What Is a Yield-Bearing Stablecoin? Where the Income Comes From
Key Takeaways
- Definition: A yield-bearing stablecoin is a dollar-pegged token, or a share or wrapper built on one, that passes income from its backing to holders.
- Four income sources: The income comes from reserve T-bill income passed through, protocol surplus, funding and basis trades, or loans and private credit.
- Two payout methods: Holders receive yield through a rising token price (value-accruing) or a growing token balance (rebasing).
- Rules split the market: The US GENIUS Act and the EU's MiCA bar payment-stablecoin issuers from paying interest. The market pairs a payment dollar with a separate yield-bearing token or share.
- Risk follows the source: Each income source carries its own risk, and any of them can fall, stop or turn negative.
Introduction
Stablecoins are built to hold a steady dollar value, and the reserves behind them earn income. The open question is who keeps that income. A yield-bearing stablecoin is one answer: a design that passes some or all of the income from its backing to the people who hold it.
The pool of dollars involved is large. Total stablecoin market capitalization stood at $279.52B on November 11, 2026, according to rwa.xyz. The reserves behind those tokens are where the question of stablecoin yield starts.
The rules are also moving. The US Office of the Comptroller of the Currency (OCC) finalized its GENIUS Act rule in October 2026. Other US regulators are still at the proposal stage, so the treatment of stablecoin yield in the US is still taking shape.
Holders face a practical choice between two kinds of token. One holds $1.00 and earns nothing, while the other passes income through and takes on the risks of whatever earns it. Knowing which you hold, and who pays its income, is the starting point for any decision about stablecoin yield.
This guide explains what makes a stablecoin yield-bearing and why payment stablecoins don't pay interest. It then covers the four sources of stablecoin yield, how holders receive it and the risks behind each design. It closes with a checklist for evaluating any yield-bearing token and the policy debate over bank deposits.
What Makes a Stablecoin Yield-bearing
A yield-bearing stablecoin is a dollar-pegged token, or a token built on one, that passes the income its backing earns through to holders. That backing might be Treasury bills, loans, trading positions or protocol revenue. With a payment stablecoin, the issuer keeps the reserve income and holders receive a token that aims to stay at $1.00.
Data providers draw the line in a similar place. DefiLlama's asset taxonomy tracks a yield-bearing attribute for each token. It defines that attribute as "whether the token passes through yield to holders." The taxonomy also has a narrower Yield Fiat Stable category for fiat-pegged stablecoins that pass reserve income to holders.
The label covers a range of designs. Many tokens sold as yield-bearing stablecoins are wrappers or shares built on a payment stablecoin. Their value floats above $1 as income builds up, so their price moves like that of any yield bearing asset.
In our view, the precise distinction is between a payment dollar and a yield-bearing share. The payment dollar holds $1.00 and pays nothing, while the share's value reflects what its backing earns.
A yield-bearing stablecoin is a digital asset, and it isn't a bank deposit. Holders have no FDIC coverage or other government deposit protection, and the income depends entirely on the assets behind the token.
Why Payment Stablecoins Don't Pay Interest
US and EU rules bar payment-stablecoin issuers from paying interest to holders. That is why yield sits in a separate token, a share built on a payment stablecoin or a program run by a third party. In the US, the open questions are how agencies implement the ban and whether it should reach third parties.
The GENIUS Act and its rulemaking in the US
The GENIUS Act bars permitted payment stablecoin issuers from paying interest or yield to holders. This ban is the reason the payment dollar and the yield-bearing share are separate products. An issuer can't pass reserve income to holders of the payment stablecoin itself.
Regulators are now writing the detailed rules. The OCC issued its final rule implementing the Act on October 21, 2026. Law firm Gibson Dunn reports that the rule, published at 91 FR 67000 on October 23, 2026, takes effect on January 18, 2027. As of October 28, 2026, the OCC was the only primary federal regulator to have finalized its rules.
The other agencies are still at the proposal stage. The Federal Reserve's proposed rule, published at 91 FR 61580 on September 29, 2026, takes comments until November 30, 2026. Its proposed 12 CFR 247.10(c)(4) says issuers "must not pay the holder of any payment stablecoin any form of interest or yield."
