Tether: The $500 Billion Stablecoin Behemoth

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Introduction

Welcome to the Tokenized newsletter, brought to you by the creators of the Tokenized Podcast Simon Taylor of Fintech Brainfood, Pet Berisha of Sporting Crypto, and Shwetabh Sameer of Molten Ventures.

We are the newsletter for institutions that need help preparing for a Tokenized future.

We run through the headlines every week, what it means for you and a market readout. Always with an institutional, business-focused perspective. 

Join us every week as we meet your Tokenization needs.

Simon’s Market Readout 💬 

The original sin of the internet was that it had no native payments capability.

When you go online today, HTTP gives you all kinds of response codes - 404 when a page isn't found, 502 for bad gateways, or 403 for forbidden access. But HTTP 402 was always designed to be the response code for payments. It was supposed to say, in a machine-readable way, that accessing this URL requires payment. It never got implemented.

Instead, PayPal came along and made payments work online on top of existing card networks. But if you go all the way back to the original browsers, that wasn't the original intent.

What's changed? Coinbase and Cloudflare just announced the x402 Foundation - a new payment system that is internet native, designed for machines. It embeds payments directly into web interactions and enables any AI agent, API, or app to transact value as easily as they exchange data.

Here's why this matters for institutions:

1. The infrastructure timing is perfect. We finally have regulatory clarity through the GENIUS Act, mature stablecoin rails, and now the protocol layer being built by serious infrastructure players. Cloudflare sees about 20% of all internet traffic - they're incredibly well-placed to ensure that anybody accessing content can pay for that content through an HTTP request.

2. The agentic economy needs native payment rails. This enables pay-per-use APIs, access to AI models per request, premium content without subscriptions, and agents paying each other with MCP-style workflows. When Google announced their agent-to-payment (AP2) protocol, x402 was a big part of that announcement (A2A x402 Extension).

3. Stablecoins become the obvious settlement layer. Traditional payment rails would get expensive very quickly for micro-transactions. But imagine if web pages could only be viewed if a micro-payment was made - baked into the internet itself. That's where our friend stablecoins come in.

What we're witnessing is an incredible amount of work to develop new open protocols for the agentic era. Adoption may be years off, but the momentum behind x402 as a standard is undeniable.

The internet is about to get its missing payments layer. You should absolutely be paying more attention to this.

Stories You Can't Miss 📰

🚀 Tether Seeks $500 Billion Valuation: The Stablecoin Giant's Next Power Play

Tether Holdings is pursuing one of the largest private fundraising rounds in history, seeking $15-20 billion for ~3% equity that could value the stablecoin giant at $500 billion. This follows their recent USAT launch and positions the move as the next phase of their US market expansion strategy.

Key Points:

• Astronomical valuation target: The $500 billion figure would place Tether alongside OpenAI and SpaceX as one of the world's most valuable private companies, despite Circle's public market cap sitting at $30-33 billion

• Profit machine validation: Tether generated $4.9 billion profit in Q2 2025 alone, bringing H1 2025 earnings to $5.7 billion. For comparison, Goldman Sachs did $3.7 billion quarterly profit in Q2

• Mixed messaging emerges: CEO Paolo Ardoino confirmed fundraising talks on social media, while conference reports suggested USAT CEO Bo Hines indicated "no plans to raise money" during Seoul remarks, highlighting some mixed messaging

• Cantor Fitzgerald's golden ticket: The investment firm advising the deal holds a 5% Tether stake that would balloon from reported valuation of $600 million to $25 billion at the target valuation, with former CEO Howard Lutnick now serving as Commerce Secretary under Trump

• Market dominance monetization: With $172.8 billion in USDT circulation representing ~58% of the global stablecoin market, Tether is essentially monetizing its position as the world's largest private dollar issuer

The Tokenized Take:

This fundraising represents the commoditization of dollar issuance itself. When a private company can achieve a $500 billion valuation by essentially digitizing Treasury bills and collecting the spread, we've entered uncharted territory where currency issuance becomes venture capital.

The timing strategically capitalizes on multiple converging factors. Circle's successful IPO established public market benchmarks for stablecoin valuations, while the GENIUS Act created regulatory pathways that reduce institutional risk concerns. Tether's USAT launch provides the compliance narrative that sophisticated investors require, even as USDT continues capturing global flows outside US regulatory reach.

But the valuation mathematics reveal aggressive growth expectations. At 37-44x trailing annual profits, Tether is being priced less like a utility and more like a premium payments network with real optionality. That signals investors may be underwriting durable distribution, network effects and new product lanes beyond pure reserve spread, while accepting the trade-offs of rate sensitivity and mark-to-market volatility. 

