Yield-Bearing Stablecoins Surge 633% to $11 Billion on Regulatory Clarity

Yield-bearing stablecoins have surged to $11 billion in circulation, marking a significant increase from $1.5 billion at the start of 2024. This growth represents 4.5% of the total stablecoin market, up from 1% earlier this year. The rise in yield-bearing stablecoins is driven by regulatory clarity and the increasing demand from users seeking better returns on their digital assets.

Pendle, a decentralized protocol that enables users to lock in fixed yields or speculate on variable interest rates, has been a major beneficiary of this trend. Pendle now accounts for 30% of the total value locked (TVL) in yield-bearing stablecoins, approximately $3 billion. Stablecoins make up 83% of Pendle’s $4 billion total value locked, a sharp increase from less than 20% a year ago. In contrast, assets like Ether (ETH), which historically contributed 80–90% of Pendle’s TVL, have shrunk to less than 10%.

Traditional stablecoins such as USDt (USDT) and USDC (USDC) do not offer interest to holders. With over $200 billion in circulation and US Federal Reserve interest rates at 4.3%, stablecoin holders are estimated to be missing out on over $9 billion in annual yield. This situation has created an opportunity for yield-bearing stablecoins to attract users looking for better returns on their stablecoin holdings.

The rise in yield-bearing stablecoins comes amid growing regulatory clarity. In February, the US Securities and Exchange Commission approved yield-bearing stablecoins as “certificates” subject to securities regulation, allowing them to operate under specific rules, including registration, disclosure requirements, and investor protections. Proposed bills such as the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) and the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) further signal a favorable regulatory environment for stablecoins.

Pendle expects stablecoin issuance to double to $500 billion in the next 18 to 24 months. The firm also anticipates yield-bearing stablecoins to capture 15% of this market, resulting in $75 billion in issuance, a sevenfold increase from the current $11 billion. This projection highlights the potential for significant growth in the yield-bearing stablecoin sector.

Pendle has shifted its focus from airdrop farming to serving as an infrastructure layer for decentralized finance yield markets. Ethena’s USDe stablecoin currently accounts for approximately 75% of Pendle’s stablecoin TVL. However, newer entrants such as Open Eden, Reserve, and Falcon have increased the share of non-USDe assets from 1% to 26% over the past year. Pendle is also expanding beyond the Ethereum network, with plans to support networks like Solana and to integrate with Aave and Ethena’s upcoming Converge blockchain.

The surge in interest in yield-generating strategies within the cryptocurrency sector has been driven by both retail and institutional investors seeking to maximize returns on their digital assets. On May 19, Franklin, a hybrid cash and crypto payroll provider, announced the launch of Payroll Treasury Yield, which uses blockchain lending protocols to help firms earn returns on payroll funds. This development further underscores the growing demand for yield-bearing financial products in the cryptocurrency space.