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Crypto Meets Wall Street as SEC Approves Yield Stablecoin
Stablecoin Regulation | Feb 21, 2025
Image: Freepik/nikitabuida
SEC Greenlights First Interest Paying Stablecoin, Disrupting Banks and Crypto
As reported by Cointelegraph, the U.S. Securities and Exchange Commission (SEC) has approved the first yield-bearing stablecoin YLDS issued by Figure Markets. Per its filing document, this stablecoin is pegged to the U.S. dollar and offers holders an annual percentage yield (APY) of 3.85%.
See: Paxos International Launches Yield-Bearing USDL Stablecoin (Abu Dabi)
This approval shows the SEC's willingness to progress and regulate the stablecoin market and foreshadows the growing integration between traditional finance and blockchain technology, giving users the ability to earn interest on digital holdings without relying on external platforms. This development could significantly impact how people manage and invest their money, affecting banks, crypto lending platforms, and even government legislation.
YLDS Overview
- YLDS generates interest by providing an APY of 3.85%, which is calculated by the Secured Overnight Financing Rate (SOFR) minus 0.50%. Interest accrues daily and is paid monthly in U.S. dollars or additional YLDS tokens. Tradable 24/7 on Figure Markets with fiat conversions available during U.S. banking hours.
- YLDS is registered as a security with the SEC and is compliant with U.S. financial regulations.
- YLDS stablecoin is backed by assets similar to those held in prime money market funds including U.S. Treasury bonds and corporate debt (stable and reliable).
- YLDS runs on the Provenance Blockchain, allowing people to send money directly to each other without middlemen. This makes transactions faster, easier, and ideal for payments or sending money across borders.
How Interest Paying Stablecoins Could Disrupt Finance
- Today, banks rely on customer deposits to fund loans. If people everyday citizens move their savings to yield-bearing stablecoins which offers more competitive interest rates than traditional bank, banks could lose access to these funds, forcing them to raise interest rates or create new products to stay competitive.
- Current stablecoins like popular USDT and USDC don’t generate yields, but YLDS changes that. If investors jump to stablecoins that pay interest, it could force other stablecoin issuers to follow suit or risk losing market share.
See: Hester Peirce’s Crypto Taskforce Roadmap: What’s Next for Regulation?
- Some large financial firms and investment funds have been hesitant to enter crypto due to volatility and regulatory uncertainty. But now with a stable, interest bearing digital asset that is SEC approved, it'll be safer for institutions to participate and may accelerate mainstream adoption.
- DeFi lending platforms like Ledn, Aave, and Compound rely on user deposits to function. If investors can earn passive income from a regulated stablecoins, they may be less likely to use DeFi lending pools which would force lending platforms to innovate or adapt.
- The SEC’s approval of YLDS sets a legal precedent for treating yield paying stablecoins as securities. This could influence how similar digital assets are taxed, regulated, and reported in the U.S. and internationally, resulting in potentially new compliance requirements for investors.
Outlook
As more investors explore secure, yield-generating digital assets, the lines between blockchain and traditional banking will continue to blur. Stablecoins will never be the same again now that the genie is out of the bottle. Whether this sparks more regulation or greater financial freedom remains to be seen.
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