Read the Hines ‘no raise’ line and Ardoino’s fundraising nod as timing, not turmoil. Tether is speaking to two rooms at once: global markets that prize scale and a US lane that prizes caution. The split signals likely come down to when and how a deal happens, not whether. The real test is execution: tightening governance and disclosures, ring-fencing a US product, and doing it without denting the global liquidity that makes Tether valuable while building the domestic credibility it now needs.

For institutional decision-makers, this changes the competitive landscape as well. Circle's "regulatory-first" positioning faces Tether's "scale-first" approach backed by unprecedented capital resources. The question becomes whether compliance advantages can compete against network effects when the dominant player could have $20 billion to deploy across infrastructure, partnerships and market development.

🏛️ SEC Approves Generic Crypto ETP Standards

The Securities and Exchange Commission approved generic listing standards for spot crypto exchange-traded products on Wednesday, streamlining the pathway for new digital asset ETPs to reach public markets while maintaining surveillance and eligibility requirements.

Key Points:

• Streamlined Process: Exchanges can list qualifying products without a separate individual assessment. This will reduce friction and time-to-market for spot crypto ETPs that meet the generic standards

• Broader Asset Coverage: The framework could support products referencing additional large-cap crypto assets that satisfy surveillance and market-quality tests, beyond the current Bitcoin and Ethereum offerings

• Market Expectations: Analysts predict a surge in new crypto ETF launches following the approval, but exact timing depends on exchange procedures and whether products meet the generic standards

• Eligibility Conditions: Products must still satisfy surveillance-sharing agreements and market quality requirements. So, faster listing doesn't eliminate compliance hurdles

• Demand Reality Check: Industry observers caution that regulatory approval alone won't drive demand. Product success still depends on institutional and retail investor appetite

The Tokenized Take:

This approval certainly removes a procedural bottleneck, but it doesn't solve the fundamental challenge of crypto ETF adoption: proving sustained institutional demand beyond Bitcoin and Ethereum.

The streamlined standards will likely lead to a wave of new product launches - Solana, XRP, and other major crypto ETFs are already in various stages of preparation. But regulatory approval and market success are different things entirely.

For institutional investors, this creates both opportunity and complexity. The expanded menu of crypto ETFs provides more precise exposure options, which portfolio managers often prefer over broad-basket approaches. However, it also means more due diligence on underlying assets, liquidity profiles, and correlation dynamics.

The real test comes with trading volumes and fee compression. As more crypto ETPs compete for the same institutional capital, we'll likely see pressure on expense ratios and minimum viable scale requirements. Early movers might capture market share, but sustained success requires demonstrating that institutions actually want exposure to these assets through regulated vehicles.

The approval signals regulatory maturation, but the market will ultimately determine which digital assets merit institutional allocation through ETF structures.

🏛️ DBS, Franklin Templeton and Ripple Outline Institutional Tokenized Money Market Fund Trading & Lending (MoU)

Southeast Asia's largest bank (DBS), Franklin Templeton, and Ripple signed an MoU to pilot trading and lending solutions for accredited and institutional investors that combine Franklin Templeton's sgBENJI tokenized money market fund units with RLUSD (Ripple's USD stablecoin). sgBENJI will be issued on the XRP Ledger and listed on DBS Digital Exchange alongside RLUSD, enabling eligible investors to trade between the two instruments on a regulated venue.

Key Points:

• Tokenized MMF Access: Investors can acquire Franklin Templeton's sgBENJI token on DBS Digital Exchange (DDEx) using Ripple's RLUSD stablecoin, creating the first repo trading solution for tokenized money market funds (MMFs)

• Collateral Pathway (Exploratory): DBS will explore allowing sgBENJI as collateral for credit via bank-run repos or on third-party platforms where DBS acts as collateral agent/custodian

• RLUSD Integration: The initiative uses RLUSD, which launched in December 2024 and is circulating across multiple venues in 2025

• XRPL Infrastructure: sgBENJI issuance occurs on the XRP Ledger; venue trading happens on DBS Digital Exchange with on-chain settlement and transfer

• Investor Scope: Targeted at accredited and institutional investors, initially via DBS' regulated platform in Singapore

The Tokenized Take:

This represents a useful next step in mainstream institutional adoption of blockchain-based financial products: DBS brings a regulated market venue and collateral operations expertise. Franklin Templeton extends its tokenized MMF capabilities onto XRPL. Ripple provides RLUSD as a settlement asset that can pair with yield-bearing tokens.

