The stablecoin market is experiencing its largest decline in four years: capital is flowing into RWA.
For the first time since the collapse of the Terra ecosystem in May 2022, the stablecoin market is experiencing such a large-scale contraction. As of July 28, the total capitalization of this segment has decreased by more than $10 billion from its May peak, settling at around $310 billion. This is the largest monthly decline in four years, signaling fundamental changes in the market structure.
Paradoxically, against the backdrop of falling capitalization, the adjusted transaction volume of stablecoins in June hit an all-time high, reaching $1.79 trillion. The monthly growth was about 63%. Such divergence is a rare phenomenon, indicating a shift in the usage model of these assets.
Where are capital and yield going?
The key catalyst for this divergence was the GENIUS Act, passed in July 2025, which prohibited stablecoin issuers from paying interest income. As finance professor David Krause from Marquette University aptly noted, this ban did not destroy the demand for yield but merely redirected it. Investors seeking a digital dollar with returns close to the US Treasury bill rate simply switched to alternative products.
As a result, major players directed funds into the tokenized real-world assets (RWA) sector. The volume of tokenized US Treasury bond funds grew from $11 billion to $16 billion in just five months. The leader in this segment became Circle's USYC fund, surpassing BlackRock's BUIDL, while a similar product from JPMorgan showed 87% growth in one month. Capital is leaving stablecoins, leaving only working balances for making payments, which explains the increase in velocity of circulation amid falling supply.
USDC's initiative takeover and business model shift
The growth in transaction activity has radically changed the balance of power. The velocity of stablecoin circulation in Q4 2025 reached 13.56, outpacing the US dollar M1 aggregate by nearly eight times. In this race, USDC became the primary tool for institutions: in the first half of 2026, it accounted for about 70% of all transactions. In June, the adjusted transfer volume in USDC was $1.21 trillion (67.6%), while USDC's figure stood at $576 billion (32%).
This dynamic is changing the basic economics of the crypto sector. The old model of issuers earning solely from interest on reserves is becoming a thing of the past. The main revenue stream is shifting to payment networks and blockchains that charge transaction fees. Traditional giants like Visa no longer evaluate the market by asset capitalization, focusing exclusively on clearing volumes. According to data from McKinsey and Artemis, only about 1% of stablecoin movements in 2025 were attributable to identifiable real payments, but this share is thirty times larger than two years ago.
My expert opinion: We are witnessing not a crisis of stablecoins, but their evolution. The market is transitioning from a "savings account" model to a "payment infrastructure" model. This is a more mature and sustainable stage, but it requires participants to adapt to new realities where yield is generated not by issuance, but by transactions.