Interest-earning stablecoin YLDS approved by SEC: A new transformation in the stablecoin market

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

Analysis of the Reasons for SEC Approval of YLDS

In 2024, a well-known stablecoin issuer's annual profit reached 13.7 billion USD, even surpassing the profit levels of traditional financial giants. These profits mainly come from the investment returns of reserve assets (such as US Treasury bonds), but ordinary users cannot benefit from this. This is precisely the market opportunity that interest-bearing stablecoins are targeting.

The core of interest-bearing stablecoins lies in the "redistribution of asset income rights". While maintaining stability, it tokenizes the income rights of underlying assets, allowing holders to directly enjoy the benefits. This "holding coins to earn interest" model makes capital gains accessible without barriers, achieving true "democratization of income".

Although transferring the underlying asset income will 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 rising. Products like YLDS, which are both stable and can offer rates higher than traditional bank interest rates, will undoubtedly be favored by investors.

The reason why YLDS obtained SEC approval is that it complies with existing U.S. securities regulations. Since the U.S. has not yet established a systematic regulatory framework for stablecoins, the current regulation is mainly based on existing laws. YLDS, as an interest-bearing stablecoin that can generate returns, has a structure similar to traditional fixed-income products, and clearly falls under the category of "securities," thus there is no regulatory dispute.

The approval of YLD indicates a continued improvement in the U.S. regulatory attitude towards cryptocurrencies, but in the short term, it cannot change the regulatory challenges faced by traditional stablecoins. More substantive changes may need to wait until the U.S. Congress formally passes stablecoin regulatory legislation, which is expected to be gradually completed in the next 1 to 1.5 years.

YLD distributes the underlying asset income to holders through smart contracts and employs a strict KYC verification mechanism. These compliance designs provide a reference for similar projects in the future. It is expected that within the next 1-2 years, we may see more compliant interest-bearing stablecoin products emerging, which will also encourage more countries and regions to consider related regulatory measures.

The Impact and Prospects of Interest-bearing Stablecoins

The SEC's approval of YLDS not only demonstrates the open attitude of US regulators but also indicates that stablecoins may evolve from "cash alternatives" into a new type of asset with the dual attributes of "payment tools" and "yield tools", which will accelerate 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 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 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 are optimistic that interest-bearing stablecoins will experience explosive growth in the next 3-5 years, potentially capturing around 10-15% of the stablecoin market share, becoming another category of crypto assets that attracts significant institutional attention and investment following Bitcoin.

The rise of interest-bearing stablecoins will further consolidate the dominance of the US dollar in the crypto world. Despite the trend of de-dollarization in the real economy, the digital on-chain world continues to gravitate towards the US dollar. Whether it is the widespread use of dollar stablecoins or the wave of tokenization initiated by Wall Street institutions, it reflects that the influence of US dollar assets in the crypto market is continuously increasing.

This trend is difficult to reverse in the short term because, in terms of liquidity, stability, and market acceptance, there are currently no more alternatives in the crypto financial market besides dollar assets represented by US Treasuries. The SEC's approval of YLDS indicates that US regulators have opened the green light for interest-bearing stablecoins similar to US Treasuries, 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 marks an important milestone in the process of financial democratization. It reveals the market's eternal demand for "making money from money." With the improvement of the regulatory framework and the influx of institutional funds, interest-bearing stablecoins are expected to reshape the landscape of the stablecoin market and strengthen the dollarization trend of crypto financial innovation. However, in this process, balancing innovation and risk management is crucial to avoid repeating past mistakes. Only on the basis of ensuring safety and compliance can interest-bearing stablecoins truly realize the vision of inclusive finance, allowing more people to benefit from financial innovation.