Written by: imToken
Have you recently seen a 12% annualized yield on USDC on certain platforms?
This is not just a gimmick. In the past, stablecoin holders were often "interest-free depositors" earning zero interest, while issuers invested the deposited funds in safe assets like U.S. Treasury bonds and bills, earning substantial profits—this is true for USDT/Tether and USDC/Circle.
Now, the exclusive dividends that used to belong to issuers are being redistributed—in addition to the interest subsidy war for USDC, an increasing number of new generation yield-bearing stablecoin projects are breaking down this "yield wall," allowing holders to directly share in the interest income from underlying assets. This not only changes the value logic of stablecoins but may also become a new growth engine for RWA and the Web3 sector.
1. What are yield-bearing stablecoins?
By definition, yield-bearing stablecoins are stablecoins whose underlying assets generate income and directly distribute that income (usually from U.S. Treasury bonds, RWA, or on-chain yields) to holders. This is distinctly different from traditional stablecoins (like USDT/USDC), where the income belongs to the issuer, and holders only enjoy the advantage of being pegged to the dollar without any interest income.
Yield-bearing stablecoins turn holding the coins themselves into a passive investment tool. The reason for this is that they distribute the interest income from U.S. Treasury bonds, which Tether/USDT used to monopolize, to a broader base of stablecoin holders. An example may help clarify this:
For instance, the process of Tether issuing USDT essentially involves crypto users "purchasing" USDT with dollars—when Tether issues $10 billion of USDT, it means crypto users have deposited $10 billion with Tether to obtain this $10 billion of USDT.
Once Tether receives this $10 billion, it does not need to pay interest to the corresponding users, effectively acquiring real dollar funds from crypto users at zero cost. If it buys U.S. Treasury bonds, that translates to zero-cost, risk-free interest income.
Source: Messari
According to Tether's disclosed second-quarter verification report, it directly holds over $157 billion in U.S. government bonds (including $105.5 billion directly held and $21.3 billion indirectly held), making it one of the largest holders of U.S. Treasury bonds globally—according to Messari data, as of July 31, 2025, Tether surpassed South Korea to become the 18th largest holder of U.S. Treasury bonds.
This means that even at a bond yield of around 4%, Tether can earn about $6 billion annually (roughly $700 million per quarter). The reported operating profit of $4.9 billion for Tether in the second quarter also confirms the profitability of this model.
Based on the market practice that "stablecoins are no longer a tool that can be summarized by a single narrative; their use varies from person to person and according to need," imToken has categorized stablecoins into several exploratory subsets (see extended reading: “Stablecoin Worldview: How to Build a Classification Framework for Stablecoins from the User Perspective?”).
According to imToken's classification method, yield-bearing stablecoins are listed as a special subclass that can provide continuous income to holders, mainly including two major categories:
- Native interest-bearing stablecoins: Users only need to hold this type of stablecoin to automatically earn income, similar to a bank's demand deposit. The tokens themselves are a type of interest-bearing asset, such as USDe, USDS, etc.;
- Stablecoins with official yield mechanisms: These stablecoins may not automatically generate interest, but their issuers or management protocols provide official income channels. Users need to perform specific actions, such as depositing them into designated savings protocols (like DAI's savings rate mechanism DSR), staking, or exchanging them for specific yield certificates to start earning interest, similar to DAI, etc.;
If 2020-2024 is the "expansion period for stablecoins," then 2025 will be the "dividend period for stablecoins." With a balance of compliance, yield, and liquidity, yield-bearing stablecoins may become the next trillion-dollar stablecoin sub-sector.
Source: imToken Web (web.token.im) yield-bearing stablecoins
2. Overview of leading yield-bearing stablecoin projects
From a practical implementation perspective, most yield-bearing stablecoins are closely related to the tokenization of U.S. Treasury bonds—on-chain tokens held by users essentially anchor the U.S. Treasury assets held in custody, preserving the low-risk attributes and income potential of Treasury bonds while also providing the high liquidity of on-chain assets, which can be combined with DeFi components to create leveraged, lending, and other financial strategies.
Currently, in the market, in addition to established protocols like MakerDAO and Frax Finance continuing to invest, new players like Ethena (USDe) and Ondo Finance are rapidly developing, forming a diverse landscape ranging from protocol-based to CeDeFi hybrid models.
Ethena's USDe
As a key player in the current yield-bearing stablecoin wave, Ethena's stablecoin USDe has recently seen its supply surpass the $10 billion mark for the first time.
Data from Ethena Labs' official website shows that as of the time of writing, USDe's annualized yield remains as high as 9.31%, previously even exceeding 30%. The high yield primarily comes from two sources:
- ETH's LSD staking yield;
- Funding rate income from Delta hedging positions (i.e., short positions in perpetual futures);
The former is relatively stable, currently fluctuating around 4%, while the latter completely depends on market sentiment, so USDe's annualized yield is, to some extent, directly tied to the overall funding rate in the network (market sentiment).