The potentially interesting piece is DBS' exploration of using tokenized MMFs as collateral. If that progresses into production, it will bridge traditional finance with DeFi mechanics while maintaining institutional compliance standards. This could establish a template for how other major banks and asset managers integrate blockchain technology into their core offerings.

But execution risk remains significant. First, aligning custody, valuation, and margin models for daily collateral operations isn't trivial. Second, ensuring XRPL integration satisfies operations and risk teams requires careful implementation. Third, demonstrating repeat institutional demand for these pairs on DDEx (especially through different rate and volatility environments) remains unproven.

The near-term objective is modest: prove stable settlement and clean operational cycles with a small set of participants before any broader scale-up. It's progress, but the hard work of institutional adoption is just beginning.

🚀 PayPal Ventures Backs Stable Blockchain to Expand PYUSD Reach

PayPal Ventures has invested in Stable, a new Layer 1 blockchain network designed for stablecoin-based payments, while enabling permissionless use of PayPal USD (PYUSD) on the platform as part of the payment giant's multi-chain expansion strategy. 

Key Points:

• Cross-chain posture: Stable says it will use LayerZero to make PYUSD accessible across supported networks with fewer bridging steps

• Bitfinex/Tether links: Stable announced its $28 mil seed round in July this year, with investors including Bitfinex. The chain has positioned USDT/USDT-linked tokens as native gas, creating a unique coexistence dynamic with PYUSD

• Commerce orientation: With PYUSD live on Stablechain, the teams say they're targeting emerging-market payments and P2P/commerce use cases. But we are yet to see performance metrics beyond vendor statements

• Issuer clarity: PYUSD remains a Paxos-issued stablecoin; the Stable integration is about distribution and rails, not a change in issuance model

The Tokenized Take:

This looks less like PayPal choosing "a chain" and more like a smart distribution strategy: broaden where PYUSD can settle without the operational burden of running their own L1. It fits the industry pattern we've been tracking (Circle's Arc and Stripe's Tempo), but takes a partner-first approach rather than building new infrastructure from scratch.

The Bitfinex/Tether adjacency will cut both ways. There may be liquidity and on-ramp advantages from operating alongside USDT. But institutions will have risk-governance questions, given USDT's role as native gas on Stable.

For enterprise users, the practical upside is optionality. More settlement venues could mean lower latency and fees in specific corridors. But the critical question remains: can these payments-specialized L1s deliver materially better reliability, compliance tooling, and total costs than established networks where treasury teams are already integrated?

We will need to see throughput, uptime, and operational data from live merchant flows, in order to give us more confidence whether there will be a decisive shift in where PYUSD volume will concentrate. PayPal is hedging their infrastructure bets, which makes sense. But execution at scale will determine whether specialized payment chains deliver on their theoretical advantages. 

💸 Plasma Launches Stablecoin-Native Neobank for Global South Access

Plasma has launched Plasma One, marketed as the first neobank built entirely around stablecoins, targeting emerging markets where dollar access is in high demand with integrated spending, saving, and earning in digital dollars.

Key Points:

• Emerging Market Focus: Targets users in regions where traditional dollar access is limited, offering stablecoin-backed cards, zero-fee USDT transfers via Plasma's dashboard (initially limited to Plasma's own products), and rapid onboarding

• Yield Claims: Advertises up to 4% cashback on spending and yields above 10% on eligible balances, with card usable in 150+ countries

• Mainnet Timeline: Launches ahead of Plasma's mainnet beta on September 25, with the platform integrating payments, savings, and transfers in a single interface

• Backing: Supported by Peter Thiel and is Tether-linked/Bitfinex-backed per reporting, potentially providing liquidity and infrastructure advantages

• Problem Statement: Addresses fragmented interfaces, reliance on centralized exchanges, and poor localization that have hampered stablecoin adoption despite hundreds of millions already using them for necessity

The Tokenized Take:

The concept makes sense in theory - emerging markets have demonstrated real demand for dollar-denominated digital assets, and current stablecoin access often requires navigating complex crypto exchanges. A banking-like interface could lower adoption barriers significantly.

However, we need to acknowledge the execution challenges here. Operating card services across 150+ countries means navigating diverse regulatory environments, banking partnerships, and compliance requirements. The advertised yields and cashback rates will also need sustainable economic models, especially in volatile rate environments.

The Tether/Bitfinex backing provides potential infrastructure advantages but also regulatory perception challenges in certain jurisdictions. For users in countries with restrictive financial policies, this could be either an advantage or a compliance risk.

The real test will be proving product-market fit beyond early adopters. Can Plasma demonstrate that users actually prefer stablecoin banking over existing solutions? Early metrics around user acquisition, transaction volumes, and retention rates will answer these questions.

