Stablecoins vs Bitcoin: The Utility Race with Unequal Odds

Every technology faces a natural limit to its growth. Once a solution solves all the problems it was designed for, expansion hits a ceiling. The market for potato peelers maxes out when all potato enthusiasts own one. Right now, the burning question about artificial intelligence is whether its problem-solving potential is finite or boundless. Stablecoins present the same puzzle.

From near-zero a decade ago, the stablecoin market has exploded to hundreds of billions in market capitalization and monthly transaction volumes exceeding $1 trillion. Citigroup projects the combined stablecoin market could reach around $2 trillion by 2030. Those are numbers that sound more like a transformational technology than a niche tool. Yet beneath the impressive figures lies a critical question: Does the stablecoin model have built-in constraints? Where are the boundaries of what they can accomplish? Understanding what created their success, what will restrict their expansion, and what their limitations mean for their future utility demands we examine three key aspects of their trajectory.

Why Stablecoins Achieved Market Dominance

The rise of stablecoins rests on three powerful advantages. First, they solve the volatility problem that plagues most cryptocurrencies. Bitcoin and Ethereum fluctuate wildly—great for speculators, unsuitable for everyday transactions. Stablecoins maintain consistent value by design. They function as a psychological inversion of speculative assets: if your holdings will depreciate over time, you spend them rather than hoard them.

Second is efficiency in value movement. Converting fiat currency to crypto remains cumbersome, but shifting between different cryptocurrencies happens instantly. Users discovered they could convert fiat into stablecoins in bulk, then execute rapid swaps across blockchain networks. USDT became the most actively traded asset across crypto markets precisely because it excels at this middle-ground function—not quite traditional money, not quite speculative crypto.

The third advantage strikes at monetary control itself. In dozens of countries where national currencies lose purchasing power faster than stablecoin reserves, these digital assets became wealth protection tools. Meanwhile, in nations with capital controls, stablecoins offered backdoor access to dollar-equivalent assets. Tax efficiency added another layer: most governments classify crypto as a taxable commodity, triggering capital gains obligations on each transaction. Stablecoins’ price stability lets users circumvent these events during routine exchanges.

The Inescapable Logic of Regulatory Centralization

Here lies the fundamental tension. Fiat currency represents state power’s ultimate instrument—whoever controls the money supply controls the economy itself. When stablecoin issuers began minting digital equivalents of trillions in national currency monthly, governments had to respond. No institution manages that scale of liquidity without attracting regulatory attention.

History provides the blueprint. As the historian Charles Tilly observed, states function as “protection rackets”—they need resources and authority, which requires regulating whatever activity they can quantify and control. Historically, states preferred tariffs over income taxes simply because tax collection across millions of households proved logistically impossible. Ports and bridges are far easier to monitor than distributed economic activity. The principle remains constant: centralization attracts regulation.

Stablecoins are doubly centralized—their value derives from centralized fiat reserves, and their operations concentrate through specific issuers. Circle and Tether, the two dominant stablecoin companies, recognized this early and voluntarily engaged with regulators. The regulatory machinery, for its part, argues that oversight protects consumers and gives issuers “more predictable operating environments”—a win-win narrative that isn’t entirely wrong. But predictability comes at a cost.

The Compliance Cost: Mapping the Regulatory Landscape

The European Union’s Markets in Crypto-Assets Regulation (MiCA), enacted in 2023, became operationally binding in early 2025. It required stablecoin issuers to obtain e-money licenses in at least one EU member state. Major exchanges responded by delisting nine leading stablecoins, including USDT—despite it being the market’s largest participant by far. The EU pursued regulatory replacement: a consortium of ostensibly systemically-important European banks now aims to launch their own euro-pegged alternative.

Across the Atlantic, the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins) adopted a lighter regulatory touch. It permits Treasury Department recognition of foreign stablecoin issuers already subject to sufficient home-country oversight, avoiding local licensing requirements. Still, the Act mandates reserve disclosures and subjects issuers to anti-money-laundering rules—the Bank Secrecy Act framework. For end-users, this means AML (anti-money laundering) and KYC (know-your-customer) processes became frictionless requirements. That friction—the removal of which originally made stablecoins attractive—crept back in.

Japan, Canada, Chile, the UK, Australia, Brazil, and Turkey each implemented or are implementing their own frameworks. Imagine the intersection of all these regulatory zones as a Venn diagram. Stablecoins’ effective utility space shrinks to wherever all these overlapping rules permit them to operate economically. The denser the regulatory matrix, the smaller those operational pockets become. A truly global stablecoin—one serving all markets with equal capability—remains unlikely. Even USDT, the most widely deployed stablecoin, operates effectively only in a handful of permissive jurisdictions. USDC, running an essentially identical product, faces structural identical limitations.

Beyond Payments: Why Bitcoin Offers What Stablecoins Cannot

So stablecoins are tokenized fiat—centralized, regulated, and geographically constrained. Does this mean they’re obsolete? No. Stablecoins will likely remain useful wherever fiat currencies function adequately: conventional payments and transactional settlement. PayPal, Stripe, Klarna, and other fintech firms launched stablecoin offerings or stablecoin accounts, recognizing that capturing payment flows justifies the compliance overhead.

But payments represent just one category of value movement. Payments, technically, involve clearing debt—an intermediary settlement between parties. Stablecoins work well for this transactional model because it’s already regulated, already intermediated, already controlled.

Yet an enormous universe of value transfer operates outside the payment paradigm. Direct peer-to-peer transfers require no intermediary. Borderless exchanges ignore political boundaries. Value transfers that don’t involve debt settlement fall outside payment infrastructure. Tipping a content creator, donating to a cause, sending remittances—these push value directly without clearing a debt. Historically, the intermediated payment model dominated because technology didn’t offer alternatives. Now it does.

The alternative is a currency detached from any national fiat system and decentralized by design. Bitcoin fills this role. As an open, neutral, borderless monetary network, Bitcoin operates without geographic constraints or regulatory capture. It’s natively programmable in ways stablecoins merely approximate. Transfers happen directly between millions of participants globally, requiring no custodians or intermediate layer.

The future that stablecoins promise but struggle to deliver is Bitcoin’s present. Bitcoin was engineered for the internet itself—built with digital-first architecture that stablecoins retrofit onto legacy financial infrastructure.

The Future Winner: Utility Without Hurdles

Utility, the economist’s preferred concept, describes human decision-making. People adopt what they find useful; that adoption proves utility exists. Stablecoins are used, ergo they possess genuine utility. But regulation constrains that utility through added friction and cost. Stablecoin expansion will slow where the utility they provide roughly equals the friction regulation imposes. Current regulatory momentum suggests we’re approaching this equilibrium soon.

Bitcoin operates under different constraints. It’s neither centralized nor pegged to state fiat, making it structurally harder to regulate. It consequently attracts far less regulatory burden. It’s digitally native—perfectly suited to a world where commerce and value flow instantaneously across borders through applications.

If regulation is the limiting factor on stablecoin utility, and Bitcoin faces dramatically less regulation, the winner of the utility race becomes clear. One operates within the regulatory maze; the other floats above it entirely.