The FDIC proposed its rule on April 10, 2026, and Treasury proposed its rule on state regimes on April 3, 2026. The NCUA has also proposed rules. None of these were final as of October 28, 2026, so the full set of US rules on payment stablecoin interest is still incomplete.
Third parties, exchange rewards and the CLARITY Act
The ban reaches issuers, and the gap it leaves is third-party payments. Gibson Dunn notes there may still be room for affiliates, distributors and other third parties to offer rewards. That gap is why some platforms offer rewards to users who hold payment stablecoins with them.
Congress is debating whether to close it. The CLARITY Act, H.R. 3633, passed the House in July 2025, according to DLA Piper. On September 15, 2026, a Senate cloture vote on the motion to proceed failed. That vote was procedural and wasn't a vote on final passage.
On July 22, 2026, Senate Banking Committee Chairman Scott and Agriculture Committee Chairman Boozman released a section-by-section summary of their draft Senate text. Its Sec. 10404 would bar third-party payments made solely for holding payment stablecoins or "economically equivalent to interest on a bank deposit." It would still allow activity-based and transaction-based rewards, and it remains a draft with no legal effect.
MiCA in the EU
The EU reaches the same result through a different route. An e-money token is MiCA's category for a token that references a single official currency, such as the euro or the dollar. Article 50 of the EU's MiCA regulation prohibits issuers of e-money tokens from granting interest on those tokens.
The ban also covers service providers when they offer services related to e-money tokens. An exchange or broker in the EU therefore can't add interest on top of an e-money token either. Under both regimes, any yield has to come from a separate structure.
The Four Sources of Yield-bearing Stablecoin Income
Every yield traces back to someone paying for the use of the dollars. A yield-bearing stablecoin earns from one or more of four sources, and each has a different payer, rate driver and main risk.
| Source | Who pays | What drives the rate | Main risk |
|---|---|---|---|
| Reserve income passed through | The US Treasury and repo counterparties | Policy rates | Falling rates; issuer and structure risk |
| Protocol surplus | Users of the protocol, through fees and interest | Protocol revenue and governance decisions | Lower surplus; governance changes |
| Funding and basis trades | Traders in derivatives markets | Demand for leverage | Negative funding; exchange and custody risk |
| Loans and private credit | Borrowers repaying loans | Borrower credit and collateral | Default; collateral value; slow exits |
Reserve income passed through
Reserves held in T-bills and repo earn short-term rates, and a yield-bearing design passes some of that income to holders. As a benchmark, the 3-month Treasury bill averaged 4.05% on a discount basis in October 2026, according to the Federal Reserve Bank of St. Louis. That figure describes the bill market and implies nothing about what any token pays.
This income moves with policy rates. When the Federal Reserve cuts rates, T-bill yields fall, and so does the income a reserve-backed token can pass through. Repo, a short-term loan secured by Treasuries, reprices just as quickly.
Ondo's USDY is one example. It is available to qualifying non-US investors, and its backing may include short-term US Treasuries, Treasury ETF holdings or bank deposits. The token's structure and the issuer behind it add risks that a T-bill held directly doesn't carry.
Protocol surplus
Some protocols pay holders from the surplus their wider system earns. Sky's sUSDS works this way: the Sky Savings Rate is a variable rate funded from aggregate Sky protocol surplus.
Sky states that the rate can change over time. The income depends on how much the protocol earns and on governance decisions about how much to pay out. A holder of this kind of token is relying on the protocol's revenue and on the people who set its payout.
Funding and basis trades
Some designs earn from derivatives markets. Ethena's documentation names four revenue sources. They are funding and basis on delta-neutral positions, overcollateralized stable-asset loans, tokenized real-world assets held as backing, and rewards on liquid stablecoin holdings.
A delta-neutral position pairs a holding with an equal short in derivatives, so price moves cancel out. The basis is the price gap between a futures contract and the spot asset. The funding rate is a periodic payment between long and short holders of perpetual futures. When traders want leverage, longs usually pay shorts, and the short side collects that payment.