Source: Ethena
Ondo Finance USDY
As a star project in the RWA sector, Ondo Finance has focused on bringing traditional fixed-income products into the on-chain market. Its USD Yield (USDY) is a tokenized note backed by short-term U.S. Treasury bonds and bank demand deposits, essentially an unregistered debt certificate, allowing holders to directly hold and enjoy income without real-name verification.
USDY essentially provides on-chain funds with exposure to risks close to that of Treasury bonds while granting token composability, allowing it to be combined with DeFi lending, staking, and other modules to amplify yields. This design makes USDY an important representative of current on-chain money market funds.
PayPal's PYUSD
PayPal's PYUSD, launched in 2023, is primarily positioned as a compliant payment stablecoin, with Paxos as the custodian, pegged 1:1 to dollar deposits and short-term Treasury bonds.
Entering 2025, PayPal began experimenting with adding a yield distribution mechanism to PYUSD, especially in collaboration with certain custodial banks and Treasury investment accounts, returning part of the underlying interest income (from Treasury bonds and cash equivalents) to holders, attempting to bridge the dual attributes of payment and yield.
MakerDAO's EDSR/USDS
MakerDAO's dominance in the decentralized stablecoin sector is well-known. Its USDS (an upgraded version of the DAI savings rate mechanism) allows users to directly deposit tokens into the protocol to automatically earn interest linked to Treasury bond yields without incurring additional operational costs.
Currently, the savings rate (SSR) is 4.75%, with deposits nearing 2 billion tokens. Objectively, the renaming event also reflects MakerDAO's repositioning of its brand and business model—from a DeFi-native stablecoin to an RWA yield distribution platform.
Source: makerburn
Frax Finance's sFRAX
Frax Finance has been one of the most proactive DeFi projects in aligning with the Federal Reserve, including applying for a Federal Reserve master account (allowing it to hold dollars and transact directly with the Federal Reserve). Its sFRAX, which utilizes U.S. Treasury bond yields, has established a brokerage account in partnership with Lead Bank in Kansas City to purchase U.S. Treasury bonds, tracking Federal Reserve rates to maintain relevance.
As of the time of writing, the total amount staked in sFRAX has exceeded 60 million tokens, with the current annualized rate around 4.8%.
Source: Frax Finance
Additionally, it is worth noting that not all yield-bearing stablecoins can operate stably; for example, the USDM project has announced liquidation, with minting functions permanently disabled and only limited time for primary market redemptions remaining.
Overall, most yield-bearing stablecoins currently concentrate their underlying configurations in short-term Treasury bonds and reverse repos, offering interest rates typically in the 4%-5% range, aligning with current U.S. Treasury yield levels. As more CeFi institutions, compliant custodial platforms, and DeFi protocols enter this sector, this type of asset is expected to occupy an increasingly important share of the stablecoin market.
3. How to view the yield enhancement of stablecoins?
As mentioned above, the reason yield-bearing stablecoins can provide sustainable interest returns lies in the robust configuration of underlying assets. After all, the income sources for most of these stablecoins are low-risk, stable-yield assets like U.S. Treasury bonds and other RWA assets.
From a risk structure perspective, holding U.S. Treasury bonds carries risks almost equivalent to holding dollars, but Treasury bonds additionally generate annualized interest of 4% or even higher. Therefore, during periods of high Treasury bond yields, these protocols earn income by investing in these assets, deducting operational costs, and distributing part of the interest to holders, forming a perfect "Treasury bond interest—stablecoin promotion" closed loop:
Holders only need to hold stablecoins as proof to receive "interest income" from the underlying financial asset of U.S. Treasury bonds, and currently, the yields on U.S. short- and medium-term Treasury bonds are close to or exceed 4%, so most fixed-income projects supported by U.S. Treasury bonds also have interest rates in the 4%-5% range.
Objectively speaking, this "hold to earn" model is inherently attractive; ordinary users can allow idle funds to automatically generate interest, DeFi protocols can use them as high-quality collateral, further deriving financial products such as lending, leverage, and perpetuals, while institutional funds can enter the on-chain space under a compliant and transparent framework, reducing operational and compliance costs.
Therefore, yield-bearing stablecoins are expected to become one of the most understandable and practical application forms in the RWA sector. It is precisely for this reason that RWA fixed-income products and stablecoins based on U.S. Treasury bonds are rapidly emerging in the current crypto market, with competition taking shape from on-chain native protocols to payment giants and new players with Wall Street backgrounds.
Regardless of how U.S. Treasury bond yields change in the future, this wave of yield-bearing stablecoins driven by the high-interest rate cycle has already shifted the value logic of stablecoins from "pegging" to "dividends."
In the future, perhaps when we look back at this time point, we will find that it is not only a watershed moment in the narrative of stablecoins but also another historical turning point in the integration of crypto and traditional finance.
【Disclaimer】The content of this article is for industry observation and information sharing only and does not constitute any investment advice. There are recent scams and high-risk projects in the market under the guise of stablecoins or high yields; please remain vigilant and conduct thorough research before making any investment or trading decisions, and take responsibility for your investment actions.
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