GuShiio.com When the earnings of interest-bearing stablecoins such as YLDS continue to crush bank interest rates, who can predict how much capital will accelerate into the chain?
Figure Markets recently received approval from the U.S. Securities and Exchange Commission (SEC) to launch its first interest-bearing stablecoin YLDS. This move not only marks the recognition of crypto financial innovation by U.S. regulators, but also indicates that stablecoins are evolving from mere payment instruments to compliant income assets. This may open up greater imagination on the stablecoin track, making it the next innovation area after Bitcoin that can attract large-scale institutional funds.
Why did the SEC give YLDS the green light?
In 2024, Tether, the issuer of the stablecoin USDT, will have a full-year profit of US$13.7 billion, which even exceeds that of traditional financial giant Mastercard (approximately US$12.9 billion). Its profits mainly come from the investment income generated by reserve assets (mainly U.S. Treasury bonds), but these have nothing to do with the holders, and users cannot use the USDT to obtain asset appreciation and investment returns-this happens to be a breakthrough in the eyes of interest-bearing stablecoins.
Tether's Financial Report (2024)
The core of interest-bearing stablecoins lies in the “redistribution of asset return rights”: under the traditional stablecoins business model, users sacrifice the time value of funds in exchange for stability, but interest-bearing stablecoins can maintain stability while passing the tokenization of the underlying assets allows the holder to directly enjoy benefits.More importantly, interest-bearing stablecoins have hit the pain point of the “silent majority”: although traditional stablecoins can also earn revenue through pledges, complex operations and security compliance risks hinder large-scale users ‘use. And stablecoins such as YLDS, which “hold money and earn interest”, make capital gains without threshold and truly achieve “income democratization.”
Although passing on the income from the underlying assets will reduce the profits of the issuer, it also greatly increases the attractiveness of interest-bearing stablecoins. Especially at a time when the global economic environment is unstable and inflation levels remain high, both on-chain users and traditional investors have an increasing demand for financial products that can generate stable returns. Products such as YLDS, which are stable and can provide income rates much higher than traditional banks, will undoubtedly become “hot cakes” in the eyes of investors.
But these are not the main reasons why the SEC approved YLDS.The key reason why YLDS can give the SEC the green light is that it circumvents the core controversy of SEC supervision and makes it comply with current U.S. securities regulations。Since a systematic stablecoin regulatory framework has not yet been introduced, stablecoin supervision in the United States is currently mainly carried out in accordance with current laws. However, many institutions, including the SEC and CFTC, have different definitions of stablecoin, trying to gain the dominance of stablecoin supervision. The wrestling between different regulatory agencies and the differences in identification between regulatory and market have led to a chaotic situation in the regulation of stablecoins in the United States, making it difficult to form a basic consensus. However, interest-bearing stablecoins such as YLDS that can generate income have a structure similar to traditional fixed income products. Even under the current legal framework, they clearly belong to the category of “securities” and are not controversial. This is a prerequisite for interest-bearing stablecoins such as YLDS to be regulated by the SEC.
But it also means thatAlthough the approval of YLDS shows that the U.S.’s attitude towards crypto supervision continues to improve, regulatory agencies including the SEC are actively adapting to the rapidly developing stablecoins and crypto financial markets, and the supervision of stablecoins has also shifted from “passive defense” to “active guidance”. However, this will not change the regulatory difficulties faced by traditional stablecoins such as USDT/USDT in the short term. More changes will still be achieved until the U.S. Congress formally passes the stablecoin supervision bill.。It is generally expected in the industry that the U.S. stablecoin regulatory bill may be gradually implemented in the next 1 to 1.5 years.
However, YLDS allocates interest income from underlying assets (mainly U.S. Treasury bonds, commercial paper, etc.) to holders through smart contracts, and uses strict KYC verification mechanisms to bind income allocation to compliant identities, reducing regulatory concerns about anonymity. Concerns, these compliant designs provide a reference for subsequent similar projects to seek regulatory approval. In the next 1-2 years, we may see more compliant interest-bearing stablecoin products, and force more countries and regions to consider the need for the development and supervision of interest-bearing stablecoin.For regions such as Hong Kong and Singapore that have introduced regulation on stablecoins and most regard stablecoins as payment instruments, when faced with interest-bearing stablecoins with obvious securities attributes, in addition to adjusting the existing regulatory system, it may also be possible to consider restricting the underlying asset types of interest-bearing stablecoins to include them in the regulatory scope of tokenized securities.
