This article is reprinted with permission from W3C DAO, author: Martin, copyright belongs to the original author.
For a long time, stablecoin holders have been in an awkward position: while the asset value is stable, the yield is zero, and the issuers invest user funds in safe assets like U.S. Treasury bonds, enjoying annual profits of billions of dollars. Data disclosed by Tether shows that it holds over $157 billion in U.S. Treasury bonds, ranking as the 18th largest holder of U.S. debt globally, with an operating profit of up to $4.9 billion in the second quarter of 2025.
However, this pattern is being completely overturned, as the rise of yield-bearing stablecoins is transforming stablecoins from "value anchoring tools" into "yield-generating assets," ushering in the "dividend era" of stablecoins.
The core of yield-bearing stablecoins lies in their underlying assets generating income, which is directly distributed to holders through smart contracts. This sharply contrasts with traditional stablecoins (like USDT, USDC) — the former makes holders "interest-free depositors," while the latter turns holding coins into passive investment tools.
Its operational logic can be simplified as follows:
• Users deposit dollars to purchase stablecoins
• The issuer allocates funds to yield-generating assets (like U.S. Treasury bonds, staking yields)
• Earnings are automatically distributed to holders through on-chain mechanisms
• Holders enjoy the dividends of "earning just by holding"
This model breaks the barrier of issuers monopolizing profits, returning traditional financial earnings like U.S. Treasury interest to users in a tokenized form.
Currently, yield-bearing stablecoins have formed a multi-layered ecological structure to meet different risk preference needs:
• Ethena's USDe: Adopts a Delta-neutral strategy of "ETH staking + perpetual contract hedging," with annual yields reaching as high as 30%, currently around 9.31%. Its market capitalization has surpassed $10 billion, becoming a key player in the field.
• Ondo Finance's USDY: Anchors short-term U.S. Treasury bonds, providing stable yields of about 4%-5%. Essentially a tokenized note, backed by Treasury bonds and bank deposits, attracting conservative investors.
• PayPal's PYUSD: Upgraded to a yield-bearing stablecoin in 2025, allowing users to earn underlying U.S. Treasury interest in payment scenarios.
• MakerDAO's USDS: An upgraded version of DAI, allowing users to enjoy a 4.75% savings rate (SSR) on deposits, with a deposit scale nearing $2 billion.
The explosion of yield-bearing stablecoins is not only a technological iteration but also an innovation in economic models:
- Redistributing financial value
Returning the tens of billions in U.S. Treasury earnings monopolized by issuers to users through on-chain mechanisms. For example, if the U.S. Treasury yield is 4%, the trillion-dollar stablecoin market could generate $40 billion in interest annually — yield-bearing stablecoins allow users to transition from bystanders to participants.
- Connecting the core pipeline of RWA (real-world assets)
Tokenized Treasury bonds are the underlying support for yield-bearing stablecoins. By 2025, the market value of on-chain tokenized Treasury bonds is expected to exceed $5.8 billion, expanding at a quarterly growth rate of 25%, making stablecoins a "compliance bridge" for traditional income flows into the crypto world.
- Activating DeFi composability
Users can collateralize USDY in Aave for lending or provide liquidity in Curve, stacking additional yields. For instance, the base yield of USDY is 4.5%, which can be increased to 6%-8% through DeFi strategies, forming a "yield-reinvestment" closed loop.
Market predictions suggest that with the promotion of regulatory compliance, cross-border payment expansion, and traditional financial access, the stablecoin market size is expected to exceed $14 trillion to $40 trillion by 2030, with yield-bearing stablecoins accounting for over 15% of the total stablecoin market size.
Yield-bearing stablecoins signify the leap of stablecoins from 1.0 (anchoring tools) to 2.0 (yield-generating assets). They are not only a product of technological innovation but also a historical process of redistributing financial power — distributing previously institutionally monopolized risk-free returns to every holder through code.
The "yield era" of stablecoins essentially reconstructs the traditional financial profit distribution mechanism in the crypto market. It not only provides a safe and efficient trading environment but also maximizes the potential of yield-bearing stablecoins through DeFi components.
In the future, as the scale of RWA tokenization further expands, the integration of stablecoins with the real economy will become closer. When holding stablecoins can yield a 4% annual return, it will have the foundational conditions to challenge traditional money market funds, becoming a value link between the real and digital worlds.
Related: Coinbase CEO predicts Bitcoin (BTC) will reach $1 million, but analysts say it must first break the $124,000 mark.
Original article: “Stablecoins Enter a New Era of Yield”
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