The Shift From Meme Coin Frenzy to Stablecoin Mainstreaming

When former US president Donald Trump launched his own meme cryptocurrency on January 17—just days ahead of his return to the White House for a second term—I was halfway up a Swiss alpine slope, attending a major crypto industry conference in the resort town of St. Moritz.

Back then, meme coins (crypto assets that almost never serve any function beyond speculative betting) were at the peak of their cultural and market hype. The year prior, millions of new meme coins flooded the market, and a handful of viral projects, including the whimsically named Fartcoin, skyrocketed to billion-dollar market valuations. Pump.Fun, a platform built specifically for launching and trading new meme coins, grew into one of the fastest-growing crypto launchpad businesses the industry had ever seen. Now, the US’s soon-to-be president was jumping on the bandwagon.

Over lunch on the conference’s second day, underneath the venue’s ornate stucco ceiling and gilded chandeliers, I found the table reserved for a breakout discussion on meme coins. While most other tables were only half occupied, the meme coin workshop was completely oversubscribed—late arrivals dragged extra chairs into the hall to fill two full rows of attendees.

Leading the conversation was Nagendra Bharatula, founder of investment firm G-20 Group. Bharatula had recently co-authored a research paper arguing that even with their silly, casual reputation, meme coins deserve a spot in professional investment portfolios. He pointed out that in the six months leading up to the conference, a curated basket of 25 “blue-chip meme coins” — a phrase that reads as an oxymoron by any measure — had outperformed Bitcoin by 150%. A number of attendees nodded and murmured in agreement.

Today, that shine has completely worn off the meme coin market. The paper value of Trump’s token, which surged to a $14 billion peak just two days after its launch, has plummeted to roughly $1 billion. Hundreds of thousands of small retail investors have lost their entire investments in the crash. Pump.Fun’s daily revenue, a reliable indicator of overall market demand for meme coin trading, is now barely a tenth of what it was back in January. The meme coin speculative gold rush has also spawned a wave of new litigation against major projects and platforms.

The next big trend in crypto? Stablecoins. If meme coins embody the reckless abandon and cutthroat profiteering that defines the wilder side of cryptoland, stablecoins represent the industry’s push to find legitimate purpose and earn mainstream respectability. Designed to hold a stable value pegged directly to $1 USD, proponents frame stablecoins as a faster, far cheaper alternative for everyday payments and cross-border money transfers.

In 2024, as the US reversed course and opened its doors to crypto business after years of firms fearing regulatory backlash under the Biden administration, stablecoins have overtaken meme coins as the industry’s trend du jour, and broken through to mainstream adoption.

While stablecoins have existed since 2014, for most of their history they were almost exclusively used by active crypto traders as a safe haven during periods of market volatility, not by ordinary people for everyday transactions. The concept also faced heavy pushback from regulators skeptical of a new untested form of money; Meta’s high-profile stablecoin venture Diem famously shut down in 2022 after facing widespread cross-agency opposition.

The big breakthrough for stablecoins came in July, when the US House of Representatives voted overwhelmingly to pass the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, the first-ever federal piece of crypto-specific legislation in US history.

Most stablecoins maintain their $1 peg through an underlying reserve of cash and low-risk assets, and issuers earn profit from the interest generated by these reserves. The GENIUS Act puts clear, federal rules in place: it requires stablecoin issuers to back their tokens 1:1 exclusively with low-risk assets such as US government bonds, register their operations with either state or federal regulators, and maintain strict anti-money laundering controls.

As the bill moved through Congress, critics attacked it as a handout to the crypto industry, which spent hundreds of millions of dollars on lobbying ahead of the 2024 congressional elections. “We need new laws to put clear guardrails and consumer safeguards in place for crypto, but this bill is ineffectual at best, and dangerous at worse,” said Democratic Senator Richard Blumenthal.

Other critics warn that rapid expansion of stablecoins could destabilize the entire US financial system if regulators fail to maintain airtight oversight. For example, if a large stablecoin issuer catastrophically mismanages its reserve, it could trigger a collapse in the token’s price and a mass run on other stablecoins. As issuers rush to sell assets to cover redemption requests, the value of US government bonds could tumble — one of many bad outcomes that would leave bond-heavy public and private pension funds completely decimated.

“The big question is: how much damage would a mass stablecoin run actually cause?” says Christian Catalini, founder of the MIT Cryptoeconomics Lab and co-creator of the former Diem stablecoin project. “The way stablecoins are structured today, I believe it could cause meaningful harm. Under the GENIUS Act’s rules, that risk becomes extremely narrow,” he claims.

The crypto industry broadly celebrated the passage of the GENIUS Act as a critical step forward to protect stablecoin holders from fraud and mismanagement. “Gone are the days where you could launch a ‘stable-in-name-only’ coin and freely operate in the US market,” Dante Disparte, chief strategy officer at Circle Internet Group — the company behind the major USDC stablecoin — told WIRED in July.

Since the GENIUS Act was signed into law, the total market capitalization of circulating stablecoins has ballooned from roughly $250 billion to more than $300 billion. US Treasury Secretary Scott Bessent has said he believes that number could realistically climb as high as $2 trillion in the coming years.

Increasingly, traditional payment processors and fintech companies are moving into the stablecoin space. Back in April, Mastercard announced a new service that allows cardholders to make purchases using stablecoins. In November, buy-now-pay-later giant Klarna launched its own native stablecoin. More recently, Visa rolled out a pilot program that lets businesses use stablecoins to settle cross-border transactions. “The GENIUS Act changed everything for this space,” Mark Nelsen, a product lead at Visa, told Reuters.

A consortium of major international banks, including Bank of America, is also exploring the possibility of launching a shared stablecoin together.

As new players flood into the market, profit margins for existing stablecoin incumbents are expected to shrink sharply. Because revenue scales directly with the amount of a stablecoin in circulation, experts predict stablecoin issuers will have to give up a large share of the interest earned on their reserves to distribution partners that help get their tokens adopted by users. Ultimately, this margin squeeze will likely lead to widespread industry consolidation, with smaller stablecoin providers either acquired by larger players or forced out of the market entirely. “Margins will be severely compressed,” says Catalini. “In the end, whoever controls or builds the largest distribution network will win.”

At the upcoming edition of CfC St. Moritz, the alpine crypto conference I attended earlier this year, stablecoins dominate the event agenda. There will be sessions covering everything from stablecoin regulation and token design to mainstream adoption and niche fringe use cases. By contrast, you will barely find a meme coin mentioned on the schedule at all.