The rise of interest-bearing stable coins will accelerate the institutionalization of the crypto market
The SEC’s approval of YLDS not only demonstrates the openness and friendliness of U.S. supervision in the emerging stage, but also indicates that in the mainstream financial context, stablecoins may evolve from “cash substitutes” to dual attributes of “payment instruments” and “revenue instruments”. New assets will accelerate the institutionalization and dollarization of the crypto market.
Although traditional stablecoins meet the needs of encryption payments, most institutions only use them as short-term liquidity tools due to the lack of interest income; interest-bearing stablecoins can not only generate stable income, but also increase capital turnover through unmediated and all-weather chain transactions, which has significant advantages in terms of capital efficiency and instant settlement capabilities. Ark Invest pointed out in its latest annual report that hedge funds and asset management institutions have begun to incorporate stablecoins into their cash management strategies, and the approval of YLDS by the SEC will further dispel institutional compliance concerns and increase institutional investors ‘acceptance and participation in such stablecoins have increased to new heights.
The large-scale influx of institutional funds will further promote the rapid growth of the interest-bearing stablecoin market, making it a more indispensable part of the encryption ecosystem.In order to cope with competition and meet market demand, OKG Research is optimistic that interest-bearing stablecoins will experience explosive growth in the next 3-5 years and account for about 10-15% of the stablecoin market share, becoming another one that can attract large-scale institutions after BTC. A crypto asset class with attention and capital investment。
Proportion of interest-bearing stablecoins in the Ethereum ecosystem (@21co, as of 2025/2/20)
The rise of interest-bearing stablecoins will also further consolidate the US dollar’s dominant position in the crypto world.Currently, there are three main sources of income for interest-bearing stablecoins on the market, which are income from investing in US bonds, blockchain pledge rewards or structured strategies. Although the synthetic U.S. dollar stablecoin USDe launched by Ethena Labs has been a great success in 2024 and has become a major player in the interest-bearing stablecoin market, it does not mean that pledge and structured strategies as a source of revenue will become the mainstream. On the contrary, we believe that interest-bearing stablecoin backed by U.S. bonds will remain the first choice for institutional investors in the future.
Although the physical world is accelerating de-dollarization: China and Japan have successively sold large amounts of US bonds in the past few years, and Saudi Arabia also announced in June 2024 that it would not renew the “Petrodollar Agreement” that has been maintained for half a century, decoupling the US dollar from oil after decoupling gold. BRICS countries are constantly trying to bypass the SWIFT network to reduce their dependence on US dollar payments, but the digital chain The world continues to move closer to the US dollar. Whether it is the large-scale application of U.S. dollar stablecoins or the wave of tokenization launched by Wall Street institutions, the United States continues to strengthen the influence of U.S. dollar assets in the crypto market, and this trend of dollarization is being strengthened.
This trend is less likely to reverse in the short term, because whether in terms of liquidity, stability or market acceptance, for tokenized innovation and crypto financial markets, at this stage, there are no more alternatives to US dollar assets represented by US bonds.The SEC’s approval of YLDS further shows that U.S. regulators have given the green light to U.S. debt interest-bearing stablecoins at this stage, which will undoubtedly attract more projects to launch similar products in the future.This is also why although we know that the income model of interest-bearing stablecoins will definitely be more diversified in the future, and reserve assets may also expand to more types of RWAs such as real estate, gold, and corporate bonds, we still believe that US bonds, as risk-free assets, will still dominate the underlying asset pool of interest-bearing stablecoins.
conclusion
The approval of YLDS is not only a compliance breakthrough in crypto innovation, but also a milestone in financial democratization. It reveals a simple truth: under the premise of controllable risks, the market’s demand for “money generates money” will always exist. With the improvement of the regulatory framework and the influx of institutional funds, interest-bearing stablecoins may reshape the stablecoin market and enhance the dollarization trend of crypto financial innovation. However, this process also needs to balance innovation and risk to avoid repeating the mistakes of the past. Only in this way can interest-bearing stablecoins truly realize “allowing everyone to make money lying down.”
