Interest-bearing stablecoin YLDS approved by SEC: A new era of stablecoin yields begins

Recently, the U.S. Securities and Exchange Commission (SEC) approved Figure Markets' launch of the first interest-bearing stablecoin YLDS. This move not only demonstrates 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-generating assets. This could open up broader development space for the stablecoin sector, making it another innovative field attracting large-scale institutional funds after Bitcoin.

Reasons for SEC Approval of YLDS

In 2024, a certain stablecoin issuer achieved an annual profit of up to 13.7 billion USD, surpassing the profit levels of traditional financial giants. These profits mainly come from the investment returns of reserve assets (primarily U.S. Treasury bonds), but are unrelated to the holders, and users cannot obtain asset appreciation or investment returns through this stablecoin. This is precisely the breakthrough that interest-bearing stablecoins aim for.

The core of interest-bearing stablecoins lies in the "redistribution of asset income rights": while maintaining stability, it allows holders to directly enjoy returns by tokenizing the income rights of the underlying assets. This model addresses the pain points of the "silent majority": although traditional stablecoins can also generate returns through staking, complex operations and security compliance risks hinder widespread user adoption. Stablecoins like YLDS that offer "hold to earn" make financial returns accessible without thresholds, achieving "democratization of收益".

The reason YLDS was able to obtain SEC approval lies in its circumvention of the core controversies of SEC regulation, complying with existing U.S. securities laws. YLDS, a yield-generating interest-bearing stablecoin, has a structure similar to traditional fixed-income products, clearly falling within the "securities" category, and there are no regulatory disputes. This is the prerequisite for YLDS to be included under SEC regulation.

However, this does not mean that the regulatory challenges faced by other traditional stablecoins will change immediately. More substantial changes may need to wait until the U.S. Congress officially passes the stablecoin regulation bill, which is expected to gradually take effect in the next 1 to 1.5 years.

YLDS distributes the interest income of underlying assets to holders through smart contracts and uses a strict KYC verification mechanism to bind income distribution to compliant identities, reducing 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 regulatory issues of interest-bearing stablecoins.

The Rise of Interest-bearing Stablecoins Accelerates Institutionalization in the Crypto Market

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

Interest-bearing stablecoins not only generate stable returns but also improve capital turnover through intermediary-free and 24/7 on-chain transactions, offering significant advantages in capital efficiency and instant settlement capabilities. A certain investment institution noted that hedge funds and asset management firms have begun to incorporate stablecoins into their cash management strategies, and the approval of YLDS by the SEC will further enhance institutional investors' acceptance and participation.

The large-scale influx of institutional funds will drive rapid growth in the interest-bearing stablecoin market. Research institutions predict that interest-bearing stablecoins will experience explosive growth in the next 3-5 years, capturing about 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 consolidate the dominance of the US dollar in the crypto world. 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 application of US dollar stablecoins or the tokenization wave initiated by Wall Street institutions, the influence of US 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 besides dollar assets represented by U.S. Treasury bonds for tokenized innovation and the crypto financial market. The SEC's approval of YLDS indicates that U.S. regulators have given the green light for interest-bearing stablecoins similar to U.S. Treasury bonds, which will attract more projects to launch similar products.

Conclusion

The approval of YLDS is not only a regulatory breakthrough for crypto innovation but also a milestone in the democratization of finance. It reveals the enduring demand in the market for "money making money." 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 needs to balance innovation and risk to avoid repeating past mistakes. Only in this way can interest-bearing stablecoins truly achieve the goal of providing stable returns for more people.