JPMorgan analysts predict that in today's high-interest-rate environment, yield-bearing stablecoins are as attractive to investors as traditional money market funds, and estimate that the proportion of yield-bearing stablecoins in the stablecoin market value may increase from the current 6% to 50%.
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ToggleRapid Growth of Yield-Bearing Stablecoins Recently
According to The Block report, JPMorgan wrote in a report on Wednesday that yield-bearing stablecoins currently account for only 6% of the total stablecoin market value, but could expand significantly, potentially capturing up to 50% market share unless regulatory changes occur.
Since the US election in November, five major yield stablecoins (Ethena's USDe, Sky Dollar's USDS, BlackRock's BUIDL, Usual Protocol's USD0, and Ondo Finance's USDY) have achieved rapid growth, with total market value rising from $4 billion to $13 billion (see black line in the chart below).
Analysts expect this growth to continue. The US Securities and Exchange Commission (SEC) recently approved Figure Markets' yield stablecoin YLDS, which is registered as a security, providing further momentum for this field.
(Blockchain Startup Figure Leads the Way! First Yield-Bearing Stablecoin Product YLDS Approved, Registered as a "Security")
Why Does JPMorgan Like Yield-Bearing Stablecoins?
JPMorgan's reasons for liking yield-bearing stablecoins are as follows:
- Provide interest without requiring holders to engage in risky trading or lending activities, or give up custody of their assets.
- Major crypto trading platforms like Deribit and FalconX now accept tokenized government bonds as collateral, enabling traders to earn yields from the posted collateral.
Yield-Bearing Stablecoins Classified as Securities, Still Subject to Regulatory Restrictions
However, JPMorgan also noted that yield-bearing stablecoins are classified as securities and subject to regulatory restrictions, which limit their adoption, especially among retail investors. Additionally, traditional non-yield stablecoins still have significant liquidity advantages.
Traditional stablecoins like Tether's USDT and Circle's USDC do not share reserve earnings with users because doing so would classify these assets as securities, which would impose additional compliance requirements and hinder their current seamless use as collateral in the crypto ecosystem.
Traditional stablecoins have a total market value of around $220 billion across multiple blockchains and centralized exchanges, providing efficient, fast, and low-cost transactions even with high trading volumes. In contrast, yield-bearing stablecoins are newer, smaller in scale, and have relatively lower liquidity.
However, as yield-bearing stablecoins become increasingly favored as a collateral source in future crypto derivatives trading, DAO treasuries, liquidity pools, and idle cash in crypto risk funds, this liquidity disadvantage may diminish over time.
Yield-bearing stablecoins may attract idle funds currently existing in traditional stablecoins but are unlikely to represent the majority of the stablecoin market.
Recently, yield-bearing stablecoins have also attracted regulatory attention, with US Democratic Senator Kirsten Gillibrand stating that stablecoin issuers offering yield products could threaten traditional banking and calling for strict regulation.
(US Senator: Yield-Bearing Stablecoins May Severely Impact Traditional Banking and Mortgage Systems, Calls for Strict Regulation)
Risk Warning
Cryptocurrency investments are highly risky, with potentially volatile prices, and you may lose all of your principal. Please carefully assess the risks.
