2.1 Actors & Roles
What You'll Learn: How seven essential players work together to keep stablecoins stable and who does what in the ecosystem, from issuers creating tokens to arbitrageurs maintaining the dollar peg.
A stablecoin ecosystem operates like a busy marketplace where different participants play specialized roles. Just as traditional markets need vendors, customers, and bankers, stablecoin systems require issuers, users, and custodians to function properly.
Each actor in this digital marketplace has a distinct job that keeps stablecoins stable and useful. When Circle issues a new USDC token, multiple systems activate. When a trader in Singapore converts Bitcoin profits to USDT, they rely on these same interconnected relationships. Understanding who these actors are and what they do helps explain why some stablecoins succeed while others fail.
This ecosystem is experiencing a major shift. As regulatory clarity emerges and major financial institutions enter the space, the line between traditional finance and digital assets continues to blur. JPMorgan processes billions daily through its digital coin, while everyday users in Argentina save their salaries in USDC. Let's meet the key players who make this possible.
Key Actors and Their Roles in Stablecoin Ecosystem
Issuers
Circle (USDC)
Tether (USDT)
MakerDAO (DAI)
PayPal (PYUSD)
Mint & burn tokens, manage reserve assets, set redemption policies and ensure peg stability
Users
Crypto Traders
DeFi Participants
Corporations
Individuals in Emerging Markets
Drive demand and utility, use stablecoins for trading, payments, savings, remittances and collateral
Arbitrageurs & Market Makers
Jump Trading Wintermute GSR Cumberland
Maintain price stability through arbitrage and provide continuous liquidity across exchanges
Custodians & Asset Managers
BNY Mellon
BlackRock
Cantor Fitzgerald
Regulated Banks
Safeguard and manage reserve assets in segregated accounts
Ensure liquidity and compliance.
Auditors & Attestation Firms
Deloitte
BDO
Provide independent verification (attestations or audits) of the issuer's reserve holdings
Regulators
U.S. Treasury
SEC
Federal Reserve
EU (MiCA)
Establish legal frameworks
Supervise issuers
Protect consumers
Mitigate systemic risk
Technology Providers
Ethereum
TRON
Chainalysis
Smart Contract Developers
Provide the underlying blockchain infrastructure, compliance tools, and the code that governs operations
The Issuers: Architects of Stability
Issuers create tokens, manage reserves, and honor redemptions, functioning like central banks for their stablecoins. Unlike central banks, they can't print money without backing.
The issuer's credibility directly determines whether people trust the stablecoin. Their business model is straightforward: they hold your dollars and give you digital tokens in return, earning money by investing those dollars in safe assets like Treasury bills while you hold the non-interest-bearing tokens [1].
Three types of issuers dominate the market
Centralized Corporations: Companies like Tether Limited (USDT) and Circle (USDC) operate like traditional businesses. They have offices, employees, and bank accounts. When you buy USDC, you're trusting Circle to manage the backing funds responsibly [2].
Decentralized Organizations (DAOs): MakerDAO takes a different approach with its DAI stablecoin. Instead of a company making decisions, token holders vote on important changes through blockchain-based governance. It's like a co-op where members collectively manage the system [3][4].
Traditional Financial Institutions: Banks are joining the party. JPMorgan's JPM Coin and PayPal's PYUSD represent a new wave of institutional stablecoins. These "tokenized deposits" work more like digital versions of bank deposits than typical stablecoins [5].
The Users: Drivers of Demand and Utility
Users give stablecoins their purpose. Without people actually using these tokens, they'd be worthless digital entries. Different users have discovered different uses, expanding far beyond the original crypto trading community.
Consider Mei-Lin, a crypto trader in Hong Kong. She manages a seven-figure portfolio across multiple exchanges. When Bitcoin surged to $100,000, she needed to secure profits without triggering bank reporting requirements or waiting days for wire transfers. She converted half her holdings to USDT in seconds, maintaining liquidity while avoiding Bitcoin's 20% intraday swings. This allowed her to re-enter positions immediately when opportunities arose [2].
Then there's Marcus, a DeFi developer in Berlin. He holds ETH worth €50,000 but needs euros for monthly expenses. Traditional crypto-to-bank transfers would trigger capital gains taxes and take 3-5 days. He deposits his ETH into MakerDAO as collateral and borrows €30,000 worth of DAI stablecoins, which he can convert to euros instantly through local exchanges. He keeps his ETH exposure while accessing immediate liquidity [6].
Meet Jennifer, startup treasurer in San Francisco. Her B2B software company serves clients across 40 countries. International wire transfers were costing $500+ per transaction and taking 3-5 business days, creating cash flow problems. She implemented USDC payments, reducing transaction costs to under $5 and settlement time to under 10 minutes. The company now processes $2 million monthly in stablecoin payments [7].
