SECApproves First Yield-Bearing Stablecoin: Great for Crypto?

Key Takeaways:

YLDS being the firstSEC-approved yield-bearing stablecoin provides a stable yield of 3.85% APR.
YLDS holders can also earn interest on their holdings, with monthly payouts in either USD or YLDS.
This approval from the SEC reflects its ever-growingacceptance of the fast-growing stablecoin market.

Figure Markets is the first U.S.-regulated firm to launch a yield-bearing stablecoin, YLDS, allowing users to earn interest on their balances. This marks a significant step in the evolving regulatory landscape for stablecoins. This indicates a possible regulatory sea change, whereby theburgeoning market for stablecoins might be viewed more favorably. However, the SEC isnt the only jurisdiction to move to regulate stablecoins, with both the European Union and Hong Kong and Singaporemaking strides toward a comprehensive approach.

What is YLDS?

YLDS, a dollar-pegged stablecoin that offers an additional yield component, provides 3.85% APR to holders. The interest rate is equal to the Secured Overnight Financing Rate (SOFR),minus 0.50%. Interest compounds daily and is paid out monthly, giving users the flexibility to receive payments in either U.S. dollars or additional YLDS tokens.

Commenting on the approval, Mike Cagney, CEO of Figure Markets, said: If I can hold this stablecoin, manage it myself, earn interest, and use it for transactions, then why do I need a bank?. Stablecoins, like YLDS with their low transaction fees, alsohave the potential to introduce financial sovereignty to individuals and facilitate the movement of money domestically and internationally.

Figures application. Source: SEC

AdministrativeRoadblocks: STABLE Act

The approval of YLDS comes asthe stablecoin market is booming and regulators the world over look to take steps toward regulating this new asset class. In the U.S., legislators are wrestling with a handful ofregulatory themes reserve management, transparency and integration with traditional financial systems.

A draft bill known as the STABLE Act, introduced by Republican lawmakers French Hill and Bryan Steil, aims to establish clearer regulatory guidelines for stablecoin issuers. But Timothy Massad, whoserved as Chairman of the Commodity Futures Trading Commission, argues that the draft is a useful beginning that nonetheless is lacking in some critical respects. He denounced it as substantially weaker than what was negotiated between the former committee chair and the ranking member last fall.

YLDS vs. ConventionalFixed-Income Products

At 3.85% APR, YLDS is a strong alternative to traditionalfixed income products. For example, although its below the average high-yieldsavings account rate of 4.75 percent, it outpaces U.S. Treasury bonds, which currently yield about 2.89 percent on 10-year notes and an average of 3.24 percent for 30-year bonds. In todays market, this is compelling for many, as investors incomesare more difficult to obtain on lower-yielding assets.

This can have a tangible impact on peoples lives, particularly retirees on fixed incomes. They need interest income to share with socialsecurity or a pension. It really depends on bond yields and interest rates on savings accounts if theyre too low, thenthese people will probably have to go into their principal, which could put their long-term financial stability at risk. A marginally higher yield from YLDS ora stablecoin could allow them to sustain their standard of living without having to draw down their savings.

Effects on the Stablecoin Market

YLDS approval could leadto a domino effect throughout the stablecoin market. Reserves funds, usually U.S. Treasuries, typically do not generate yield for leading stablecoins such as USDT Tetherand USDC USDC. This has led to theproliferation of tokenized money-market funds and investment vehicles such as BlackRocks BUIDL and Franklin Templetons BENJI.

Yield-bearing stablecoins such as YLDS canpotentially change the dynamics in play. This encourages stablecoin holders to spread their investments into yield-bearing assets that may bring new funds into crypto and limitmarket share of stablecoins not generating yield.

In addition, as YLDS has been classified as a security, it establishes a precedent for how regulatory bodies wouldaddress yield-bearing assets moving forward. This would hopefully pave the way forgreater clarity and consistency in the regulatory framework for stablecoins, increasing investor confidence and fostering further innovation within the sector.

Potential Use Cases for YLDS

YLDS has potential use cases in exchange collateral, borderless remittances,and payment rails, according to Figure Markets. This allows for a world inwhich you can earn on your money whilst still being able to use a digitised form of cash in the form of a stablecoin for transactions.

Cagney said We see tremendous applications for YLDS Exchange collateral, cross-border remittances, and payment rails are immediate opportunities, but this is just the beginning of a larger shift of traditional finance to blockchain.

Imagine a small business owner who frequently pays suppliers in other countries. By using YLDS, they could benefit from faster, cheaper cross-border transactions while also earning interest on their funds before making payments.

MarketReaction: Dynamic Performance Analysis

The SEC approved launch of $YLDSbuilt by Figure on February 20, 2025. In the opening hour, $YLDStrading on DEXs exceeded 10 million $YLDS tokens compared to 2 million tokens daily average.

Just as at 1:00 PM EST, the Relative Strength Index (RSI) value for $YLDS showed up at the range of65, meaning that the asset is still yet to reach overbought territory even after the initial rush for demand. At 12:30 PM EST,the Moving Average Convergence Divergence broke bullish on the 4 hour time frame. AI-driven trading algorithms could also use the new arbitrage potential, suggesting a 5% increase in trading volumes ofAI-driven trading platforms since the $YLDS announcement.

More News: SEC Approves Bitcoin-Ether ETFs for Hashdex and Franklin Templeton

Current Competition and Future Outlook

The first US company to obtain SEC approvalfor a yield-bearing stablecoin, Figure Markets is not the only one making such a move. Reeve Collins, a co-founder of Tether, has announced plans for the launch of an interest-yielding decentralized stablecoin in the second half of the year, which has turned new doors of opportunity forstablecoin users.

The approval of YLDS is a significant milestone in the stablecoin sector. It creates a new class of interest-bearing digital assets, which could appeal to institutional investors looking for nonvolatilereturns. This mini-ecosystem is a catalyst for further innovation in the sector, as it incentivizes morecompanies to experiment with yield-bearing stablecoins! The continued evolution of regulatory frameworks and increasedinvestor demand will pave the way for more such assets to be created that will help shape the future of finance and usher in a new era of crypto adoption.

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