A significant development in the world of cryptocurrency has emerged with the recent approval of a yield-bearing stablecoin by the U.S. Securities and Exchange Commission (SEC). This marks a pivotal moment for stablecoins, which play a crucial role in the crypto market, facilitating vast amounts of transactions daily. Traditionally, stablecoins have been seen as a means for investors to maintain stable asset values without the volatility associated with other cryptocurrencies, like Bitcoin and Ethereum. However, they often did not provide any yield, forcing investors to sacrifice potential returns for price stability. With the SEC’s endorsement of the first yield-bearing stablecoin, this dynamic is set to change.
The newly approved stablecoin, developed by Figure Certificate Co., is designed to offer a yield to its holders while maintaining a stable value. Unlike conventional stablecoins, which do not provide returns to their users, this innovative stablecoin, referred to as “YLDs,” generates yield by investing its reserves into secure securities such as U.S. Treasuries and commercial paper. This approach allows it to deliver returns without losing the key feature of stability that appeals to many investors.
YLDs have been classified by the SEC as “certificates,” thereby subjecting them to securities regulations. This classification distinguishes them from major existing stablecoins, such as Tether’s USDT, which does not provide yield to its users despite generating significant income for its issuers.
In highlighting the benefits of this new offering, there is much anticipation regarding its competitive potential. Figure Markets anticipates that YLDs will serve multiple key functions such as facilitating payments, enabling cross-border transfers, and supporting collateralized lending. Its main competitors include the established Tether—currently the leading stablecoin—and BlackRock’s BUIDL, which is tailored for institutional investors.
The appetite for yield-bearing stablecoins appears to be on the rise. Notably, a co-founder of Tether recently announced plans to create a similar product, indicating a growing acknowledgment of investor interest in earning passive income from digital assets.
The journey to obtaining SEC approval for YLDs commenced in August 2023, with a confidential filing that guided the application through the complex regulatory landscape. With the backing of the SEC achieved, there is now a pathway for further yield-bearing stablecoins to potentially enter the market, although additional regulatory approvals are expected to take a few more months.
Furthermore, this development comes amidst a broader trend of increasing attention from U.S. policymakers regarding stablecoins. Recent executive orders in the Trump administration have indicated support for the growth of dollar-backed stablecoins, which enhances the prospects for regulatory clarity in the future. Concurrently, Congress is actively working on creating formal legislation that could establish a clear framework for stablecoin operations.
In summary, the launch of yield-bearing stablecoins is poised to transform the cryptocurrency landscape. By providing a new avenue for investment that combines yield with price stability, these innovations could attract even more participants to the crypto market. With regulatory support now in place, the stage is set for a competitive market where investors can earn passive income while mitigating volatility risks, ultimately reshaping the future of crypto assets.