Chainfeeds Briefing:
Stablecoins should be distinguished into "payment" and "yield" categories to better match user needs and regulatory frameworks.
Article Source:
https://x.com/Jacek_Czarnecki/status/1920069774681280867
Article Author:
jacek
Perspective:
jacek: Stablecoins have long been viewed as a breakthrough application in the crypto market, but to truly achieve scale, a user-centric framework is needed. This article proposes a simple yet insightful division: payment-first stablecoins and yield-first stablecoins. The primary task of payment-first stablecoins is to maintain peg as much as possible, used for instant consumption and low-cost settlement, with yields typically owned by the issuer but potentially earning returns in lending markets. These stablecoins optimize for simplicity and ease of use. While yield-first stablecoins are also pegged, their main goal is to pass on yields from specific strategies to holders, typically held rather than used for payment, and often with more complex designs. Understanding this distinction helps improve user experience, regulatory design, and market adoption. Although the boundaries between these two categories are not always clear, thinking from the user's purpose (rather than technical or legal definitions) can help us build products more intelligently, optimize regulation, and reduce user confusion. Discussing payment-first and yield-first stablecoins separately can provide a clearer risk framework and user experience. For yield-first stablecoins, the analysis should focus on: yield sources and their health, strategy concentration, redemption/exit risks, peg stability, leverage usage, and protocol exposure. For payment-first stablecoins, the focus should be on peg stability, market depth and liquidity, redemption mechanisms, reserve quality and transparency, and issuer risks. One-size-fits-all risk assessment metrics are no longer applicable. In terms of retail adoption, this division matches the traditional finance (TradFi) mental model, reducing confusion and misuse for new users, and avoiding unintentional holding of complex yield tokens. For wallet providers, avoiding confusion between payment and yield stablecoins on the interface will unlock a simpler, smarter user experience and make integration easier for new banks and other fintech companies. Of course, the real user experience challenge is not just about labels, but educating users about potential tail risks. The distinction between payment and yield stablecoins not only helps users understand products but also promotes regulatory clarity. These two types of products have fundamentally different risk characteristics, so regulators will naturally treat them differently. For example, the US GENIUS Act and the EU's MiCAR have already acknowledged this: payment stablecoins and investment products (such as securities) are subject to completely different regulatory systems. This doesn't mean payment-first stablecoins can never provide yields (as discussed in the GENIUS Act), but it would be more like adding a savings account to a range of investment products. The article emphasizes that this framework is not perfect, as yield tokens themselves cover multiple subtypes (some borrowing from DeFi, some staking ETH, others buying government bonds), and may further differentiate in the future. Additionally, the question of who owns the yields is complex - if yields do not belong to users, then the issuer is profiting. In this context, proposing the payment/yield classification is an important and urgently needed progress, helping the market, users, and policies develop more directionally.
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