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

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

Analysis of the Reasons for SEC Approval of YLDS

In 2024, a large stablecoin issuer's annual profit reached as high as $13.7 billion, even surpassing the profit levels of traditional financial giants (around $12.9 billion). These profits mainly come from the investment returns of reserve assets (dominated by U.S. Treasury securities), but are unrelated to stablecoin holders, and users cannot achieve asset appreciation and investment returns by holding stablecoins. This is precisely the breakthrough that interest-bearing stablecoins are targeting, which is expected to disrupt the existing landscape.

The core of interest-bearing stablecoins lies in the "redistribution of asset income rights": while maintaining stability, it allows holders to directly enjoy the income 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 income through staking, complex operations and security compliance risks hinder mass user adoption. In contrast, stablecoins like YLDS, which offer "earnings by holding coins," have achieved a barrier-free access to capital income, truly realizing "income democratization."

The reason why YLDS was able to gain SEC approval lies in its compliance with current U.S. securities regulations. As a systematic regulatory framework for stablecoins has not yet been established, the regulation of stablecoins in the U.S. currently relies mainly on existing laws. YLDS, as a yield-generating interest-bearing stablecoin, has a structure similar to traditional fixed-income products and clearly falls under the category of "securities," which is not disputed. 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 be resolved in the short term. More substantive changes may have to wait until the U.S. Congress formally passes stablecoin regulatory legislation. Industry insiders generally expect that the U.S. stablecoin regulatory bill may be gradually implemented within the next 1 to 1.5 years.

YLD distributes the interest income of underlying assets to holders through smart contracts and binds income distribution to compliant identities through a strict KYC verification mechanism. These compliance designs provide a reference for similar projects seeking regulatory approval in the future. In the next 1-2 years, we may see more compliant interest-bearing stablecoin products emerge, which will also drive more countries and regions to consider the development and regulatory issues of interest-bearing stablecoins.

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

The SEC's approval of YLDS not only demonstrates the current open attitude of US regulators but also presages that stablecoins may evolve from "cash substitutes" into a new type of asset that combines the dual attributes of "payment tools" and "yield tools" in the mainstream financial context, which will accelerate the institutionalization and dollarization of the cryptocurrency market.

Interest-bearing stablecoins not only generate stable returns but also improve capital turnover through intermediary-free and around-the-clock on-chain trading, demonstrating significant advantages in capital efficiency and instant settlement capabilities. 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 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 indispensable part of the crypto ecosystem. Research institutions optimistically 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 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 its de-dollarization, the digital on-chain world continues to gravitate towards the dollar. Whether it is the large-scale application of US dollar stablecoins or the tokenization wave led by Wall Street institutions, the influence of dollar assets in the crypto market is continuously strengthening, and this trend of dollarization is being reinforced.

This trend is difficult to reverse in the short term, as there are currently no more alternative options for tokenized innovation and the crypto financial market, apart from dollar assets represented by U.S. Treasury bonds, in terms of liquidity, stability, and market acceptance. 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 undoubtedly attract more projects to launch similar products.

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: the market's demand for "money making money" eternally exists under the premise of controllable risks. With the improvement of regulatory frameworks and the influx of institutional funds, interest-bearing stablecoins are expected to reshape the stablecoin market and strengthen the dollarization trend of crypto financial innovation. However, this process also requires balancing innovation and risk to avoid repeating past mistakes. Only in this way can interest-bearing stablecoins truly achieve the goal of "making it easy for everyone to earn returns."