Yield-Bearing Stablecoins Could Hit 50% Market Share: JPMorgan

Stablecoins have always been popular in crypto because they offer stable alternatives to volatile digital assets. However, a new type of digital fund, yield-bearing stablecoins, is gaining traction in the industry.

These tokens offer interest to investors, similar to how savings accounts in traditional banks work. JPMorgan analysts, led by managing director Nikolaos Panigirtzoglou, believe yield-bearing stablecoins could grow massively in the coming years. 

Currently, these stablecoins make up just 6% of the stablecoin market. Panigirtzoglou suggests they could grow to 50% if regulatory hurdles do not slow them down.

Why More Investors Are Choosing Yield-Bearing Stablecoins  

JPMorgan analysts say more people choose yield-bearing stablecoins because they offer interest without risk. Panigirtzoglou explained that investors do not need to trade or lend money; just holding these treasury funds is enough.

These stablecoins have grown fast in recent months. Since the U.S. election in November 2024, the top five treasury-backed assets have increased in value. 

This includes Ethena’s USDe, Sky Dollar’s USDS, BlackRock’s BUIDL, Usual Protocol’s USD0, and Ondo Finance’s USDY. Their market cap has jumped from $4 billion to over $13 billion. 

As traditional decentralized finance (DeFi) platform yields have dropped, more investors are turning to them. Crypto trading platforms now accept tokenized U.S. Treasurys as collateral, making earning interest while holding assets easier. 

Additionally, well-known crypto projects like Frax Finance are now using these stablecoins, which is pushing the trend further. 

The SEC’s Approval Could Open the Door for More Growth  

Despite their fast growth, yield-bearing stablecoins still face challenges. They are classified as securities, which creates legal issues and limits their use, especially for everyday investors. 

However,  things might be changing. The U.S. Securities and Exchange Commission (SEC) recently approved a new yield-bearing tokens called YLDS, which is registered as a security. This could open the door for more stablecoins like it.  

Traditional stables, like Tether’s USDT and Circle’s USDC, do not share their earnings with users because doing so would make them securities. 

That would bring stricter rules, making them harder to use in crypto transactions. More companies might follow this model with the SEC approving a yield-bearing stablecoin.  

Will Yield-Bearing Stablecoins Replace Traditional Ones?  

Unlike traditional stablecoins with a $220 billion market cap, these newer assets have lower liquidity and are not widely used. However, JPMorgan analysts believe these obstacles may fade as more traders and projects adopt them. 

As more traders and crypto projects use yield-bearing tokens, their liquidity could improve. This could make them widely used as collateral in crypto trading, part of DAO treasuries, or even a way for crypto investment funds to store idle cash.

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