SEC Approves First Yield-Bearing Stablecoin: A New Era for Crypto

The U.S. Securities and Exchange Commission (SEC) has approved the first yield-bearing stablecoin, YLDS, marking a significant step in the evolving regulatory landscape for stablecoins. This approval reflects the SEC's growing acceptance of the fast-growing stablecoin market and could pave the way for a regulatory sea change.

YLDS, a dollar-pegged stablecoin, offers a stable yield of 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. This approval comes as the stablecoin market is booming, and regulators worldwide are taking steps to regulate this new asset class.

Mike Cagney, CEO of Figure Markets, the first U.S.-regulated firm to launch a yield-bearing stablecoin, commented on the approval: "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, have the potential to introduce financial sovereignty to individuals and facilitate the movement of money domestically and internationally.

The approval of YLDS comes as the stablecoin market is booming, and regulators worldwide are looking to take steps toward regulating this new asset class. In the U.S., legislators are wrestling with a handful of regulatory themes, including 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. However, Timothy Massad, who served as Chairman of the Commodity Futures Trading Commission, argues that the draft is a useful beginning but is lacking in some critical respects.

At 3.85% APR, YLDS is a strong alternative to traditional fixed-income products. For example, although it's below the average high-yield savings 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. This can have a tangible impact on people's lives