Stablecoin Lending Boom — A $670B Shift That Could Redefine Subprime Credit Access

Visa reports that stablecoin lending activities have experienced growth of $670 billion in the past five years. The market adoption of blockchain-based smart contract loans hit $51.7 billion in August 2025.

Most of the action involves USDC (Circle) and USDT (Tether). These constitute over 98% of all stablecoins that are used in lending. More than 81,000 borrowers took around 427,000 loans in August.

The average interest rate was 6.7%. Much of this happens due to major DeFi platforms like Aave and Compound, and MakerDAO (issuer of DAI stablecoin). Lenders and borrowers automatically find each other on these systems.

Stablecoins are tied to national currencies, like the U.S. dollar. They are less volatile than cryptocurrencies. Their stability means borrowers can better predict their payments. It also provides lenders comfort through the use of smart contracts that automatically control payments and collateral.

Visa anticipates the coming decade will usher in radical changes as conventional assets such as bonds and mortgage loans get increasingly tokenized. Visa also sees blockchain-based identity tools helping people without large crypto holdings to get undercollateralized loans.

The shift could be important for subprime borrowers who have trouble qualifying for a bank loan because banks rely on traditional credit scores and moldy data.

Visa foresees stablecoins revolutionizing the banking and loan industries — something subprime lenders and borrowers should look out for.

But a blockchain with real-time transaction records should help lenders make better risk estimates. More borrowers may qualify for smaller, short-term loans, which should help them build credit.

Visa is also in prep mode, providing consulting in blockchain finance strategies, custody plans, and market studies. The firm would like to help ferry partners through the change and extend responsible access to credit.

Lenders can use Visa’s involvement in stablecoin systems to help modernize. Ryan McInerney said that Visa is partnering with stablecoin firms to expand its “settlement stack.” These efforts will try to improve liquidity management and lower cross-border costs via blockchain automation.

Modernization is a must for subprime lenders. Those relying on older systems risk losing ground to fintechs. The difference between competing and faltering could hinge on automation.

In addition, Visa is testing stablecoin tools to help lenders accelerate money movements. 

The competition is not idly sitting by. Walmart and Amazon are developing their own digital dollars. PayPal and Paxos are continuing to grow their stablecoin networks.

Visa is fighting back by adding new settlement partners. It is also trying to keep ahead by supporting stablecoins such as Global Dollar (USDG), PayPal USD (PYUSD), and the euro-backed EURC.

Remember the “crypto winter” of 2021-2023? That’s when several risky crypto platforms failed, including Terra/Luna and FTX. On-chain lending is a new wave that benefits from the peg to stable currencies and better regulations.

The 2025 GENIUS Act initiated a federal framework for stablecoins. This encouraged safe expansion by financial institutions. The Act does not cover tokenized deposits. This leaves room for banks to issue those assets under different rules.

At the same time, S&P Global Ratings and Chainlink teamed up to bring stablecoin stability ratings onto the blockchain. Lenders can use these to more rapidly assess risk. The ratings encourage wider adoption among prime and subprime borrowers.

Regulatory issues persist, but lenders now have a foothold for expansion. Servicing credit-challenged borrowers, those lenders must strike a balance between accessibility and reasonable oversight. The way they do this will determine who succeeds in a changing market.

The future of lending won’t depend on banks closing at 5 p.m. It will be open around the clock, powered by smart contracts and stablecoins. This is already occurring — one loan block at a time.