Funding can turn negative, which means the short side pays. Ethena says negative-revenue periods "are designed to be borne by the Reserve Fund." That fund is a buffer with a finite balance. Its design carries no promise that holders avoid losses.
Loans and private credit
The fourth source is interest that borrowers pay on loans secured by real assets. The rate is set by the borrower's credit and the collateral behind the loan. It doesn't track policy rates or derivatives markets directly.
The risks are credit risks. A borrower can default, and the collateral can be worth less than the loan when it's sold. Recovering value after a default also takes time and carries costs. Loans often amortize over several years, so cash comes back gradually and a holder's exit depends on the cash available at the time.
In our view, loan income needs loan-level evidence to evaluate. A holder should be able to see which loans exist, what secures them and whether borrowers are paying on schedule.
How Holders Receive the Yield: Value-accruing Vs Rebasing
Yield-bearing stablecoins pay holders in one of two ways. A value-accruing token keeps your balance fixed while its price rises against the dollar. A rebasing token targets a price of $1.00 and adds new tokens to your balance instead.
Ondo's USDY shows both methods. USDY itself is accumulating, so its price rises as income builds up. rUSDY is a rebasing wrapper that targets $1.00 and grows the holder's balance. Sky's sUSDS is also value-accruing, becoming redeemable for more USDS over time.
The choice has practical effects. Lending markets and liquidity pools handle fixed balances more easily, so value-accruing tokens tend to fit DeFi more smoothly. A rebasing token held in a pool may not pass its new tokens to the person who deposited it. Accounting also differs, because each rebase changes the number of tokens a holder owns.
A value-accruing token also doesn't hold a $1 peg. Its price sits above $1 and moves with the income behind it, which matters for any system that expects a dollar price.
| Feature | Value-accruing | Rebasing |
|---|---|---|
| Token balance | Stays fixed | Grows as income is added |
| Token price | Rises against the dollar | Targets $1.00 |
| DeFi use | Easier for lending markets and pools | Harder for protocols built around fixed balances |
| Accounting | One position whose value changes | Many small balance changes to record |
| Examples | USDY, sUSDS | rUSDY |
The Risks Behind Each Design
Risk follows the income source, and holders of any yield-bearing token can lose principal. A token earning from T-bills, a protocol, a trade or a loan book inherits the risks of that activity.
Smart contract risk applies to every design. A bug or exploit in the token's code can cause losses regardless of how its income is earned. Many tokens also depend on other protocols, such as lending markets or price feeds, which add their own code risk.
The table below sets out the main risk for each income source. A token that combines several sources carries several of these risks at once.
| Income source | Main risk | What it looks like |
|---|---|---|
| Reserve income | Rate risk | Income falls when policy rates fall |
| Protocol surplus | Governance and surplus risk | Payout is cut or protocol revenue drops |
| Funding and basis trades | Negative funding; venue and custody risk | Shorts pay longs, or an exchange or custodian fails |
| Loans and private credit | Credit and liquidity risk | Borrowers default, or exits wait for repayments |
| All designs | Smart contract risk | Code fails or is exploited |
A stress case: USDe in October 2025
Ethena's own account of October 10–11, 2025 shows how a venue-specific dislocation can look. According to Ethena's October 2025 governance update, published November 17, 2025, USDe traded as low as 0.65 USDT on Binance and 0.92 on Bybit. Independent research from 21Shares also puts the Binance low at $0.65 and found the drop wasn't reflected onchain.
Ethena says the Binance price normalized within about 90 minutes, while onchain pools held near 0.99. Ethena also says about $1.9B of USDe, roughly 13% of supply, was redeemed without using the Reserve Fund. Ethena puts liquidations on Aave and Pendle at about $47K.
The lesson is to check where a token's price is set and how redemption works. A token can trade far below its backing on one venue while redemption at the issuer works as designed. Holders who borrow against a token on a lending market should also know which price feed that market uses.
How to Evaluate a Yield-bearing Stablecoin
In our view, every yield should come with a named payer and dated evidence. The checklist below applies to any yield-bearing stablecoin, whatever its income source.
