The Stablecoin Trust Layer: Infrastructure for Digital Dollar Adoption

In the ten months between October 2025 and August 2026, the price of Bitcoin fell by more than 50%, while the total crypto market cap lost over $2T. Yet, over the same period, the total supply of stablecoins barely flinched, maintaining roughly $290B in value, a notable divergence from past crypto cycles. 

Source: The Block

In past crypto bear markets, particularly 2022-2023, the total supply of stablecoins fell alongside the broader crypto market, as much of it was utilized mainly as trading collateral, which declined alongside trading volume and frequency. This cycle, however, the stablecoin supply has grown to be far more robust, as use-cases have expanded beyond just trading collateral. Stablecoins are now widely used as a store of value in developing countries, for cross-border remittances, B2B and B2C payments, as well as collateral beyond just crypto, such as tokenized stocks and money market funds.

Each of those use cases has accelerated the movement and circulation of stablecoins across counterparties, geographic locations and blockchains. This is an inherently different proposition from merely trading collateral moving across crypto exchanges, where both sides of a transaction are typically crypto-native platforms operating under the same market surveillance. Once stablecoins are functioning as remittances or B2B payments instead, the counterparties on either end are ordinary businesses, individuals, and institutions scattered across jurisdictions and platforms, and this is the point at which visibility tapers off and transaction pathways begin to look opaque.  

While ~90% of the total supply of stablecoins is issued by Tether and Circle, this concentration shows nothing about the specific parties that hold stablecoin balances and what they use them for.

This gap, between what is legible at the point of issuance and what the funds are actually being used for, is what a “trust layer” has to address. In other words, identifying the counterparties at both sides of a transaction, whether both are who they claim to be, and whether those answers hold up after an extended period of time, not just at the moment the coins were first issued or first verified.

This shift is already visible to the firms building on stablecoin rails, many of whom have shared their thoughts and experiences in a series of interviews with Socure and The Block’s Research team.

Paxos mentioned that crypto-native traders have historically only cared about whether a stablecoin can hold its peg, while institutions have tended to give more emphasis on reserve composition, legality, redemptions during stress events, identity of their counterparties, and any orderly wind-down plans if required.

Meanwhile, zerohash described the same shift as a move from asking whether the technology works, to asking whether it can embed inside traditional financial institutions, claiming that what was “good enough for crypto exchanges in the past is not good enough for regulated payment systems now,” adding that provable compliance has become baseline expectation rather than a differentiator.

This primer sets out why the current norm of one-time KYC is just a piece of the puzzle that solves day zero, but doesn’t consider the entire lifecycle, and no longer fits the way stablecoins move. 

What Point-in-Time KYC Cannot See

Despite the flat stablecoin supply figure, there has been notable growth in terms of usage, as stablecoin transfer volume over the last 365 days came in at over $90T, more than double 2025.

Daily turnover, measured by transfer volume divided by supply, grew from 0.38x in August 2024 to 0.66x in August 2025, to 0.78x in August 2026. In essence, this implies that the same amount of stablecoins is moving roughly twice as often as they were just two years ago, which naturally implies a higher level of risk in terms of illicit transactions and counterparties.Despite all this, traditional KYC procedures are done at one moment in time, indexed to a particular balance at that point.

For example, a customer KYC’d in August 2024 would transact with a materially larger and different set of counterparties today than their record from 2024 describes.

Moreover, where those dollars move also compounds the problem. Ethereum holds ~$147B of the total stablecoin supply and turns it over 0.51x a day. Base holds $4.5B and turns it over 16.7x a day, with its transfer volume roughly on par with Ethereum’s but with just 3% of the balance. Solana sits between the two extremes, holding $~$13B and turning it over 1.08x a day. On the other end of the spectrum, Tron, which holds over $90B of stablecoins, turns over at 0.25x

Source: The Block

Though worth noting a caveat, raw stablecoin transfer volume is not economic activity. The Bank for International Settlements (BIS) put 2025 stablecoin volumes at ~$35T, while estimating payment-related flows at just 1.1% of that. 

Meanwhile, Chainalysis found that illicit addresses received at least $154 billion worth of stablecoins in 2025, a 162% YoY increase, though illicit activity remains under 1% of attributed on-chain volume.

