Circle and Tether emerge as key beneficiaries of the neobank boom

The fastest-growing digital banks in emerging markets have a common thread running through their payment rails: stablecoins. And the two companies minting those stablecoins, Circle and Tether, are reaping the rewards of a fintech expansion they didn’t have to build themselves.

While neobanks across Latin America, Africa, and Southeast Asia race to sign up customers with promises of cheap transfers and dollar-denominated accounts, roughly 76% of them remain unprofitable.

The stablecoin layer powering digital banking

Neobanks targeting volatile economies have a compelling pitch: skip the legacy banking system, avoid forex fees that can eat up to 5% of a transaction, and settle payments instantly using blockchain rails. The stablecoins making that possible are overwhelmingly USDC and USDT.

Platforms like Rizon, Altitude, Fuse, Cleva, Plasma One, and Kast have all built their services on top of stablecoin infrastructure. Even Nubank, one of the world’s largest digital banks, has integrated stablecoin functionality. Specialized services like Lipaworld are using stablecoins to facilitate cross-border payments in markets like Kenya where traditional transfer costs remain punishingly high.

Circle’s USDC market cap surged to approximately $75 billion in 2025, representing a 73% year-on-year increase. Tether’s USDT also grew, though at a slower clip, marking the second consecutive year where USDC outpaced its larger rival in percentage terms. Together, the two dominate a fiat-backed stablecoin market that expanded roughly 46% year-on-year in 2025.

Neobanks have a revenue problem

The neobanks themselves are in a trickier position. Most rely on interchange fees, the small cut a card issuer takes when a customer swipes, which typically land between 1% and 2% per transaction. That sounds fine until you factor in customer acquisition costs, compliance overhead, and the regulatory friction of operating across multiple jurisdictions.

With three out of four neobanks running at a loss, the sector resembles the early ride-sharing era: lots of growth, lots of funding, not a lot of profit.

Some platforms are pivoting toward revenue streams with better unit economics. Net interest income, subscription tiers, and lending products are all on the table. But none of these approaches have fully resolved the fundamental challenge of making a digital bank profitable in markets where the average customer generates modest revenue.

Regulatory moats are forming

Both stablecoin issuers have been making regulatory moves that could lock in their advantages for years. Circle received approval for an OCC national trust bank charter, a first for any major stablecoin issuer. Tether, historically more cautious about US regulatory engagement, has taken its own steps by planning to launch a US-regulated stablecoin called USAT through Anchorage Digital Bank.

The broader stablecoin market’s 46% growth rate in 2025 suggests this isn’t a temporary trend.

What this means for the market

The divergence between USDC and USDT growth rates is also worth watching. USDC’s faster expansion, driven partly by Circle’s regulatory positioning and fintech partnerships, could eventually challenge USDT’s overall market cap lead.

The neobank sector’s profitability struggles also introduce a layer of risk to this story. If a wave of neobank failures hits emerging markets, it could temporarily reduce stablecoin demand in those corridors. But given the structural advantages stablecoins offer over traditional forex channels, including speed, cost savings of up to 5%, and 24/7 settlement, the underlying demand driver seems durable even if individual platforms don’t survive.

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