The Rising Interest in Stablecoins

Stablecoins have long been a cornerstone of the crypto ecosystem, but their rising utility is attracting fresh interest from venture capitalists. The momentum is underscored by Y Combinator's recent Winter 2025 batch request, which spotlighted stablecoins as a category founders should pursue.

Recent funding rounds reflect this growing focus:
– usdx.money, a stablecoin infrastructure project, raised $45 million at a $275 million valuation from investors including NGC Ventures.
– Binance Labs invested in Quine Co., the developer of Perena, a stablecoin protocol on Solana.
– Quantoz Payments, a MiCA-compliant EU stablecoin issuer, raised funding from Tether, Kraken, and Fabric Ventures.

Driving much of the renewed enthusiasm is Stripe's $1.1 billion acquisition of stablecoin payments platform Bridge, the largest deal in crypto's history. The acquisition was "tremendously validating for a lot of people," according to Dan Elitzer, co-founder of crypto VC Nascent. "It was a big exit in a relatively short timeframe. And so, it's very real."

Juan Lopez, general partner at VanEck Ventures, called the Stripe-Bridge deal a "huge validation" and pointed to its ripple effects. Startups like Yellow Card, a licensed on/off-ramp platform in Africa, and Felix Pago, a stablecoin-powered remittance service integrated with WhatsApp, are gaining momentum as they demonstrate stablecoins' utility beyond crypto trading. Lopez predicts that in the next 3–5 years, about 30% of U.S.–Mexico remittance volume (around $20 billion of the annual total) could run on stablecoins.

Will Nuelle, general partner at Galaxy Ventures, noted that non-crypto use cases of stablecoins are set to accelerate. These use cases, like trade finance and payment processing, already account for $200–250 billion annually and are growing 100% year-on-year. Nuelle expects this figure to hit $1 trillion annualized by the end of 2026, representing over 1% of the global cross-border business-to-business (B2B) payments market share.

Kinjal Shah, general partner at Blockchain Capital, called stablecoins a "trillion-dollar opportunity" that will transform payments and fintech. Dana Malman Warren, venture partner at Canaan Partners and former leader at Stripe and PayPal, highlighted stablecoins' potential to solve inefficiencies in cross-border payments, where traditional systems are costly and slow.

On the regulatory front, progress is increasing optimism. Jake Brukhman, founder and managing partner of CoinFund, pointed out that the European Union's Markets in Crypto-Assets (MiCA) regulation and proposed U.S. stablecoin legislation are pivotal developments. He added that crypto-friendly leadership under Donald Trump could further accelerate progress, positioning stablecoins for likely regulatory clarity in the U.S.

The Opportunities

VCs are targeting several categories of stablecoin startups to drive future growth:
– Infrastructure remains a top priority. Brendan Dickinson, general partner at Canaan Partners (a Paxos investor), sees potential in projects offering compliance tools, fraud prevention, and wealth management services.
– Vertical integration is another key area. Nuelle from Galaxy Ventures said companies that own multiple layers of the stablecoin stack will lead the market.
– Bridging traditional finance and crypto is critical. Viktor Bunin emphasized the need for startups that enable businesses to integrate stablecoins seamlessly into existing operations.
– Distribution strategies may determine winners at the application layer. Lopez argued that unique go-to-market strategies will stand out as the infrastructure begins to commoditize.

Lopez added that the stablecoin sector is still in its early days and predicted major developer and consumer platforms will enter as stablecoins gain legal recognition in the U.S.

The Challenges

Despite the growing momentum, stablecoins face significant hurdles:
– Regulatory uncertainty looms large. Elitzer highlighted risks seen during Silicon Valley Bank's collapse, which caused a minor depeg of Circle's USDC stablecoin.
– Reliance on traditional banking infrastructure remains a risk. Bunin pointed to the dependence of stablecoins on traditional systems.
– Compliance demands are intensifying. Nuelle noted that payment businesses must excel in compliance to maintain banking relationships.

Anil Hansjee, general partner at Fabric Ventures, mentioned that stablecoin issuers face steep hurdles as this category becomes increasingly regulated. He suggested that partnering with a Layer 1 or Layer 2 blockchain optimized for processing could enable a self-sovereign banking experience.

To subscribe to the free The Funding newsletter, click here.