Regardless of this, the point stands that every blockchain with a meaningful amount of stablecoins has participants with their own behavioral baselines. This breeds contradiction in terms of KYC procedures, as the activities of KYC’d individuals can vary drastically across chains, but the procedure of identification across all those chains is standardized equally.

zerohash notes that while blockchains offer something traditional rails cannot, that being on-chain records that reveal every counterparty’s transaction history in a way cash and ACH never could, the open question is how many hop backs from a particular transaction is actually meaningful for compliance purposes.

Paxos takes the position that some obligations extend beyond a firm’s own customer base entirely, preferring to set a minimum compliance standard and extending it down to B2B2C partners.

From Onboarding Gate to Lifecycle Risk

The GENIUS Act was signed in July 2025. But beyond that, most regulations remain as proposals and are yet to be finalized. For example, in April 2026, FinCEN and OFAC jointly proposed treating payment stablecoin issuers as financial institutions under the Bank Secrecy Act while requiring sanctions compliance programmes. In August 2026, the Treasury proposed the definitions that determine who falls inside that perimeter.

The key word in all that is “proposed”, and not “finalized” or “signed.” In short, firms are being asked to build controls, but the rules governing them aren’t even final.

Socure, the AI-powered trust infrastructure platform, argues that identity shouldn't be verified once and treated as settled. They contend that the signals that actually reveal a change in a participant's risk are the ones generated after initial KYC onboarding, particularly changes in onchain behavior such as transaction velocity, counterparties, and geographic location.

If a participant is flagged, step-up verification should then be enforced for that specific user, rather than standardized "blanket controls” applied to everyone.

Rain, the issuer of a stablecoin-backed credit card and the infrastructure behind Western Union’s cross-border product, offered an example: A merchant that declared $10,000 in monthly processing volume and is suddenly running $100,000 is a red flag that only continuous monitoring catches. The firm then argued that identity, device, behavioral, account and on-chain signals are each noisy in isolation, but are considerably cheaper if layered together.

Better signals also let low-risk users pass through with little friction while step-up checks are reserved for genuinely high-risk cases, making higher conversion a byproduct of not over-scrutinizing clean users. zerohash made a similar case from a different angle, monitoring users across ~100 platform partners where the same individual may appear on several at the same time. 

Socure puts numbers to that same trade-off, as they claim its RiskOS stack, which pairs real-time global watchlist screening with continuous portfolio monitoring rather than a single check at account opening, clears 98% of users through frictionless auto-approval. Meanwhile, their Sigma Identity product concentrates ~90% of fraud within the riskiest 3% of users while cutting false positives by 13x against legacy models.

However, Paxos adds a caveat that accumulating signals could overload alerts and lead to slower decision-making, and that signal quality varies significantly across different regions.

Trust at the Institutional Scale

Institutions have beneficial ownership, corporate structures, and authorized signatories. That structure means there are more moving parts to get right at onboarding, and more of them can shift afterward. Ownership can change hands, signatories can be replaced, a corporate entity can be restructured, any of which can discreetly invalidate what was verified the first time. Therefore, regulator-friendly audit rails and sanctions attestations that hold up after, rather than just at the point of onboarding, are even more important.

Stablecoins do carry one control advantage within the enforcement layer over most traditional payment rails, in that issuers can freeze tokens. This is a sharper tool than what most traditional rails offer, where reversing a wire or clawing back funds after the fact is slow, tedious, and often unsuccessful. Though that in itself is a remedy rather than outright control, as it only works after a particular wallet has been identified as illicit, which means the burden of detection still sits with the platform that interacted at the first point-of-contact.

Altitude, a company that runs global operating accounts across 150 countries and settles in stablecoins, fully KYBs every customer and applies KYC to each ultimate beneficial owner within those businesses.

Phil Jacobson, Altitude’s Chief Business Officer, stated, “Stablecoins are just a new, faster form of money. If it’s money, it needs to be treated like money.” The requirements he mentions that are needed for adoption at scale are knowing the source and cleanliness of funds, identifying counterparties on both sides of every transaction, monitoring throughout the customer lifecycle rather than at the point of onboarding alone, and periodic re-checking that actual account usage still matches what was declared at KYB.

zerohash addressed a similar point, noting how compliance is its second-largest team after engineering, as it holds licenses across all US states and an EMI in Europe.

What Has to Improve

The supply of stablecoins has already proven it is decorrelated and can hold through a crypto market-wide drawdown. On the other hand, stablecoin payment volume, at a mere few hundred billion dollars against a $200T global payments market, has not proven itself yet.

The continuous rise of stablecoin turnover while supply has remained the same is the flashing signal that identification infrastructure could, and should, evolve further. The next two primers will address this.