SEC Approves First Interest-Bearing Stablecoin YLDS, Opening a New 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 demonstrates the regulatory body's recognition of innovation in crypto finance but also signals that stablecoins are evolving from mere payment tools into compliant yield-bearing assets. This could create new development space in the stablecoin sector, making it another innovative area capable of attracting large-scale institutional funds following Bitcoin.

Why did the SEC approve YLDS?

In 2024, a well-known stablecoin issuer reported an annual profit of up to $13.7 billion, even surpassing the profits of traditional financial giants (around $12.9 billion). These profits mainly stem from the investment returns of reserve assets (primarily U.S. Treasury bonds), but are unrelated to ordinary users. This is precisely the breakthrough that interest-bearing stablecoins are focusing on.

The core of interest-bearing stablecoins lies in the "redistribution of asset revenue rights": while maintaining stability, it allows holders to directly enjoy profits by tokenizing the revenue rights of the underlying assets. This model of "holding coins generates interest" makes capital gains accessible without thresholds, achieving "democratization of profits".

Although transferring the underlying asset yield will reduce the profits of the issuing institution, it greatly enhances the attractiveness of interest-bearing stablecoins. In the current context of global economic instability and high inflation levels, the demand for stable and high-yield financial products is continuously increasing.

However, the main reason the SEC approved YLDS is that it complies with current securities regulations. Since the United States has not yet established a systematic regulatory framework for stablecoins, regulation is currently based on existing laws. Interest-bearing stablecoins like YLDS, which have a structure similar to traditional fixed-income products, clearly fall under the category of "securities," making it easier for the SEC to regulate them.

Although the approval of YLDS indicates a positive trend in the U.S. regulatory attitude towards cryptocurrencies, it cannot change the regulatory challenges faced by traditional stablecoins in the short term. It is widely expected in the industry that the U.S. stablecoin regulatory legislation may gradually be implemented within the next 1 to 1.5 years.

YLD distributes the underlying asset income through smart contracts and adopts a strict KYC verification mechanism, providing a compliance reference for similar projects in the future. In the next 1-2 years, more compliant interest-bearing stablecoin products may emerge, which will also encourage more countries and regions to consider relevant regulatory issues.

The Rise of Interest-Bearing Stablecoins Accelerates the Institutionalization of the Crypto Market

The SEC's approval of YLDS not only demonstrates the open attitude of U.S. regulators but also suggests that stablecoins may evolve from "cash alternatives" into a new type of asset that combines the dual attributes of "payment tools" and "yield tools," thereby accelerating the institutionalization and dollarization process of the crypto market.

Interest-bearing stablecoins not only generate stable returns but also enhance the capital turnover rate through intermediary-free and round-the-clock on-chain trading, offering significant advantages in capital efficiency and instant settlement capabilities. Some research institutions have pointed out that hedge funds and asset management firms have begun to incorporate stablecoins into their cash management strategies. After YLDS receives SEC approval, it may further increase 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. Some believe that interest-bearing stablecoins will see explosive growth in the next 3-5 years, capturing about 10-15% of the stablecoin market, becoming another category of cryptocurrency that attracts 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. Currently, the yields of interest-bearing stablecoins on the market mainly come from three aspects: investment in US Treasuries, blockchain staking rewards, or structured strategy returns. Although some synthetic US dollar stablecoins may succeed in 2024, it is expected that interest-bearing stablecoins backed by US Treasuries will still be the preferred choice for institutional investors in the future.

While the real world is accelerating the process of de-dollarization, the digital on-chain world continues to gravitate towards the US dollar. Whether it is the widespread use of dollar stablecoins or the tokenization wave driven by Wall Street institutions, the influence of dollar assets in the crypto market is continually strengthening. This trend is difficult to reverse in the short term, as there are currently no more alternative options besides dollar assets represented by US Treasuries, in terms of liquidity, stability, and market acceptance.

Conclusion

The approval of YLDS is not only a compliance breakthrough in crypto innovation but also an important milestone in the democratization of finance. It reveals the market's eternal demand for "money making money." As the regulatory framework improves and institutional funds flow in, interest-yielding 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-yielding stablecoins truly achieve the goal of allowing more people to enjoy the dividends of financial innovation.