Standard stablecoins like USDC and USDT hold US Treasuries in reserve. The interest those Treasuries earn — roughly 4–5% annualised in the current rate environment — goes to the issuer, not to you. Yield-bearing stablecoins change that arrangement: they are tokens engineered to pass the Treasury or money-market return directly to the holder, built into the token itself rather than requiring a separate lending step.
The category is not new — tokenised money-market funds predate the term — but it has grown sharply. From a single $100 million fund in March 2024, the total market reached roughly $15 billion across products by May 2026 — a meaningful and fast-growing share of total stablecoin supply. The growth reflects a simple economic logic: if you are holding dollars on-chain anyway, why give the yield to the issuer?
How yield-bearing tokens work
Two distribution mechanisms dominate:
Value-accruing (price rises): The token's redemption price increases gradually as interest accumulates. You hold 1,000 tokens; each token is worth slightly more each day. When you redeem, you get more dollars than you put in. USDY and USYC use this model.
Rebasing (balance increases): The token's price stays at $1.00, but your wallet balance grows automatically each day. If you hold 1,000 USDM (Moonwell), tomorrow you might hold 1,000.37. This makes accounting simpler in some contexts; the tax treatment is similar either way.
Both models differ fundamentally from holding USDC and then lending it on Aave. With yield-bearing tokens, the yield mechanism is inside the token contract — you do not need to interact with a lending protocol. With lending, the yield is external and the rate fluctuates with borrower demand.
The three leading products
USDY — Ondo Finance
USDY is Ondo Finance's yield-bearing dollar token, backed by short-term US Treasury bills and bank demand deposits. The token's price accrues daily; as of March–April 2026 it yielded approximately 4.25–4.8% APY, tracking short-term Treasury rates minus Ondo's fee.
Key details:
- AUM: Approximately $650–700 million (April 2026)
- Chains: Ethereum, Solana, Aptos, and several others
- Access: Primary issuance restricted to non-US persons at the offering stage. A 40–50 day seasoning period applies before newly issued tokens become transferable on-chain.
- Secondary market: Available on DEXs with fewer restrictions than primary issuance in some jurisdictions; verify before buying.
The seasoning period is the most significant friction for USDY — it exists because the tokens are structured as a security at primary issuance, and the seasoning satisfies transfer restriction requirements under US securities law. Once tokens have seasoned, they trade freely on-chain.
USYC — Circle (via Hashnote)
USYC is the on-chain share class of the Hashnote Short Duration Yield Fund, backed primarily by reverse repurchase agreements against US Treasuries — a form of secured overnight lending to institutions. Circle acquired Hashnote in early 2025 and made USYC the designated yield-bearing collateral inside Circle's payments network.
Key details:
- AUM: Approximately $2.58 billion (May 2026), placing it second in the category
- Issuer: Hashnote (Circle subsidiary)
- Access: Institutional and qualified investors; KYC required through Circle's channels
- Use case: Frequently used as yield-bearing collateral by stablecoin issuers and DeFi protocols — you may hold USYC indirectly through other products
USYC's rapid growth reflects its positioning as collateral infrastructure rather than a retail savings product. Its primary growth driver is B2B adoption, not retail yield-seekers.
BUIDL — BlackRock
BlackRock USD Institutional Digital Liquidity Fund (BUIDL) is the largest single product in the tokenised Treasury category. It invests in short-duration US Treasury bills, managed by BlackRock.
Key details:
- AUM: Approximately $2.6–2.9 billion (May 2026)
- Chains: Ethereum (primary), with expanding multi-chain availability
- Access: Accredited investors only — the minimum investment has historically been $5 million
- Distribution: Daily yield accrual via rebasing (balance increases)
- Custodian: BNY Mellon; transfer agent: Securitize
BUIDL is the institutional product in the category. For a DeFi treasury or hedge fund needing on-chain T-bill exposure at scale, it is the most recognised name and has the deepest liquidity. For an individual with $50,000 to invest, it is inaccessible.
How they compare
| Token | Issuer | AUM (May 2026) | Underlying | Approx. yield (Jun 2026) | Retail access |
|---|---|---|---|---|---|
| BUIDL | BlackRock | ~$2.6–2.9B | US T-bills | ~4–5% | Accredited investors only ($5M+ min) |
| USYC | Circle/Hashnote | ~$2.58B | Reverse repo / T-bills | ~4–5% | Institutional / qualified investors |
| USDY | Ondo Finance | ~$650–700M | T-bills + bank deposits | ~4.25–4.8% | Non-US persons (primary); secondary market varies |
| sDAI | Spark Protocol | — | DAI stability fees + RWA | ~4.5% (Q1 2026) | Permissionless DeFi (any wallet) |
| USDM | Mountain Protocol | — | US Treasuries | ~4–5% | Non-US persons |
Rates reflect short-term Treasury yields in the current rate environment and will move if the Federal Reserve changes its policy rate.
Yield-bearing vs payment stablecoins: the practical distinction
Yield-bearing stablecoins are hold-to-earn tokens. Payment stablecoins like USDC and USDT are move-and-settle tokens. The distinction matters operationally:
- Liquidity: USDC and USDT are the deepest, most widely accepted stablecoins. USDY and BUIDL have thinner order books and fewer direct payment integrations.
- Composability: USDC plugs into almost every DeFi protocol and exchange. Yield-bearing tokens are composable in DeFi but at lower depth.
- Payment use: You cannot pay a supplier in USDY as readily as in USDC — most payment rails do not accept it. A treasury workflow might hold USYC for yield and convert to USDC when disbursing.
- Access: USDC is permissionless globally. BUIDL and USYC require institutional onboarding; USDY restricts US persons.
The risks that do not disappear
Yield-bearing stablecoins are not a free lunch:
- Smart-contract risk: The token contract itself can be exploited. BUIDL's Securitize infrastructure and USDY's Ondo contracts have been audited, but no audit eliminates the possibility.
- Regulatory risk: Tokens backed by securities (T-bills) may themselves be classified as securities in certain jurisdictions. BUIDL and USDY explicitly restrict US retail investors at primary issuance for this reason.
- Liquidity risk: In a stress scenario, secondary-market liquidity for these tokens is thinner than for USDC. Redemptions at par may take time or require KYC.
- Rate risk: As Treasury yields fall, the APY on these products falls with them. They are not fixed-rate instruments.
- No FDIC insurance: Like all on-chain assets, these are not deposits at an insured bank.
The bottom line
Yield-bearing stablecoins close the gap between "holding dollars on-chain" and "earning something on those dollars" — without requiring a separate lending protocol. For institutional and qualified investors, BUIDL and USYC are the clearest products; for non-US individual investors, USDY is accessible on secondary markets; for permissionless DeFi users, sDAI is the most open option. The category is growing fast because the economics are straightforward: if you are already holding on-chain dollars, letting them earn the risk-free rate while you hold them is strictly better than earning nothing. The constraint is access, not economics. For how to earn yield on standard USDC or USDT directly, see How to earn interest on USDC and USDT.