How Stablecoins are Supplanting Traditional Banks — Insights from Gem Wallet

The market capitalization of stablecoins surpassed $250 billion at the beginning of June 2025. The leading stablecoin is Tether (USDT), boasting a market cap of over $153 billion, followed by Circle’s USDC at $61 billion.

Initially, stablecoins like Tether (USDT) emerged to address the needs of cryptocurrency traders for realizing profits from Bitcoin and altcoin trading, as well as for swiftly transferring capital between exchanges for arbitrage operations. They served as a «digital dollar» within the crypto market, particularly at a time when banks were reluctant to collaborate with cryptocurrency exchanges and the direct conversion of crypto to fiat was limited.

In 2024, a substantial number of transactions involving stablecoins were still initiated by bots and large traders. A study by Visa and Allium Labs indicated that out of $2.2 trillion in total transactions, only $149 million stemmed from «organic payment activities.»

*“This indicates that stablecoins are still in the early stages of their evolution as a payment instrument,”* stated Pranav Sud, the regional manager at Airwallex.

However, the advantages of stablecoins are becoming increasingly evident to a broader audience, driven by factors such as the significant growth of the decentralized finance (DeFi) sector in 2020.

Tokens like DAI, USDC, and USDT have become the «fuel» for DeFi protocols, utilized for lending, borrowing, providing liquidity, and earning yields. This symbiotic relationship has generated sustained demand for stablecoins and further propelled the growth of their market capitalization.

*“By 2025, stablecoins are being used more actively for everyday financial transactions. Companies like Meta are considering their integration into their platforms, and the number of individuals using USDT and USDC exclusively for business and personal transactions within the crypto industry is on the rise,”* asserts the Gem Wallet team.

Over the past five years, stablecoins have shifted from being a «fiat substitute» for transferring funds between exchanges and users to offering yields that can outperform traditional bank products, thus providing an alternative investment approach for assets like gold.

*“For instance, while EURT serves as a straightforward euro equivalent, Ondo US Dollar Yield (USDY) operates as a more complex financial instrument featuring a built-in mechanism for achieving over 4% annual returns,”* Gem Wallet representatives explain.

Additionally, one of the attractive features of stablecoins is the potential to earn passive income through DeFi platforms such as decentralized exchanges (DEX) and lending projects. In May, lending protocols surpassed DEX in terms of transaction volume.

Henrik Andersson, founder of Apollo Capital, attributes this trend to lending becoming the only stable source of income in DeFi. According to him, the appeal of DEX liquidity pools is diminishing due to impermanent losses and increasing competition.

The yield from the aforementioned uses of stablecoins often exceeds interest rates on traditional bank deposits.

*“Even basic flexible deposits in USDT on centralized exchanges (CEX) like Binance can yield up to 7% annually,”* notes Gem Wallet.

For comparison, traditional dollar deposits in banks of emerging markets typically offer much lower returns of around 1% or less. In the United States, as of June 2025, the average rate stands at approximately 0.42% APY, though some high-yield savings accounts may reach up to 5% annually. In the CIS countries, rates on dollar deposits may be higher, but they come with local economic and regulatory risks, often requiring specific conditions, such as large sums or longer terms.

*“It’s crucial to understand that the high yields in DeFi are associated with elevated risks, including vulnerabilities of smart contracts and the potential for developer malpractice. The yield difference between stablecoins and bank deposits is not a ‘free lunch,’ but rather a cost of risk.*

Moreover, entry barriers into DeFi are steeper. While opening a bank deposit can be achieved in two clicks, purchasing or swapping stablecoins presents a more complex challenge for novice crypto investors,”* emphasizes the Gem Wallet team.

In addition to fiat-backed stablecoins, there are tokens backed by real-world assets, such as gold. A prominent example is Tether Gold (XAUt), whose market capitalization exceeded $830 million in July.

Each XAUt token represents ownership of one troy ounce of physical gold stored in a vault in Switzerland. The token offers several advantages compared to traditional gold ownership:

*“The appeal of Tether Gold, PAX Gold, and other similar tokens lies not just in the abstract notion of ‘gold on the blockchain,’ but in their ability to solve real-world issues associated with precious metal ownership. They democratize access to this asset class, making it more convenient, liquid, and accessible to everyone,”* states Gem Wallet.

Stablecoins do not simply present an alternative to bank deposits but offer a fundamentally different approach to financial management. Users can choose their level of risk and potential return, actively engaging in DeFi or opting for more conservative saving methods like XAUt.

However, this approach necessitates greater financial literacy and competence. Managing digital assets requires selecting a reliable cryptocurrency wallet that ensures both security and convenience.

All crypto wallets can be divided into two types: custodial and non-custodial. The choice of how to store stablecoins directly impacts the level of control over assets.

In a custodial wallet, a third party (such as a cryptocurrency exchange) stores and manages the private keys on behalf of the user, trusting that entity with the security of their crypto assets, much as one trusts a bank with their fiat money.

Advantages of custodial wallets include:

Disadvantages:

In a non-custodial wallet, the private keys are solely controlled by the user, who bears full responsibility for the security of their assets.

*“The term ‘self-custody’ emphasizes the ideology of these wallets: ‘Only you are responsible for your assets.’ In the Russian-speaking space, the term non-custodial has gained popularity but does not highlight the ownership aspect as much,”* Gem Wallet points out.

Advantages of non-custodial wallets include:

Disadvantages:

Examples of non-custodial wallets include Gem Wallet, MetaMask, as well as hardware wallets like Ledger and Trezor.

*“The choice between a custodial and non-custodial wallet depends on the user’s objectives, and there is no one-size-fits-all solution. Custodial wallets and CEX accounts are perfect for P2P trading, microtransactions, and participation in exchange promotions. However, as experience and capital grow, a non-custodial wallet becomes preferable, providing enhanced security and access to new assets.*

For instance, the token TRUMP appeared on DEX before hitting CEX, enabling users of non-custodial wallets to purchase it at a better price,”* comments the Gem Wallet team.

The Gem Wallet team offers the following recommendations:

Gem Wallet is a wallet for Android and iOS designed for everyday use. It supports over 60 blockchains and thousands of tokens, including popular stablecoins. Early next year, developers plan to add support for Ledger.

Key security principles embedded in Gem Wallet include:

Since 2014, stablecoins have evolved into multifunctional financial instruments that can offer real alternatives to traditional banking services. Their market capitalization reflects significant adoption and trust from both companies and everyday users.

As the popularity of stablecoins grows, the safe storage of these assets becomes increasingly important. The decision between custodial and non-custodial wallets is crucial for each user, impacting both security and usability of the assets.

Non-custodial wallets like Gem Wallet provide users with complete control over their funds while placing the full responsibility for securing private keys on them.