- Income source: Identify where the income comes from and who pays it, whether the US Treasury, protocol users, traders or borrowers.
- Downside case: Check what happens when income falls or turns negative, and whether a buffer exists and how large it is.
- Exit terms: Find out how and when you can exit, and what cash pays redemptions. Check whether selling on a market is the only fast route.
- Independent reporting: Look for attestations, reserve- or loan-level detail and a dated scope for each report.
- Code and governance: Review smart contract audits and who can change the token's parameters. Note any delay before changes take effect.
- Eligibility: Confirm who can hold the token, since some are closed to certain jurisdictions.
One red flag outweighs the rest: yield with no traceable payer. If you can't name who pays the income, you can't judge whether it will continue. Treat a high or steady rate with no visible source as a reason to look harder.
Does Stablecoin Yield Pull Deposits from Banks?
The evidence on deposit flight is contested, and the answer depends on the model's assumptions. The White House Council of Economic Advisers modeled a yield ban in April 2026. At its baseline calibration, a prohibition produces "an increase in lending of 0.02%," or about $2.1B.
The Bank Policy Institute, an industry group, pointed to a far larger effect in September 2025. Citing a 2025 model by Huther and Wang, BPI describes a worst case where all stablecoin growth comes from deposits as a 20 percent decline. BPI calls its dollar figures indicative.
Both results come from models, and they rest on different assumptions about where stablecoin dollars come from. The CEA figure reflects its baseline calibration, while BPI's worst case assumes every new stablecoin dollar leaves a bank deposit.
Conclusion: a Payment Dollar and a Yield-bearing Share
The rules and the market point to the same structure. A payment dollar pays no interest, and a separate yield-bearing share reflects what its backing earns. USD.AI is a natural example of that split.
USDai is a stablecoin backed 1:1 by PYUSD. It pays no yield on its own and has no exposure to GPU loans. PYUSD is issued by Paxos Trust Company N.A., with monthly third-party attestations. You can swap USDC for USDai in the USD.AI app, and the USDai stablecoin page covers how it's used.
sUSDai, received by staking USDai in Earn, is your share of Earn. Its value reflects income from GPU loans and reserves. sUSDai isn't a stablecoin and isn't 1:1 with USDai. Holding it isn't ownership of any one loan or GPU.
USD.AI's documentation sets a maximum sUSDai utilization of 90% for deploying new loans. USD.AI's CHIP governance docs say CHIP holders vote on protocol rules, including utilization.
Withdrawals are processed in order. The loans behind it are reported in an independent Proof of Loans report. For more on its backing, see how sUSDai works.
sUSDai's value can rise or fall, and no yield is guaranteed. To see how staking, withdrawals and reporting fit together, read how USD.AI Earn works.
FAQ
What is a yield-bearing stablecoin?
A yield-bearing stablecoin is a dollar-pegged token, or a token built on one, that passes the income its backing earns through to holders. That income can come from T-bill reserves, protocol surplus, funding and basis trades, or loans. Holders receive it through a rising token price or a growing balance.
Can you earn yield on USDC?
Under the GENIUS Act, issuers of payment stablecoins can't pay holders interest or yield. Third parties, including some exchanges, run rewards programs on stablecoin balances, and Congress is debating whether to limit them.
Are yield-bearing stablecoins securities?
It depends on how each token is structured and where it's offered. The GENIUS Act covers payment stablecoins, whose issuers can't pay yield, and a yield-bearing token's status turns on its own structure and facts. This is general information and isn't legal advice.
What is the difference between rebasing and value-accruing stablecoins?
A rebasing token targets $1.00 and pays yield by increasing your token balance. A value-accruing token keeps your balance fixed and pays yield through a rising token price.
Is a yield-bearing stablecoin the same as a bank deposit?
No. A yield-bearing stablecoin is a digital asset with no FDIC coverage, and both its value and its yield can fall.
Is sUSDai a stablecoin?
No. sUSDai is the yield-bearing share of Earn, and its value can rise or fall with the GPU loans and reserves behind it. USDai is the stablecoin: it's backed 1:1 by PYUSD and pays no yield on its own.
