SEC Approves First Interest-Bearing Stablecoin YLDS, Opening the Era of Stablecoin Yields

Recently, the U.S. Securities and Exchange Commission (SEC) approved the first interest-bearing stablecoin YLDS launched by Figure Markets. This move not only reflects the recognition of U.S. regulators for innovation in crypto finance but also indicates that stablecoins are transitioning from mere payment tools to compliant yield-bearing assets. This may bring more opportunities to the stablecoin sector, making it another innovative field that attracts large-scale institutional funds after Bitcoin.

Reasons for SEC Approval of YLDS

In 2024, a well-known stablecoin issuer achieved an annual profit of up to $13.7 billion, even surpassing traditional financial giants. These profits mainly come from the investment returns of reserve assets (such as U.S. Treasury bonds), but holders cannot benefit from them. This is precisely the breakthrough that interest-bearing stablecoins hope to disrupt the current landscape.

The core of interest-bearing stablecoins lies in the "redistribution of asset income rights". In the traditional stablecoin model, users sacrifice the time value of their funds for stability. However, interest-bearing stablecoins can maintain stability while tokenizing the income rights of underlying assets, allowing holders to directly enjoy the earnings. This model of "holding coins to earn interest" makes earning from funds accessible to all, achieving "democratization of earnings".

Although transferring the underlying asset yields will reduce the profits of issuing institutions, it greatly enhances the attractiveness of interest-bearing stablecoins. In the current unstable global economic environment and with high inflation levels, the demand for financial products that can generate stable returns is continuously increasing among both crypto users and traditional investors.

The reason why YLDS was able to obtain SEC approval lies in its compliance with current U.S. securities regulations. As the U.S. has yet to establish a systematic regulatory framework for stablecoins, current stablecoin regulation mainly relies on existing laws. YLDS, a yield-generating interest-bearing stablecoin, has a structure similar to traditional fixed-income products and clearly falls under the category of "securities," with no regulatory disputes.

It is worth noting that the approval of YLD indicates a continued positive attitude of U.S. crypto regulation, but in the short term, it cannot change the regulatory challenges faced by traditional stablecoins. The industry generally expects that U.S. stablecoin regulatory legislation may gradually come into effect within the next 1 to 1.5 years.

YLD distributes the interest income of underlying assets to holders through smart contracts and employs a strict KYC verification mechanism to alleviate regulatory concerns about anonymity. These compliance designs provide a reference for similar projects in the future. In the next 1-2 years, more compliant interest-bearing stablecoin products may emerge, prompting more countries and regions to consider the development and regulation of interest-bearing stablecoins.

The Rise of Interest-earning Stablecoins Will Accelerate the Institutionalization of the Crypto Market

The SEC's approval of YLDS not only demonstrates the open attitude of U.S. regulators but also indicates that stablecoins may evolve from "cash substitutes" into a new type of asset with dual attributes of "payment tools" and "yield tools", which will accelerate the institutionalization and dollarization process of the cryptocurrency market.

Interest-bearing stablecoins not only generate stable returns but also enhance capital turnover through intermediary-free and round-the-clock on-chain transactions, offering significant advantages in capital efficiency and instant settlement capabilities. Some hedge funds and asset management institutions have begun to incorporate stablecoins into their cash management strategies, and the approval of YLDS will further alleviate institutional compliance concerns.

The large-scale influx of institutional funds will drive the interest-bearing stablecoin market to achieve rapid growth. Research institutions optimistically predict that interest-bearing stablecoins will see explosive growth in the next 3-5 years, capturing around 10-15% of the stablecoin market, becoming another category of crypto assets that attracts significant institutional attention and investment after Bitcoin.

The rise of interest-bearing stablecoins will further solidify the dominance of the US dollar in the crypto world. Currently, the sources of yield for interest-bearing stablecoins on the market primarily fall into three categories: investment in US Treasury bonds, blockchain staking rewards, and structured strategy returns. Although some synthetic dollar stablecoins have achieved success in 2024, interest-bearing stablecoins backed by US Treasury bonds may still be the preferred choice for institutional investors in the future.

It is worth noting that while the physical world is accelerating its de-dollarization, the digital on-chain world continues to gravitate towards the US dollar. Whether it is the large-scale adoption of dollar stablecoins or the wave of tokenization initiated by Wall Street institutions, the influence of dollar assets in the crypto market is constantly strengthening.

This trend is difficult to reverse in the short term, as there are currently no more alternative options for tokenized innovation and the cryptocurrency financial market, aside from dollar assets represented by US Treasury bonds, in terms of liquidity, stability, and market acceptance. The SEC's approval of YLDS indicates that US regulators have given the green light for interest-bearing stablecoins similar to US Treasury bonds, which will undoubtedly attract more projects to launch similar products.

Conclusion

The approval of YLDS is not only a regulatory breakthrough in crypto innovation but also a milestone in the democratization of finance. It reveals a simple truth: the market's demand for "money making money" always exists under the premise of manageable risk. With the improvement of regulatory frameworks 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 requires a balance between innovation and risk to avoid repeating past mistakes. Only in this way can interest-bearing stablecoins truly realize the vision of "making it easy for everyone to earn returns."