# What are yield-bearing stablecoins? USDY, USYC, BUIDL explained

> Yield-bearing stablecoins are tokens that pass Treasury or money-market returns directly to the holder — unlike USDC or USDT, which keep that yield for the issuer. USDY (Ondo), USYC (Circle/Hashnote), and BUIDL (BlackRock) are the leading examples. The category held roughly $15 billion in assets as of May 2026 and is growing fast, but access restrictions and smart-contract risk mean they are not drop-in replacements for USDC.

6 min read · Updated 2026-06-09 · Topic: use-cases

Canonical: https://tempo.dataos.so/articles/yield-bearing-stablecoins-explained

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](/articles/earn-interest-usdc-usdt).

## FAQ

**What is a yield-bearing stablecoin?**

A yield-bearing stablecoin is a token that automatically accrues interest — from US Treasuries or a money-market fund — as you hold it. The yield is embedded in the token rather than requiring you to lend it through a separate protocol.

**How do USDY, USYC, and BUIDL differ from USDC?**

USDC stays at $1 and the issuer (Circle) keeps the Treasury yield generated by the reserves. Yield-bearing tokens pass that yield back to the holder, either by letting the token's price rise daily (USDY, USYC) or by increasing the wallet balance (rebasing tokens). The trade-off is access restrictions and less liquidity.

**Who can buy USDY?**

USDY restricts primary issuance to non-US persons and non-US entities at the initial offering stage. Secondary market purchases face fewer restrictions in some jurisdictions. Always verify current eligibility on Ondo's official documentation.

**What yield do these tokens pay?**

As of early-to-mid 2026, USDY paid approximately 4.25–4.8% APY, tracking short-term US Treasury rates. USYC and BUIDL pay similar rates reflecting their underlying short-duration Treasury or repo exposure. These rates move with the Federal Reserve's policy rate.

**Are yield-bearing stablecoins safe?**

They carry a different risk profile from payment stablecoins: smart-contract risk (the token contract could be exploited), regulatory risk (they may be classified as securities in some jurisdictions), liquidity risk (thinner markets than USDC/USDT), and the underlying fund's credit risk. They are not FDIC insured.

## Sources

1. [Ondo Finance — USDY](https://ondo.finance/usdy)
2. [Circle — USYC](https://www.circle.com/usyc)
3. [Securitize — BlackRock USD Institutional Digital Liquidity Fund (BUIDL)](https://securitize.io)
4. [Stablecoin Insider — Top 10 tokenized treasury funds 2026](https://stablecoininsider.org/top-10-tokenized-treasury-funds-in-2026-buidl-benji-and-the-highest-yielding-on-chain-options/)
5. [CoinPaprika — How yield-bearing stablecoins work](https://coinpaprika.com/education/yield-bearing-stablecoins-how-usdy-sdai-and-usde-work/)

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Neutral, sourced explainer from tempowiki. Index: https://tempo.dataos.so/llms.txt