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SEC approves interest-bearing stablecoin YLDS, ushering in a new era of stablecoin yields.
SEC Approves 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 reflects the U.S. regulators' recognition of crypto financial innovation but also indicates that stablecoins are transforming from mere payment tools to compliant yield-bearing assets. This could bring more development opportunities to the stablecoin space, making it another innovative field capable of attracting large-scale institutional funds after Bitcoin.
Reasons for SEC Approval of YLDS
In 2024, a well-known stablecoin issuer achieved an annual profit of up to $13.7 billion, surpassing traditional financial giants like Mastercard (approximately $12.9 billion). These profits mainly stem from the investment returns of reserve assets (primarily U.S. Treasuries), but holders cannot benefit from them. This is precisely the market opportunity that interest-bearing stablecoins are targeting.
The core of interest-bearing stablecoins lies in the "redistribution of asset yield rights": while maintaining stability, it allows holders to directly enjoy the benefits by tokenizing the yield rights of underlying assets. This model not only meets the needs of the "silent majority" of users but also achieves "yield democratization."
The reason YLDS has received SEC approval is that it complies with the 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. is currently mainly based 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," with no regulatory disputes.
Although the approval of YLDS indicates a continued positive attitude towards cryptocurrency regulation in the United States, it cannot change the regulatory challenges faced by traditional stablecoins in the short term. It is widely expected that the U.S. stablecoin regulatory bill may gradually come into effect in the next 1 to 1.5 years.
YLD distributes the interest income of underlying assets to holders 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 prompt more countries and regions to consider the development and regulation of interest-bearing stablecoins.
Interest-earning stablecoins drive institutionalization of 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 substitutes" into a new type of asset with dual attributes of both "payment tools" and "yield tools," accelerating 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 transactions, demonstrating 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. The approval of YLDS will further enhance institutional investors' acceptance and participation in such stablecoins.
Research institutions are optimistically predicting 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.
Interest-bearing stablecoins consolidate the dominance of the US dollar
The rise of interest-bearing stablecoins will further consolidate the dominance of the US dollar in the crypto world. Currently, the sources of returns for interest-bearing stablecoins on the market mainly fall into three categories: investing in US Treasury bonds, blockchain staking rewards, or structured strategy returns. Although some synthetic USD stablecoins may achieve success in 2024, interest-bearing stablecoins backed by US Treasury bonds are still likely to become the preferred choice for institutional investors.
Although the physical world is accelerating its de-dollarization, the digital on-chain world continues to lean towards the US dollar. Whether it is the widespread use of dollar stablecoins or the wave of tokenization initiated by Wall Street institutions, the influence of dollar assets in the crypto market is continuously strengthening in the United States.
The SEC's approval of YLDS indicates that U.S. regulators have given the green light for interest-bearing stablecoins backed by U.S. Treasury securities, which will attract more projects to launch similar products. Although the yield model for interest-bearing stablecoins may diversify in the future and reserve assets may expand to include more types of physical assets, U.S. Treasury securities as a risk-free asset will likely continue to dominate the underlying asset pool of interest-bearing stablecoins.
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 the market's ongoing demand 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 in crypto financial innovation. However, this process must also balance innovation and risk to avoid repeating past mistakes. Only in this way can interest-bearing stablecoins truly achieve the goal of inclusive finance.