Finally, Carlos, software engineer in Buenos Aires. He earns $5,000 monthly but faces 200% annual inflation in Argentina. Previous currency devaluations wiped out his parents' savings three times. He immediately converts his peso salary to USDC through local P2P markets, then stores it in a hardware wallet. His purchasing power remains stable while neighbors lose 15% monthly to inflation [6].
Understanding Stablecoin Markets
Stablecoins trade in two distinct markets:
Primary Market: Authorized participants (typically institutions) mint new tokens and redeem existing ones directly with issuers at exactly $1.00. This requires KYC verification, business accounts, and often minimum transactions of $100,000 or more. When Circle creates new USDC, it happens here.
Secondary Market: Everyone else—retail users, traders, businesses—buys and sells stablecoins on exchanges and DEXs at floating prices. Prices typically range from $0.99 to $1.01 but can widen during market stress (USDC traded as low as $0.88 in March 2023).
This two-tier structure explains why arbitrageurs exist: they have primary market access and can profit by bridging the gap between $1.00 (primary) and market prices (secondary), keeping stablecoins stable for regular users.
The Arbitrageurs and Market Makers: Guardians of Stability and Liquidity
While arbitrageurs keep prices aligned, market makers ensure you can always buy or sell. Together, they form the invisible infrastructure that makes stablecoins functional.
Arbitrageurs profit from tiny price differences, constantly pushing stablecoins back to $1. Imagine USDT trading at $0.998 on one exchange. An arbitrageur instantly:
Buys 1 million USDT for $998,000
Redeems them with Tether for exactly $1 million
Pockets $2,000 profit
This buying pressure pushes the price back up. When USDT trades above $1, they do the reverse: minting new tokens and selling them, which pushes the price down [8][9].
Market Makers play a different but complementary role. Firms like Jump Trading, Wintermute, and GSR maintain standing orders to buy and sell stablecoins on major exchanges. They profit from the bid-ask spread (the tiny difference between buying and selling prices) while providing essential liquidity.
Think of market makers as the oil in the engine. Without them, you might struggle to convert $10 million of USDC to USDT quickly without moving the price. Market makers absorb these large trades, breaking them into smaller pieces across multiple exchanges. During the March 2023 USDC depeg, market makers processed billions in panicked selling while maintaining some semblance of order in chaotic markets.
The relationship between issuers and market makers is often formal. Tether and Circle have agreements with major trading firms, providing them with preferential minting and redemption terms in exchange for maintaining liquidity. This symbiotic relationship ensures that whether you're trading $100 or $100 million, there's always someone willing to take the other side of your trade.
These traders make small profits on huge volumes while keeping stablecoins stable and liquid for everyone else. Without them, stablecoins would be far more volatile and much less useful as a medium of exchange.
The Custodians and Asset Managers: Safekeepers of the Reserves
Behind every fiat-backed stablecoin are traditional financial institutions holding the actual dollars. These aren't crypto companies; they're established banks and asset managers bringing centuries of experience to the digital world.
Circle partnered with BlackRock, the world's largest asset manager, to manage USDC reserves. Bank of New York Mellon, America's oldest bank, provides custody services. This arrangement brings institutional credibility: your digital dollars are backed by real dollars held by the same institutions managing pension funds and government assets [10].
Custodians hold reserve assets in segregated accounts, separate from issuers' operational funds. This legal separation means that if Circle went bankrupt, USDC holders could still redeem their tokens from the protected reserve [11].
Auditors and Attestation Firms: Verifiers of Trust
Major accounting firms like Deloitte and BDO have found a new line of business: verifying stablecoin reserves. Every month, they check that issuers actually hold what they claim to hold [12][13].
However, these "attestations" are snapshots, confirming reserves on a specific date but not guaranteeing what happens in between. It's like checking your bank balance once a month versus monitoring it daily. This limitation has led regulators to push for more comprehensive auditing standards.
Regulators and Supervisory Bodies: Shapers of the Ecosystem
Governments worldwide are writing the rules for stablecoins. In the U.S., proposed laws would require dollar-backed stablecoins to hold reserves only in cash and Treasury bills. Europe's MiCA regulation already sets clear standards for "e-money tokens."
This isn't bureaucracy for its own sake; it's about preventing another Terra/UST collapse that wiped out $60 billion. Clear rules help legitimate projects while keeping out bad actors [5][14].
Technology Providers: The Foundation
Every stablecoin needs robust technological infrastructure to function. This includes not just blockchains for transaction processing, but critical systems that monitor and maintain stability.
