Stablecoins Enter the "Yield Era": A Comprehensive Interpretation of Income-Generating Stablecoins

Beyond the anchoring attributes, starting from 2025, stablecoins are entering a whole new "earning" phase. This article originates from a piece written by imToken, organized, compiled, and authored by ForesightNews. (Background: What are yield-generating stablecoins? A review of five leading projects: USDe, USDY, PYUSD) (Additional context: A review of seven major stablecoin dedicated chains: Plasma, Stable, Tempo... opening up a new battlefield for payments) Have you recently seen a 12% annualized yield on USDC on certain platforms? This is not just a gimmick. In the past, stablecoin holders were often "non-interest depositors" with zero interest, while issuers invested idle funds in safe assets like U.S. Treasury bonds and bills to earn substantial returns, as seen with USDT/Tether and USDC/Circle. Now, the exclusive bonuses that used to belong to issuers are being redistributed—besides the interest subsidy battle for USDC, an increasing number of new generation yield-generating stablecoin projects are breaking down this "yield wall," allowing holders to directly share the interest income from underlying assets. This not only changes the value logic of stablecoins but may also become a new growth engine for RWA and Web3 tracks. 1. What are yield-generating stablecoins? By definition, yield-generating stablecoins refer to stablecoins whose underlying assets can generate income and directly distribute that income (usually from U.S. bonds, RWA, or on-chain earnings) to holders, which is distinctly different from traditional stablecoins (such as USDT/USDC) since their earnings belong to the issuers, and holders merely enjoy the advantage of being pegged to the U.S. dollar without interest income. Yield-generating stablecoins, however, allow holding coins themselves to become a form of passive investment vehicle. The reason lies in redistributing the bond interest income, which Tether/USDT monopolized, to a vast number of stablecoin holders. An example might help clarify this intuitively: For instance, the process of Tether issuing USDT essentially means that crypto users use dollars to "purchase" USDT—when Tether issues $10 billion worth of USDT, it means that crypto users have deposited $10 billion with Tether to obtain this $10 billion of USDT. After Tether receives this $10 billion, it does not need to pay interest to the corresponding users, effectively acquiring real dollar funds from crypto users at zero cost. If it buys U.S. Treasury bonds, that results in zero-cost, risk-free interest income. Source: Messari According to Tether's second-quarter attestation report, it directly holds over $157 billion in U.S. government bonds (including $105.5 billion in direct holdings and $21.3 billion in indirect holdings), making it one of the largest holders of U.S. Treasury bonds globally—data from Messari indicates that as of July 31, 2025, Tether surpassed South Korea to become the 18th largest holder of U.S. Treasury bonds. This means that even at a bond yield rate of around 4%, Tether can earn approximately $6 billion a year (about $700 million per quarter). The report stating that Tether's second-quarter operating profit reached $4.9 billion also confirms the profitability of this model. Based on the market practice that "stablecoins can no longer be summarized by a single narrative, their use varies from person to person and need to need," imToken has categorized stablecoins into multiple exploratory subsets (further reading: "Stablecoin Worldview: How to Build a Stablecoin Classification Framework from the User's Perspective?"). According to imToken's classification method, yield-generating stablecoins are singled out as a special subclass that can provide continuous earnings for holders, primarily including two categories: Native interest-bearing stablecoins: Users only need to hold this type of stablecoin to automatically earn income, similar to a bank's savings account. The token itself is an income-generating asset, such as USDe, USDS, etc.; Stablecoins with official yield mechanisms: These stablecoins may not automatically earn interest, but their issuers or management protocols provide official income channels. Users need to perform specific actions, such as depositing them into designated savings protocols (like DAI's deposit rate mechanism DSR), staking, or exchanging them for specific income certificates to start earning interest, similar to DAI, etc.; If we say that 2020-2024 was the "expansion period for stablecoins," then 2025 will be the "dividend period for stablecoins." Balanced between compliance, yield, and liquidity, yield-generating stablecoins may become the next trillion-dollar stablecoin subclass. Source: imToken Web (web.token.im) 2. A review of top yield-generating stablecoin projects In terms of practical landing paths, most yield-generating stablecoins are closely related to the tokenization of U.S. Treasury bonds—users holding on-chain tokens essentially peg their value to U.S. bond assets held by custodians, which retains the low-risk attributes and yield capabilities of bonds while providing high liquidity of on-chain assets. This can also be combined with DeFi components to derive financial strategies such as leveraging and borrowing. Currently in the market, besides established protocols like MakerDAO and Frax Finance ramping up their efforts, new players like Ethena (USDe) and Ondo Finance are also rapidly accelerating their development, forming a diverse landscape from protocol-based to CeDeFi hybrid models. Ethena's USDe serves as a key player in the current yield-generating stablecoin wave, with its supply recently breaking the $10 billion mark. According to Ethena Labs' official website, as of the time of writing, USDe's annualized yield remains as high as 9.31%, and previously even maintained above 30%. The high yield mainly comes from two sources: ETH's LSD staking income; Delta hedging positions (i.e., the funding rate income from perpetual futures' short top positions); The former is relatively stable, currently fluctuating around 4%, while the latter completely depends on market sentiment, thus USDe's annualized yield is in some sense directly influenced by the overall market funding rate (market sentiment). Source: Ethena Ondo Finance USDY Ondo Finance, as a star project in the RWA track, has been focusing on bringing traditional fixed-income products into the on-chain market. Its launched USD Yield (USDY) is a tokenized note guaranteed by short-term U.S. Treasury bonds and bank demand deposits, essentially belonging to a bearer bond certificate, meaning that holders do not need to undergo real-name verification to directly hold and enjoy the yield. USDY essentially provides on-chain capital with a risk position close to that of Treasury bonds while granting token composability, allowing it to be combined with DeFi lending, staking, and other modules for yield amplification. This design makes USDY an important representative of the current on-chain quasi-money market funds. PayPal's PYUSD PayPal's PYUSD, launched in 2023, is primarily positioned as a compliant payment stablecoin, with Paxos as the custodian, pegged 1:1 to dollar deposits and short-term Treasury bonds.