The interest-bearing stablecoin YLDS has been approved by the SEC, marking the beginning of a new era for stablecoin yields.

Recently, the U.S. Securities and Exchange Commission (SEC) approved the first interest-bearing stablecoin YLDS launched by Figure Markets. This decision not only reflects the regulatory body's recognition of innovation in crypto finance, but also indicates that stablecoins are transitioning from mere payment tools to compliant yield-bearing assets. This development could open up broader prospects for the stablecoin sector, making it another innovative field attracting large-scale institutional funds after Bitcoin.

The Reason for SEC Approval of YLDS

In 2024, a well-known stablecoin issuer's annual profit reached 13.7 billion USD, surpassing some traditional financial giants. These profits mainly come from the investment returns of reserve assets (such as US Treasury bonds), but are unrelated to stablecoin holders. Interest-bearing stablecoins are precisely targeting this breakthrough, attempting to redistribute asset income rights.

The core concept of interest-bearing stablecoins is "redistribution of asset yield rights". In the traditional stablecoin model, users sacrifice the time value of their funds for stability. Interest-bearing stablecoins maintain stability while tokenizing the yield rights of the underlying assets, allowing holders to directly enjoy the returns. This "holding coins to earn interest" model eliminates operational thresholds and achieves true "democratization of returns".

Although transferring the underlying asset's yield may reduce the profits of the issuing institution, it significantly enhances the attractiveness of interest-bearing stablecoins. In the current context of global economic instability and high inflation, the demand for financial products that can provide stable returns is on the rise. Products like YLDS, which are both stable and able to offer yields higher than traditional bank rates, will undoubtedly become a popular choice among investors.

However, the key to the SEC approving YLDS lies in its compliance with current U.S. securities regulations. As the United States has not yet established a dedicated regulatory framework for stablecoins, oversight is currently based on existing laws. Different regulatory agencies have varying definitions of stablecoins, leading to a complex regulatory environment. However, YLDS, as an interest-bearing stablecoin, has a structure similar to traditional fixed-income products, clearly falling under the category of "securities," thus avoiding regulatory disputes.

The approval of YLDS indicates that the U.S. regulatory attitude towards cryptocurrencies is continuously improving, but in the short term, it cannot change the regulatory challenges faced by traditional stablecoins. It is widely expected that the U.S. stablecoin regulatory bill may gradually be implemented in the next 1 to 1.5 years.

YLDS allocates underlying asset returns through smart contracts and employs a strict KYC verification mechanism, providing a compliance reference for other similar projects. In the next 1-2 years, more compliant interest-bearing stablecoin products may emerge, prompting more countries and regions to consider related regulatory measures. For regions that have considered stablecoins as payment tools, there may be a need to adjust the existing regulatory framework or consider incorporating interest-bearing stablecoins into the regulatory scope of tokenized securities.

The Potential Impact of Interest-Generating Stablecoins

The SEC's approval of YLDS not only demonstrates the open attitude of American 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" in mainstream finance. This trend will accelerate the institutionalization and dollarization process of the crypto market.

Interest-bearing stablecoins not only generate stable returns but also improve capital turnover 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 institutions have begun to incorporate stablecoins into their cash management strategies. After YLDS received SEC approval, it is expected to further 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. Research institutions optimistically predict that interest-bearing stablecoins will experience explosive growth in the next 3-5 years, potentially capturing about 10-15% of the stablecoin market share, 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 the de-dollarization process, the digital on-chain world continues to gravitate towards the US dollar. Whether it's the widespread use of US dollar stablecoins or the wave of tokenization initiated by Wall Street institutions, the United States is strengthening the influence of dollar assets in the crypto market.

From the perspectives of liquidity, stability, and market acceptance, dollar assets represented by U.S. Treasury bonds remain the best choice for tokenization innovation and the crypto finance market. The SEC's approval of YLDS indicates that U.S. regulators have given the green light for interest-bearing stablecoins based on U.S. Treasury bonds, which will attract more projects to launch similar products. Although the yield model for interest-bearing stablecoins may become more diversified in the future, and reserve assets may expand to include more RWA types such as real estate, gold, and corporate bonds, U.S. Treasury bonds will still hold an important position in the underlying asset pool of interest-bearing stablecoins as a risk-free asset.

Conclusion

The approval of YLDS is not only a regulatory breakthrough for crypto innovation but also a milestone for financial democratization. It reveals the market's ongoing demand for "money making money." 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 in crypto financial innovation. However, in this process, balancing innovation with risk management is crucial to avoid repeating past mistakes. Only under this balance can interest-bearing stablecoins truly achieve the ideal of inclusive finance.