The Funding: Why stablecoins are drawing more VC interest

Stablecoins have long been a cornerstone of the crypto ecosystem, but their rising utility is attracting fresh interest from venture capitalists. The momentum is underscored by Y Combinator's recent Winter 2025 batch request , which spotlighted stablecoins as a category founders should pursue. Recent funding rounds also reflect this growing focus: usdx.money, a stablecoin infrastructure project, raised $45 million at a $275 million valuation from investors, including NGC Ventures; Binance Labs invested in Quine Co., the developer of Perena, a stablecoin protocol on Solana; and Quantoz Payments, a MiCA-compliant EU stablecoin issuer, raised funding from Tether, Kraken and Fabric Ventures.

Driving much of the renewed enthusiasm is Stripe's $1.1 billion acquisition of stablecoin payments platform Bridge, the largest deal in crypto's history. The acquisition was "tremendously validating for a lot of people," Dan Elitzer, co-founder of crypto VC Nascent, told me. "It was a big exit in a relatively short timeframe. And so, it's very real."

Juan Lopez, general partner at VanEck Ventures and formerly of Circle Ventures, also called the Stripe-Bridge deal a "huge validation" and pointed to its ripple effects. Startups like Yellow Card, a licensed on/off-ramp platform in Africa, and Felix Pago, a stablecoin-powered remittance service integrated with WhatsApp, are also gaining momentum as they demonstrate stablecoins' utility beyond crypto trading, Lopez said. He predicts that in the next 3–5 years, about 30% of U.S.–Mexico remittance volume (around $20 billion of the annual total) could run on stablecoins.

Will Nuelle, general partner at Galaxy Ventures, also said that non-crypto use cases of stablecoins are set to accelerate. He told me such use cases, like trade finance and payment processing, already account for $200–250 billion annually and are growing 100% year-on-year. He expects this figure to hit $1 trillion annualized by the end of 2026, representing over 1% of global cross-border business-to-business (B2B) payments market share globally.

Kinjal Shah, general partner at Blockchain Capital, also called stablecoins a "trillion-dollar opportunity" that will transform payments and fintech. Similarly, Dana Malman Warren, venture partner at Canaan Partners and former leader at Stripe and PayPal, highlighted stablecoins' potential to solve inefficiencies in cross-border payments, where traditional systems remain costly and slow.

On the regulatory front, progress is increasing optimism. Jake Brukhman, founder, managing partner, and CEO of CoinFund, told me that the European Union's Markets in Crypto-Assets (MiCA) regulation and proposed U.S. stablecoin legislation are pivotal developments. He added that crypto-friendly leadership under Donald Trump could further accelerate progress, positioning stablecoins likely to achieve regulatory clarity in the U.S.

The opportunities

VCs are targeting several categories of stablecoin startups to drive future growth.

Infrastructure remains a top priority. Brendan Dickinson, general partner at Canaan Partners (a Paxos investor), sees strong potential in projects offering compliance tools, fraud prevention and wealth management services, which can unlock new use cases in B2B payments and underserved markets.

Vertical integration is another key area. Nuelle of Galaxy Ventures said companies that own multiple layers of the stablecoin stack — such as issuers pairing blockchain infrastructure with distribution layers — will lead the market. Brukhman echoed this sentiment, highlighting "full-stack" projects that combine infrastructure with user-friendly platforms to attract both institutional and retail users.

Bridging traditional finance and crypto is critical. Viktor Bunin, general partner at Credibly Neutral and protocol specialist at Coinbase, emphasized the need for startups that enable businesses to integrate stablecoins seamlessly into existing operations without overhauling their systems.

Distribution strategies may help determine winners at the application layer. Lopez of VanEck Ventures argued that infrastructure will begin to commoditize itself, and startups with unique go-to-market strategies will stand out. Elitzer of Nascent agreed, pointing to the relatively low adoption of PayPal's PYUSD stablecoin as an example of how short-term incentives can fail without a compelling long-term strategy.

Lopez added that the stablecoin sector is still in its early days and predicted major developer and consumer platforms will enter as stablecoins gain legal recognition in the U.S.

The challenges

Despite the growing momentum, stablecoins face significant hurdles that could limit adoption.

Regulatory uncertainty looms large. Elitzer of Nascent highlighted risks such as those seen during Silicon Valley Bank's collapse last year, which caused a minor depeg of Circle's USDC stablecoin. Until clear regulatory frameworks are established, these risks will persist, Elitzer said.

Reliance on traditional banking infrastructure remains a risk, Bunin said. He pointed to events like "Operation Chokepoint 2.0" and the collapse of crypto-focused banks such as Silvergate Bank as examples of how dependent stablecoins are on traditional systems. However, he expressed optimism that upcoming U.S. legislation could mitigate these risks.

Compliance demands are intensifying. Galaxy's Nuelle noted that payment businesses, particularly at the on/off-ramp layer, must also excel in compliance to maintain banking relationships. This can be both costly and operationally challenging.

Stablecoin issuers face steep hurdles as this category becomes increasingly regulated, according to Anil Hansjee, general partner at Fabric Ventures. He highlighted the challenges, including technical, regulatory and banking complexities, as well as go-to-market strategies for scaled stablecoins. "By running or partnering with a Layer 1 or Layer 2 blockchain that is optimized for processing and payments, there is a potential to enable a self-sovereign banking experience," Hansjee said. "These solutions effectively will create an entirely new end-to-end acceptance and settlement process on-chain (bypassing traditional networks like Visa or Mastercard or banks) so that merchants receive faster payments with reduced fees."

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