As the stablecoin competition is heating up with looming regulation

As the stablecoin competition is heating up with looming regulation in the U.S., traditional finance institutions are taking notice—largely out of fear of losing out

Traditional finance institutions are massively interested in entering the stablecoin space, largely driven by fear of being left behind by the burgeoning digital dollar movement, according to Ben Reynolds, managing director of stablecoins at BitGo.

Speaking at Consensus 2025 in Toronto, Reynolds said that since BitGo launched its stablecoin-as-a-service offering earlier this year, there’s been “incredible inbound” interest from both U.S. and foreign banks looking to tokenize deposits or issue stablecoins.

A handful of yield-bearing stablecoins and tokenized money market funds have seen rapid growth in recent months, though they still make up only a fraction of the $230 billion stablecoin market.

Sam Broner, partner at a16z, said that while yield-bearing stablecoins are a promising market segment, the primary use case for stablecoins is still in payments and transactions, where users don't really care about yields. Still, a near-term killer use case could be “collateral mobility”—the ability to instantly move money to meet obligations across different platforms.

"You can’t do a lot of things with a share of a money market fund," Broner said. “It’s got lock-up periods, business-hour settlement, and contracts that have to be manually reviewed. Crypto gives you programmatic, permissionless flexibility.”

Yield-bearing stablecoins could also be attractive for institutions, said Matt Kunke, crypto product strategist at BlackRock. "If you're a DAO, protocol, or market maker, moving between crypto holdings on an exchange and your brokerage account is slow and full of friction," he said. "Stablecoins that carry yield just reduce that drag.”

However, Kunke said that regulatory distinctions will shape the market. “A tokenized Treasury fund is a security, and an actual stablecoin is not,” he explained. “They deserve fundamentally different markets."

Joseph Saldana, chief financial officer of the Wyoming Stable Token Commission, pointed out that yield–generating tokens have the power to broaden investors' access compared to mutual funds that often have minimum limits of investment that "lock out a lot of people."

"We want to service the underbanked and give broader access to instruments the rest of us enjoy every day," Saldana said.