Blockchain Networks: Ethereum pioneered smart contract stablecoins but high fees pushed many users to alternatives. TRON now processes more stablecoin transactions than any other network by offering near-zero fees, critical for small remittances where every cent counts [15].
Oracle Providers: The Price Truth-Keepers
Oracles are the nervous system of decentralized stablecoins, constantly feeding real-world price data into blockchain systems. Without accurate price feeds, a stablecoin can't know if it's actually worth $1.
Consider what happens when someone mints DAI using Ethereum as collateral. The MakerDAO system needs to know the exact ETH/USD price to calculate collateralization ratios. If ETH is worth $4,000, you can borrow more DAI than if it's worth $3,900. But blockchains can't access external data directly—that's where oracles come in.
Chainlink dominates this space, providing price feeds to most major DeFi protocols. Their decentralized network aggregates prices from multiple exchanges and data providers, reducing manipulation risk. When Terra collapsed, many blamed inadequate oracle design that allowed attackers to exploit price discrepancies. This highlighted how a compromised or poorly designed oracle can destroy even well-capitalized stablecoins.
For centralized stablecoins like USDC, oracles play a different but equally important role. They enable smart contracts to verify the stablecoin's price across different exchanges, triggering alerts if significant depegging occurs. This early warning system helps issuers and traders respond quickly to market stress.
Compliance and Analytics Tools: Companies like Chainalysis and Elliptic provide the monitoring tools that help issuers freeze illicit funds and comply with regulations. Without these technology providers, the entire ecosystem couldn't function.
How It All Works Together
These actors don't operate in isolation: they form an interconnected system where each depends on the others. Issuers need custodians to hold reserves and auditors to verify them. Users need arbitrageurs to maintain the peg and technology providers to process transactions. Regulators set the rules that everyone must follow.
When all actors perform their roles effectively, stablecoins work smoothly. When one fails, as seen with Terra's algorithmic experiment or concerns about Tether's reserves, the entire system can destabilize.
Understanding these relationships helps evaluate different stablecoins. A token with reputable custodians, regular audits, clear regulations, and active arbitrageurs will likely be more stable than one missing these elements. But stability is just one part of the equation. Now that we understand the key players in the stablecoin ecosystem, let's examine the different mechanisms they use to maintain price stability.
Key Takeaways:
Six actors make stablecoins work (issuers → create tokens, users → drive demand, arbitrageurs → maintain peg)
Issuer credibility determines trust (centralized Circle, decentralized MakerDAO, institutional JPMorgan)
Arbitrageurs profit from tiny price differences while keeping stablecoins at exactly $1
Traditional finance now plays crucial roles (BlackRock manages reserves, BNY Mellon provides custody)
Resources
[1] How to Think About Stablecoins - https://fintechtakes.com/articles/2025-01-10/how-to-think-about-stablecoins/
[2] What is a Stablecoins? - https://hedera.com/learning/tokens/what-is-a-stablecoin
[3] Stablecoins: A Deep Dive into Valuation and Depegging - https://www.spglobal.com/content/dam/spglobal/corporate/en/images/general/special-editorial/rl_stablecoins.pdf
[4] What is Dai? (DAI) - https://www.kraken.com/learn/what-is-dai
[5] The Rise of Stablecoins and How to Regulate Them - https://econofact.org/the-rise-of-stablecoins-and-how-to-regulate-them
[6] Chainalysis - "Stablecoins 101: Behind crypto's most popular asset" - https://www.chainalysis.com/blog/stablecoins-most-popular-asset/
[7] An Introduction to Stablecoins - https://www.arnoldporter.com/en/perspectives/advisories/2025/05/an-introduction-to-stablecoins
[8] How do we keep stablecoins stable? - https://www.wbs.ac.uk/news/how-do-we-keep-stablecoins-stable/
[9] Stablecoin Runs and the Centralization of Arbitrage - https://anthonyleezhang.github.io/pdfs/stablecoin.pdf
[10] Transparency & stability - https://www.circle.com/transparency
[11] The GENIUS Act: What Is It and What's Next? - https://www.troutman.com/insights/the-genius-act-what-is-it-and-whats-next.html
[12] How to read a stablecoin attestation report and why it matters - https://cointelegraph.com/news/how-to-read-a-stablecoin-attestation-report
[13] Peeking Under the USDT Hood: Tether Releases Partial Audit Amid Growing Scrutiny - https://www.pymnts.com/cryptocurrency/2025/usdt-tether-releases-partial-audit-amid-growing-scrutiny/
[14] Stablecoin Overview - https://klrd.gov/2024/11/15/stablecoin-overview/
[15] TRON leads global stablecoin network - https://dig.watch/updates/tron-leads-global-stablecoin-network
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