Banking and Finance Law Daily Wrap Up, FEDERAL RESERVE SYSTEM—Kansas City Fed research finds stablecoins still largely tied to crypto finance, (Apr 16, 2026)

By Suzanne Cosgrove

A review of current stablecoin distribution by function finds payments still constitute only a small part of the stablecoin ecosystem.

While their proponents note that stablecoins—a type of cryptocurrency intended to maintain a stable value relative to other assets, such as the U.S. dollar—can serve multiple functions, the shares of stablecoins used in these different roles are still evolving, according to a recent Payments Systems Research Briefing published by the Federal Reserve Bank of Kansas City.

Stablecoins are distributed across four broad categories in the report: trading assets, payments, transfers, and idle.

Although stablecoins are widely believed to have the potential to operate independently of crypto finance, nearly half of all stablecoins continue to be used in crypto finance, including exchanges, finance, and infrastructure protocols, with CEXs and DEXs playing major roles, the report found.

Slow growth. Payments defined in the traditional sense of business-to-business (B2B), person-to-business (P2B), and so on, have yet to live up to the promise of explosive growth predicted many since the passage of the GENIUS Act in July 2025, and account for less than 1 percent of all stablecoin use, the report found.

“However, the use of stablecoins in payments is undoubtedly growing,” the report stated.

Stablecoins’ other use cases include functioning as trading assets or tools that facilitate the trading of other crypto assets. They provide liquidity to exchanges and decentralized finance (DeFi) protocols, serve as collateral in lending and borrowing applications, act as a safe haven for capital between trades, and facilitate the transfer of value.

The Fed’s report estimates 48.8 percent of all stablecoins are used as trading assets.

Stablecoin’s ecosystem. Citing data from DeFiLlama’s Stablecoins Tracker, the report states the total number of stablecoins in the 2,455 crypto finance-related protocols that DeFiLlama tracks—USDT (Tether), USDC (Circle), USDE (Ethena), and USDS (Sky Dollar)—make up over 90 percent of all stablecoins.

Taken together, these four stablecoins serve as a proxy for the entire stablecoin market, the report stated. According to DeFiLlama data as of November 14, 2025, the total stablecoin market cap was $300.5 billion, with $146.6 billion in stablecoins used in DeFi and other finance protocols.

Trading assets can be further divided into three subcategories: exchanges, finance, and infrastructure. Stablecoins can provide liquidity to exchanges, which are at the center of crypto finance and the overall stablecoin ecosystem. The report suggests the disproportionately large role played by crypto finance in the stablecoin ecosystem implies that the entire ecosystem is sensitive to the rise and fall of the market.

The exchange category includes both centralized exchanges (CEXs), where an intermediary conducts trades and provides other services, and decentralized exchanges (DEXs), where trades and other services are provided through smart contracts with no intermediaries.

Interoperability issues. Exchanges not only provide custody and trading facilities but also financial services and the ability to convert one stablecoin into another, allowing value movement across different blockchains.

According to the report’s estimates, a little more than 5 percent of stablecoins are tied up in the infrastructure of the stablecoin ecosystem, primarily bridges, indicating that interoperability problems exist.

And given the many infrastructure services provided by exchanges, the portion of stablecoins devoted to the machinery needed to move tokens across chains and facilitate stablecoin usage may be understated, the report found.

Methodology. Estimating the distribution of stablecoins across functions in the stablecoin ecosystem “involves some guesswork,” according to Franklin Noll, a lead payments specialist at the Federal Reserve Bank who wrote the report.

He said he used a combination of types and sources of data to present general figures and percentages for the report, many for November 2025. The strongest data are in the trading asset category, from DeFiLlama’s Stablecoins Tracker, specifically its report, “Token Usage – USDT, USDC, USDE, USDS,” Noll wrote.

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