Yield-Bearing Stablecoins vs Tokenised Treasuries After the Yield Ban

Here is the awkward fact at the centre of the stablecoin business. The dollars backing your USDC are earning around 3.5% a year in Treasury bills, and you, the holder, get none of it. American law now says it must stay that way. So a parallel market has grown up to give onchain dollars a yield: tokenised money market funds on one side, crypto-native "savings" stablecoins on the other. They look similar on a wallet screen. Legally and economically they are very different things.

Why payment stablecoins cannot pay interest

The GENIUS Act, signed in July 2025, bars licensed stablecoin issuers from paying holders any interest or yield simply for holding, using or keeping the coin. Congress had two reasons. Regulators wanted payment stablecoins to stay payment instruments rather than become unregistered investment products. And banks argued, loudly, that interest-paying stablecoins would pull deposits away from them. A Congressional Research Service brief from March 2026 notes that a Treasury advisory body identified about $6.6 trillion of US transactional deposits as potentially exposed.

The statute only names issuers, which left a gap: exchanges and wallets that receive reserve income from issuers can pass some of it on as "rewards". The Office of the Comptroller of the Currency has proposed closing much of that gap with a presumption that an issuer breaks the rule if an affiliate or related partner pays yield on its behalf, according to Perkins Coie. The industry disputes that reading, and the final rules are still pending. Singapore's draft stablecoin legislation, published in September 2026, also bans issuers from paying interest. We cover the wider rulebook in our GENIUS Act and MiCA explainer.

Option one: tokenised Treasury funds

The cleanest way to earn yield onchain is to hold a token that is itself a share in a regulated fund. These are securities, sold mostly to institutions and qualified investors, and they pay what the underlying bills pay.

According to rwa.xyz, the five biggest on 14 October 2026 were Circle's USYC at $2.38 billion, Ondo's USDY at $2.35 billion, BlackRock's BUIDL at $2.16 billion, Franklin Templeton's iBENJI at $1.71 billion and WisdomTree's WTGXX at $1.23 billion. JPMorgan's onchain money fund was sixth at about $738 million.

The design details matter. BlackRock launched BUIDL in March 2024 with a $5 million minimum; it holds cash, Treasury bills and repo, and pays accrued dividends monthly as new tokens. Franklin Templeton's money fund, launched on Stellar in 2021, was the first US-registered money fund to use a public blockchain as its official ownership record, and its yield accrues throughout the day. Holders of these tokens are fund investors, with the protections and restrictions that implies: they generally must pass investor checks, and transfers can be limited to approved wallets.

Their biggest new use is as collateral. Exchanges and lenders increasingly accept tokenised Treasury funds in place of stablecoins, so a trading firm can post margin that keeps earning interest. Circle's Arc network made BUIDL and USYC available for trading and lending at launch in September 2026.

Option two: crypto-native yield stablecoins

The second family is built inside DeFi and is available to anyone with a wallet in most places. As of May 2026, according to a comparison by Eco, the three biggest worked as follows:

These are not payment stablecoins in the GENIUS sense, and their yields are not risk-free. Ethena's model, in particular, earns money from traders paying to hold leveraged long positions. When the market turns, that income can vanish. During the liquidation cascade of 10 October 2025, USDe briefly traded as low as $0.65 on Binance, although it held close to a dollar elsewhere, and its supply fell from about $14.7 billion to about $6.3 billion over the following two months.

A yield of 4% that someone else is paying you to hold a dollar is never just a dollar.

How to think about the risks

• Legal wrapper. A tokenised fund share is a regulated security with a manager, custodian and auditor. A DeFi savings token depends on smart contracts and governance votes.
• Liquidity at redemption. Fund tokens redeem through the manager on business days. sUSDe has a seven-day cooldown, or a discounted sale on decentralised exchanges in a hurry.
• Where the yield comes from. Treasury yield falls when the Federal Reserve cuts. Funding-rate yield falls when traders stop paying to be leveraged, and can turn negative.
• Contagion. DAI lost its peg briefly in March 2023 because it held USDC when USDC itself wobbled. Stacked products inherit the weaknesses of everything underneath. Our history of stablecoin depegs shows how quickly that can travel.

Our view: the split is healthy

It would be easy to see the yield ban as regulators protecting banks, and there is some of that. But separating "money to spend" from "money to park" is how the traditional system already works: a current account pays little, a money fund pays the market rate, and nobody confuses the two. A hotel receptionist in Doha sending part of her salary home each month needs a token that is always worth exactly a dollar and redeemable in a day. A company sitting on a few million dollars of onchain working capital needs a fund share that earns interest and can be posted as collateral. Asking one token to do both jobs is how you get runs.

The open question is where the rewards line ends up in the United States. If the final rules let exchanges and payment apps keep sharing reserve income, holders will still see a yield, just from the platform rather than the issuer. If they do not, more cash will move into tokenised funds. For the wider picture of tokenised assets, see our 2026 RWA report.

This article explains how products work and is not financial advice. Yields change frequently and past rates do not guarantee future returns.

About this researchMuffinPay InsightsIndependent analysis of stablecoins, CBDCs, cross-border payments and digital public infrastructure. Every figure is linked to its source. Read our editorial standards →