Jamie Dimon, previously a Bitcoin skeptic, reflecting improved regulatory conditions and institutional demand. The move could prompt other major banks to follow suit, accelerating crypto's integration with traditional finance and offering more competitive loan products globally.
Capital Moves
Figma is going public with a $1.03 billion auction-style IPO, targeting a $13.6 billion valuation after its Adobe acquisition fell through due to regulatory issues. The company plans to sell 37 million shares at $25-$28, using investor limit orders instead of traditional roadshows for more direct market feedback. The real kicker is Figma's S-1 filing reveals "pre-authorized" blockchain common stock capabilities, signaling potential tokenized equity down the line. This auction approach could avoid typical IPO underpricing while the tokenization angle hints at broader equity liquidity through on-chain settlement and fractionalized trading.
Regulation & Compliance
Anchorage Digital will issue Ethena Labs' USDtb stablecoin domestically, making it the first GENIUS Act-compliant stablecoin in the U.S. USDtb maintains its $1 peg through BlackRock's BUIDL and crypto collateral rather than traditional reserves, and has already locked $1.45 billion since its offshore December launch. Anchorage will provide full infrastructure for minting, redemption, and compliant distribution under federal regulatory framework. This positions Anchorage to compete directly with Circle, PayPal, and traditional banks like JPMorgan in the race to deliver compliant, yield-generating digital dollars.
Despite the GENIUS Act and House-approved CLARITY Act, the IRS maintains its 2014 stance: crypto remains "intangible property" for tax purposes. This means no wash sale protections like securities get, and no Section 1256 commodity benefits (except Bitcoin futures with their 60/40 split). Traders can still harvest losses more flexibly, but can't access mark-to-market accounting or the 20% QBI deduction. Even Bitcoin ETF holders get taxed as if they own the underlying asset directly.
Polymarket acquired CFTC-licensed exchange QCEX and its clearing house for $112 million, providing a legal pathway to re-enter the U.S. market after operating offshore. The platform's political prediction markets have already generated massive liquidity, often surpassing traditional derivatives platforms during election cycles. Polymarket is also considering launching its own stablecoin to capture interest income from user funds and boost profitability. This compliance-first approach positions prediction markets to evolve from niche tools into mainstream financial infrastructure, especially with a potentially crypto-friendly regulatory environment ahead.
Gauntlet has proposed an on-chain regulatory framework for DeFi that acknowledges the fundamental differences between self-custodial, permissionless protocols and traditional finance. Drawing from their $1.3 billion asset management experience, they focus on three areas: disclosure requirements, accountability based on direct control, and compliance standards for non-intermediated systems. This comes as U.S. crypto regulation gains momentum with the GENIUS Act and potential SEC "innovation exemptions." Smart regulation could boost institutional adoption while preserving DeFi's core advantages like lower costs and universal access.
Tether CEO Paolo Ardoino confirmed that U.S. market entry plans are "well underway", with institutional solutions expected in coming months following Trump's signing of the GENIUS Act stablecoin framework. The company previously hinted at launching a US-native institutional stablecoin separate from its $162 billion USDT, focusing on faster settlement services. Tether faces competition from traditional finance giants like JPMorgan but emphasizes its superior technology and market knowledge. The world's largest stablecoin issuer is working toward full audits to boost U.S. compliance while maintaining its private status, unlike competitor Circle's public approach.
Hong Kong's monetary authority will unveil stablecoin issuer rules next week, but HKMA Chief Eddie Yue is already warning against market "over-exuberance" as publicly listed companies see stock surges just from announcing stablecoin exploration plans. The regulator plans to issue only a handful of licenses initially and stressed that short-term profits remain uncertain due to phased development and resource demands. This signals Hong Kong's cautious, conservative approach to crypto regulation — prioritizing stability over hype. The strict licensing framework provides clear guidance that investors should assess company fundamentals rather than chase speculative trends.
Five major banking associations are pushing back against crypto firms' trust bank charter applications, claiming Circle, Fidelity Digital Assets, Protego Trust, and Ripple haven't disclosed enough details — with up to 90% of documents redacted. The banks argue these applications are a "backdoor" attempt to become national banks and want the OCC to delay approvals until full business plans are public. This represents a clear effort by traditional finance to block crypto's entry into regulated banking. The OCC's decision will directly shape how major stablecoin issuers can compete and expand within the U.S. financial system.
Tether just helped U.S. authorities freeze $1.6 million in USDT tied to terror financing through Gaza's BuyCash network, part of a larger $2 million DOJ forfeiture case. The company has now frozen over $2.9 billion in illicit USDT globally, working with 275+ law enforcement agencies across 59 jurisdictions. This showcases blockchain's transparency advantage over traditional finance — transactions can be traced, frozen, and recovered in real-time. Tether's proactive compliance approach strengthens both its regulatory standing and the broader legitimacy of stablecoins.
Final Takeaway
The stablecoin ecosystem is no longer a parallel financial experiment — it's actively dismantling and rebuilding the core architecture of global finance. With $265 billion in market cap and regulatory frameworks like the GENIUS Act providing legitimacy, we're witnessing the real-time reconstruction of money itself.
Traditional banks face an existential choice: modularize and integrate, or watch as companies like PayPal build entirely new financial stacks that bypass them completely. The CLARITY Act debate reveals this isn't just about regulation — it's about fundamentally different visions of what finance should be: controlled and intermediated, or permissionless and composable.
As value shifts from scarcity and fees to velocity and network effects, the winners won't be those who control the rails, but those who enable the fastest, most frictionless capital flows. PayPal World's 2 billion user reach and integration of AI agent payments shows the future: finance as invisible infrastructure, not gatekept service.
For builders and investors, the message is clear: the next decade of finance won't be built in bank towers but in code repositories. The question isn't whether stablecoins will transform finance, it's whether you'll be part of building what comes next.
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