The stablecoin market has declined sharply by over $10 billion, while transaction volumes hit a record high, influenced by new regulations.
The stablecoin market has seen a notable contraction, with total market capitalization decreasing by over $10 billion since its peak in May to approximately $310 billion, according to DeFiLlama. This marks the most significant monthly drop since the collapse of Terra in May 2022.
In contrast, June 2026 recorded a historic high in adjusted transaction volume, reaching $1.79 trillion, a 63% increase from the previous month.
Capital Shifts and Legislative Impact
A key driver behind the contrasting trends of declining market cap and increasing transaction volumes is the GENIUS Act, implemented in July 2025. This legislation restricts stablecoin issuers from providing interest on payment stablecoins.
David Krause, a finance professor at Marquette University, highlighted that while the prohibition does not eliminate the demand for yield, it redirects investors towards alternative products that can legally offer returns comparable to U.S. Treasury bill rates. Options such as tokenized Treasury bond funds, DeFi lending protocols, and offshore stablecoin issuers are stepping in to fill this gap. Consequently, capital is flowing out of stablecoins, even as their working balances circulate more quickly, resulting in a decline in supply despite record transaction volumes.
USDC's Dominance in a Competitive Landscape
Amid these changes, USDC has emerged as the preferred choice for institutional investors, capturing around 70% of stablecoin transactions in the first half of 2026. By the end of June, USDC's adjusted transfer volume reached $1.21 trillion (about 67.6%), while USDT accounted for $576 billion (around 32%). Despite USDT's lead in market capitalization, USDC's transaction velocity has significantly outpaced it, with stablecoins in Q4 2025 achieving a velocity of 13.56 compared to the dollar's M1 aggregate of 1.65.
This shift in transaction dynamics is reshaping the economics of the cryptocurrency sector. Key changes include:
- Old Business Models Under Pressure: Revenue generated solely from interest on reserves is no longer the main financial driver for stablecoin issuers.
- Emergence of New Revenue Sources: Payment networks, processors, and blockchains that charge transaction fees are becoming the primary revenue generators.
- Corporate Sector Influence: A joint study by McKinsey and Artemis revealed that only about 1% of the movement in 2025 was linked to identifiable real payments, although this figure is significantly higher than in previous years.
Experts have also noted the implications of the prohibition on issuing Central Bank Digital Currencies (CBDCs) by the Federal Reserve, which was discussed in June.
