Each $1 of stable coin is supposed to be backed by $1 of dollar or short term equivalent. So the issuer is making money by collecting interest on it.

3-4% of billions (USDC alone is $80 billion) would itself be billions of dollars of annual interest. Easily covering the operating cost of these companies.

However, they don’t keep it all. Nobody is going to let you hold their cash in size without getting a slice of the interest. All the big players (like an exchange holding USDC of its patrons) cut deals with the stable coin issuers for a revenue split of that interest.

Well if you pay 0 on deposits and then loan money out even just to treasuries there is money to be made. Get enough volume and it is big. Next step is riskier investments and not being fully backed... After all it is just IOU you minted yourself...

The profit created from issuing currency is called seigniorage. It is madness letting private companies capture this.

Yes, bonds, sometimes corporate debts, often money market participation.