Table of Contents
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Key highlights:
- The stablecoin market has reached institutional scale, with growing use across on-chain payments, settlements, DeFi, and tokenized finance.
- Stable-value assets are becoming more diverse, expanding beyond traditional dollar-pegged stablecoins to include tokenized deposits, yield-bearing products, and non-USD digital assets.
- This evolution is creating demand for new exchange infrastructure, capable of supporting diverse pricing models, liquidity mechanisms, and regulated on-chain markets.
- Data from five Algebra-powered DEXs showed that stablecoins already account for over 75% of decentralized trading volume, highlighting their central role in on-chain liquidity.
- The next phase of stablecoin market development will be defined by the efficiency of the infrastructure supporting their real-world use.
For years now, stablecoins were mainly associated with crypto trading, serving as a way to more easily move capital between exchanges or reduce exposure to market volatility without leaving the blockchain space. But that role has been gradually changing, and today, stablecoins are increasingly looked upon as a potential settlement layer for a much broader on-chain economy.
The use cases for these assets are being explored not just in payments or DeFi, but also in tokenized real-world assets (RWAs) and even foreign exchange transactions. Traditional financial institutions are bringing more financial products on-chain, creating demand for infrastructure capable of supporting far more than simple dollar- or euro-pegged assets.
Stablecoin market capitalization (DefiLlama chart)
The stablecoin market itself reflects this shift. Its total market capitalization has already surpassed $300 billion by the end of 2025, while on-chain transaction volumes have reached almost $9 trillion in H1 2026 alone.
At the same time, the rapid expansion of tokenized assets illustrates how stablecoins are becoming closely tied to broader financial infrastructure. Between Q1 2025-Q1 2026, the market capitalization of tokenized RWAs has more than tripled to $19.3 billion, with tokenized Treasuries accounting for most of that growth.
As a result, we now see a market that comes closer every day to resembling traditional financial infrastructure.
Stablecoins Are No Longer One Asset Class
It should also be pointed out that while USDT and USDC remain the dominant stablecoins by market capitalization and trading activity, the broader category of digital assets with stable values is becoming much more diverse.
Banks have started introducing tokenized deposits that integrate directly with existing banking infrastructure, with Wells Fargo being the most recent example of this trend. At the same time, major asset managers – J.P Morgan and BlackRock, for example – are launching tokenized money market funds and Treasury-backed products that combine price stability with yield generation.
Institutions are also building the infrastructure needed to support tokenized securities, funds, and other regulated financial instruments. Firms like Ondo Finance and Securitize have been steadily expanding the availability of tokenized equities, ETFs, and Treasuries, while tokenized stocks and ETFs have become one of the fastest-growing segments of the RWA market.
All of this means that "stable-value assets" no longer behave in the same way as they used to. Traditional dollar-pegged stablecoins typically remain close to a constant value. Yield-bearing Treasury products, on the other hand, gradually increase in value as interest accrues. At the same time, tokenized deposits operate within existing banking frameworks, while non-USD stablecoins continuously move according to foreign exchange rates rather than maintaining a permanent 1:1 relationship with the US dollar.
As all these products continue to develop, treating them as a single asset class becomes increasingly difficult. Infrastructure originally designed around assets permanently trading at one dollar cannot effectively support instruments whose prices follow net asset values (NAV), accumulate yield over time, or reflect continuously changing exchange rates.
In other words, the very term "stablecoin market" is now expanding to adopt a much broader definition.
The Infrastructure Challenge
Seeing as the adoption of stable-value assets is progressing at institutional level, it raises a crucial question: has market infrastructure evolved sufficiently enough to support this transformation?
As tokenized Treasuries, funds, equities, and other real-world assets continue moving on-chain, they all require liquid settlement assets, and in many cases, that role is fulfilled by stablecoins. However, supporting these markets requires more than simply matching buyers and sellers.
Liquidity mechanisms need to be able to accommodate assets with different pricing models. Exchanges must support instruments whose values change with NAV or FX rates rather than remaining fixed around the same one-dollar mark. Liquidity providers also require protection during periods of increased volatility, while the transition of regulated assets on-chain introduces additional operational requirements: identity verification, trading-hour restrictions, emergency controls, etc.
As digital assets mature, attention is shifting away from simply tokenizing financial products and toward building the infrastructure that allows them to function efficiently in real markets. Tokenized money market funds, for example, are being developed not only as investment products but also as collateral, settlement assets, and components of broader liquidity management systems.
The next phase of market development, therefore, is going to be less about issuing more digital assets and more about creating exchanges capable of supporting all these diverse financial instruments.
What Algebra's Data Shows
Market-wide data illustrates well the direction in which stablecoins are moving, but there’s also activity across decentralized exchanges to look at. And what we can see from these statistics is how deeply stablecoin assets have already become embedded in on-chain trading.
Between January 1 and July 21, 2026, the five largest Algebra-powered DEXs processed $14.8 billion in trading volume and more than 37.2 million swaps. Of that activity, 76.8% of trading volume and 75.5% of swaps involved at least one stablecoin. USDC participated in pools responsible for 65.6% of total volume, while USDT accounted for another 21.4%.
Stablecoin activity across Algebra-powered DEXs
Since this data covers only five exchanges, it should not be taken as representative of the entire decentralized exchange market, but it does provide a fairly good picture of how central stablecoins have already become to decentralized liquidity.
Stablecoin share of transaction activity by DEX
As the composition of stable-value assets continues to evolve, exchange infrastructure must evolve alongside it. Algebra approaches this challenge through concentrated liquidity, which allows capital to be deployed more efficiently around relevant trading ranges, together with dynamic fees that adjust to changing market conditions. The platform also supports pricing models based on NAV and live FX rates for assets that do not trade around a permanent 1:1 peg, while providing features such as pool-level access controls, configurable trading hours, and emergency pause mechanisms for regulated markets.
Rather than treating every stable-value asset identically, this approach recognizes that different instruments require different market structures.
The Course Ahead
The stablecoin market has reached a point where future growth will be entirely determined by how efficiently these assets can be used.
USDT and USDC are likely to remain the dominant settlement assets for the foreseeable future, but at the same time, the market will continue expanding through new asset types and yield-bearing products. As more traditional financial instruments move on-chain, stablecoins will most likely come to serve as the settlement pairs connecting all these various markets.
"The first stage of stablecoin market development was about issuing digital dollars. The next stage will be about building efficient markets around them. As tokenized securities, yield-bearing assets and non-dollar currencies move on-chain, exchanges will need more sophisticated pricing, liquidity and compliance infrastructure," says Vladimir Tikhomirov, Co-Founder of Algebra.
This evolution will bring DEX infrastructure closer to the standards expected in foreign exchange and regulated capital markets. Features such as dynamic pricing, compliance controls, and support for multiple types of stable-value assets will become increasingly important as institutional participation grows.
The success of the stablecoin market will ultimately be measured not just by market capitalization alone but also by liquidity quality, efficiency, and the breadth of real-world financial activity taking place in the on-chain landscape.
