The interest-bearing stablecoin YLDS has been approved by the SEC, ushering in a new era of stablecoin yields.

The U.S. Securities and Exchange Commission (SEC) recently approved the launch of the first interest-bearing stablecoin YLDS by Figure Markets. This move not only highlights the recognition of U.S. regulators for innovations in crypto finance but also indicates that stablecoins are transitioning from mere payment tools to compliant yield-bearing assets. This could open up broader development space for the stablecoin sector, making it another innovative field that can attract large-scale institutional funds after Bitcoin.

Reasons for SEC Approval of YLDS

In 2024, a well-known stablecoin issuer's annual profit reached $13.7 billion, even surpassing that of traditional financial giants (approximately $12.9 billion). These profits primarily stem from investment returns on reserve assets (such as U.S. Treasury bonds), but are unrelated to holders, and users cannot achieve asset appreciation and investment returns through this stablecoin. This is precisely the breakthrough that interest-bearing stablecoins hope to disrupt the existing landscape.

The core of interest-bearing stablecoins lies in the "redistribution of asset income rights": while maintaining stability, the income rights of underlying assets are tokenized, allowing holders to directly enjoy the benefits. This model addresses the pain points of the "silent majority": although traditional stablecoins can also generate income through staking, complex operations and security compliance risks hinder widespread user adoption. On the other hand, stablecoins like YLDS, which allow for "earning interest just by holding coins", make income generation accessible without thresholds, achieving "democratization of earnings".

The reason why YLDS obtained SEC approval lies in its compliance with current U.S. securities regulations. Since the United States has not yet established a systematic regulatory framework for stablecoins, regulation is currently based primarily on existing laws. YLDS, as an interest-bearing stablecoin that generates returns, is structurally similar to traditional fixed-income products and clearly falls under the category of "securities," which is undisputed. This is a prerequisite for YLDS to be included under SEC regulation.

However, this does not mean that the regulatory dilemmas faced by traditional stablecoins will change immediately. More substantial changes may have to wait until the U.S. Congress formally passes the stablecoin regulatory bill, which is expected to 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 binds the distribution of income to compliant identities using a strict KYC verification mechanism. These compliance designs provide references 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. For regions that have implemented stablecoin regulations and regard them as payment tools, when facing interest-bearing stablecoins with securities attributes, in addition to adjusting the existing regulatory framework, they may also consider regulating them by restricting the types of underlying assets of interest-bearing stablecoins and including them under the regulation of tokenized securities.

The Rise of Interest-bearing Stablecoins Drives Institutionalization in 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 alternatives" to a new type of asset that possesses both "payment tool" and "yield tool" attributes, which will accelerate the institutionalization and dollarization process of the crypto market.

Traditional stablecoins meet the needs of crypto payments, but due to the lack of interest income, most institutions only use them as short-term liquidity tools. In contrast, 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. A certain investment institution pointed out in its latest annual report that hedge funds and asset management institutions have begun to incorporate stablecoins into their cash management strategies. After YLDS receives SEC approval, it will further alleviate institutional compliance concerns and enhance institutional investors' acceptance and participation in such stablecoins.

The large-scale influx of institutional funds will drive rapid growth in the interest-bearing stablecoin market, making it an increasingly important component of the crypto ecosystem. Optimistically, interest-bearing stablecoins are expected to experience explosive growth in the next 3-5 years, capturing about 10-15% of the stablecoin market share, becoming another category of crypto assets that can attract significant institutional attention and investment after Bitcoin.

The rise of interest-bearing stablecoins will further consolidate the dominance of the US dollar in the crypto world. While the physical world is accelerating the de-dollarization, the digital on-chain world continues to gravitate towards the US dollar. Whether it is the widespread adoption of US dollar stablecoins or the wave of tokenization initiated by Wall Street institutions, the influence of US dollar assets in the crypto market is constantly strengthening, and this trend of dollarization is being reinforced.

In the short term, the likelihood of this trend reversing is low. From the perspectives of liquidity, stability, and market acceptance, there are currently no alternative options for tokenized innovation and the crypto financial market, aside from dollar assets represented by U.S. Treasury bonds. The SEC's approval of YLDS indicates that U.S. regulators have given the green light to interest-bearing stablecoins of the U.S. Treasury bond type, which will undoubtedly attract more projects to launch similar products. Although the income model for interest-bearing stablecoins may become more diversified in the future, with reserve assets potentially expanding to more types of physical assets such as real estate, gold, and corporate bonds, U.S. Treasury bonds will still dominate the underlying asset pool of interest-bearing stablecoins as a risk-free asset.

Conclusion

The approval of YLDS is not only a compliance breakthrough in crypto innovation but also a milestone in the democratization of finance. It reveals a simple truth: under the premise of controllable risk, the market's demand for "money making money" is eternal. 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 past mistakes. Only in this way can interest-bearing stablecoins truly achieve the vision of "allowing everyone to earn money effortlessly."