Have you noticed platforms recently advertising a 12% annual yield on USDC?
This isn't just a marketing gimmick. For years, stablecoin holders received no yield—issuers kept the profits from investing idle cash (e.g., in U.S. Treasuries and short-term bills) for themselves, whether it was Tether's USDT or Circle's USDC.
Now, that yield is starting to be shared. Beyond USDC's incentive programs, a new wave of yield-bearing stablecoins is emerging, allowing holders to earn interest directly from the underlying assets. This not only reshapes how stablecoins are valued but could also become a new growth driver for RWA (Real World Assets) and Web3.
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What are Yield-Bearing Stablecoins?
By definition, yield-bearing stablecoins hold assets that generate yield and pass that yield (typically from Treasuries, other RWA assets, or on-chain strategies) back to the holder. This contrasts with traditional stablecoins like USDT or USDC, where the issuer retains the yield, and users only benefit from the dollar peg without receiving interest.
In practice, simply holding the token becomes a passive investment. Simply put, it redistributes the Treasury interest that issuers (like Tether) historically kept for themselves to stablecoin users.
Example:
When Tether issues $10 billion in USDT, users deposit $10 billion and receive $10 billion in tokens.
Tether does not pay interest on these deposits. If the cash is invested in U.S. Treasuries, the interest translates into nearly zero-cost, low-risk income.
According to its Q2 financial audit report, Tether directly holds over $157 billion in U.S. Treasuries ($105.5B direct, $21.3B indirect), making it one of the world's largest holders of U.S. debt. Data from Messari shows that as of July 31, 2025, Tether has surpassed South Korea to become the 18th largest holder of U.S. Treasuries.
At an approximate 4% yield, this equates to roughly $6 billion in annual interest, or about $700 million per quarter. Tether's $4.9 billion operating profit in Q2 highlights the power of this model.
At imToken, we view stablecoins through the lens of user needs—no single narrative. In our framework (Stablecoins Simplified: A Practical Framework for User Needs), yield-bearing stablecoins stand out as a distinct category, paying ongoing yield to holders primarily in two ways:
Native Yield: Yield is earned simply by holding the token, like a savings account on-chain (e.g., USDe, USDS).
Via Official Yield Avenue: The token doesn't auto-accumulate yield, but the issuer or protocol provides an official avenue to earn yield, such as depositing into DAI's DSR, staking, or converting to a yield-bearing receipt.
If 2020-2024 was the scaling phase, then 2025 marks the dividend phase. With a balance of compliance, yield, and liquidity, yield-bearing stablecoins could grow into a trillion-dollar niche.
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A Look at Popular Projects
Most designs revolve around tokenized U.S. Treasuries: your on-chain token is backed by Treasuries held by a custodian, combining low-risk yield with on-chain liquidity and DeFi composability (lending, leverage, etc.).
Beyond established protocols like MakerDAO and Frax Finance, new entrants like Ethena (USDe) and Ondo Finance are expanding rapidly, covering models from protocol-native to CeDeFi.
Ethena — USDe
A breakout project of this cycle, its supply recently surpassed $10 billion. According to Ethena Labs, USDe's annualized yield is currently around 9.3%, sometimes even exceeding 30%.
Yield primarily comes from two sources:
ETH liquid staking rewards (~4%, relatively stable)
Delta-hedged funding income (shorting perpetuals), which is market-driven, so the APY fluctuates with funding sentiment
Ondo Finance — USDY
Ondo is a Real World Asset (RWA) platform bringing fixed income on-chain. Its USD Yield (USDY) is a tokenized note backed by short-term U.S. Treasuries and bank demand deposits. Effectively, it's a bearer instrument, meaning holders earn yield without needing KYC.
USDY offers Treasury-like exposure for on-chain capital combined with full DeFi composability (lending, staking, etc.), making it a top proxy for an on-chain money market fund.
PayPal — PYUSD
PYUSD launched in 2023 as a payment-focused stablecoin (custodied by Paxos; fully backed by dollar deposits and short-term Treasuries).
In 2025, PayPal added yield distribution in select custodial wallet setups, returning a portion of the underlying interest (from Treasuries and cash equivalents) to holders, combining stablecoin payments with yield.
MakerDAO — EDSR / USDS
Maker remains the dominant decentralized stablecoin protocol. Its upgraded structure (USDS + Enhanced Dai Savings Rate) allows users to deposit directly with the protocol and automatically earn Treasury-pegged yield, no extra steps required.
Current Savings Rate (SSR): 4.75%
Deposits: ~$2 billion
This rebrand highlights Maker's evolution from a pure DeFi stablecoin to an RWA-driven yield distribution platform.
Frax Finance — sFRAX
Frax Finance is among the most proactive DeFi projects engaging with the Federal Reserve, including seeking a Fed master account. Its Treasury-backed staking vault, sFRAX, purchases U.S. Treasuries via a broker (Lead Bank, Kansas City) and tracks the Fed rate.
Over 60 million sFRAX is currently staked, with an APY of ~4.8%.
Note: Not all yield-bearing stablecoins will survive. For example, USDM has entered a wind-down phase, with minting permanently halted and limited redemptions available.
Overall: Most designs focus on short-term U.S. Treasuries and reverse repos, offering quoted rates of 4% - 5%, aligning with current Treasury yields. As more CeFi platforms, regulated custodians, and DeFi protocols join, this sector is poised to capture a growing share of the stablecoin market.
The sustainability of yield-bearing stablecoins stems from conservative assets—primarily U.S. Treasuries. Holding U.S. Treasuries carries near-zero credit risk while earning ~4% or more. Protocols invest in these instruments and, after covering operational costs, distribute a portion of the yield to holders, creating a "Treasury yield → stablecoin adoption" flywheel effect.
Holders earn Treasury-backed interest simply by holding the tokens. With short and mid-term yields near or above 4%, most fixed-income stablecoins currently offer yields around 4% - 5%.
This "hold-to-earn" model is naturally attractive:
Retail users: Generate passive income on idle capital.
DeFi protocols: View it as quality collateral for lending, leveraged trading, and derivatives.
Institutions: Access traditional yield on-chain in a compliant, transparent manner, reducing operational costs.
Yield-bearing stablecoins are one of the clearest use cases for Real World Assets (RWA)—expanding from crypto-native protocols to payment giants and Wall Street-backed newcomers. Regardless of U.S. rate movements, this shift has moved stablecoins from simple "pegs" to "dividends."
By shifting yield from issuers to holders, these assets combine real-world fixed income with on-chain liquidity and composability, positioning yield-bearing stablecoins as a potential growth engine for stablecoins and the broader convergence of crypto and traditional finance.