For institutional observers, this represents another experiment in bringing crypto infrastructure to mainstream users. The Global South focus is pragmatic. These markets often have the strongest use cases for dollar-denominated digital assets. But building compliant, scalable financial services across emerging markets remains extraordinarily difficult, regardless of the underlying technology.

🏛️ BitGo Files for Public Markets Debut as Crypto Custody Demand Surges

The institutional crypto custody giant has filed for a New York Stock Exchange listing under ticker BTGO, adding another established infrastructure provider to the public-market pipeline.

Key Points:

• Revenue Scale: Generated $4.2 billion in revenue during the first half of 2025 (vs H1 2024: $1.12 billion), demonstrating significant institutional demand for crypto custody services

• Asset Base: Currently holds $90 billion in cryptocurrency assets on its platform, positioning it as one of the largest institutional custodians globally

• NYSE Listing: Plans to list Class A common stock under ticker BTGO, giving traditional investors direct exposure to crypto infrastructure

• Profitability Pressure: Net income declined to $12.6 million in H1 2025 from $30.9 million in the same period last year, reflecting investment in scale and competitive pricing

• Market Timing: Filing comes as crypto's total market cap sits around $4 trillion, showing early signs of market maturation

The Tokenized Take:

This filing signals that institutional crypto custody is steadily becoming core financial infrastructure rather than a side bet. BitGo's $4.2 billion revenue run rate puts it among significant fintech companies, but the profit squeeze tells an important story.

That margin compression likely reflects heavier infrastructure spending and sharper pricing as larger peers and traditional banks expand their digital asset services. It's a natural growing pain, but one worth watching.

The regulatory backdrop helps here. The GENIUS Act and SEC's Project Crypto reduce uncertainty around custody rules and market structure. These are useful tailwinds for going public. But policy clarity doesn't eliminate execution risk.

So the strategic question becomes: Can public-company capital translate into lasting advantages? Think broader coverage, deeper product suite, and stronger regulated distribution channels. BitGo will be competing with Coinbase, Fidelity, State Street and major banks that are all deepening their custody capabilities.

📰 Some More News:

🏦 Tokenization, Stablecoins & Finance

• Coinbase and Cloudflare Will Launch the x402 Foundation (Read more here)

• HSBC debuts cross-border tokenized deposit offering with first U.S. dollar transaction between Hong Kong and Singapore for Ant International (Read more here)

• Kaia and Line launch stablecoin super app targeting Asian markets with integrated payments and DeFi services (Read more here)

• Largest Solana treasury Forward Industries to tokenize stock using Superstate's Opening Bell platform (Read more here)

• Tokenized real-world assets surpass $30 billion amid growing institutional adoption, with private credit leading at $17 billion (Read more here)

• Polkadot's largest DeFi protocol Hydration launches HOLLAR stablecoin backed by DOT, ETH, and Bitcoin (Read more here)

• Ebanx makes stablecoin play and expands into Philippines with AI-driven cross-border payment tools (Read more here)

• Ripple advances institutional DeFi with lending and privacy tools including zero-knowledge proofs for XRPL (Read more here)

• Nubank plans stablecoin integration for credit card transactions, expanding digital asset payment options (Read more here)

🤑 Funding and M&A

• Zerohash Raises $104 Million for ‘AWS of on-Chain Infrastructure’ (Read more here)

• Shield raises $5 million to grow neobank for exporters, processing $150 million in cross-border USDT payments (Read more here)

• AgriFORCE relaunches as AVAX One with $550 million Avalanche treasury plan, backed by Anthony Scaramucci (Read more here)

• Tom Lee's BitMine holds over 2% of ETH supply and raises $365 million offering at 14% premium to market price (Read more here)

• Strive acquires Semler Scientific in all-stock Bitcoin-focused merger, adding 10,900 BTC to treasury (Read more here)

• CZ's family office YZi Labs deepens stake in Ethena as USDe stablecoin supply tops $13 billion (Read more here)

• Cannabis firm Flora Growth launches $401 million treasury backing Zero Gravity AI blockchain (Read more here)

💼 Government & Policy

• US Treasury opens second round of comments on GENIUS Act implementation, seeking input on consumer protections (Read more here)

• UAE announces 2027 rollout of automatic crypto tax reporting system under CARF framework (Read more here)

• Chinese regulators crack down on real-world asset tokenization businesses in Hong Kong (Read more here)

• Toyota, BYD, and Yamaha now accept USDT payments in Bolivia following country's crypto framework establishment (Read more here)

Tweet of the Week 🐤 

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