The Stablecoin ‘Yield’ Fight Isn’t About Crypto Returns — It’s About Who Gets to Print the Next $1 Trillion of Bank Deposits (and what the CLARITY Act compromise really changes)
Stablecoin “yield” is a battle over reserve income from Treasuries—and whether deposit-like digital dollars can compete with bank funding without bank rules. Congress can ban issuer interest, but intermediaries may still route the economics to users as “rewards.”
By TheMurrow Editorial
May 5, 2026
Key Points
- 1Follow the money: stablecoin reserves earn Treasury-rate income, and the core fight is who controls—and shares—that spread with users.
- 2Recognize the threat vector: once stablecoins act like transaction balances, “yield” turns them into deposit-like competitors to bank funding.
- 3Track the loopholes: issuer bans (GENIUS Act-style) can be bypassed via exchange “rewards,” wrappers, or routing that recreate yield economically.
Stablecoin “yield” sounds like a niche argument about crypto interest rates. In Washington and on Wall Street, it’s treated like something else entirely: a fight over who gets paid for holding the safest assets in America.
A modern stablecoin issuer typically backs each digital dollar with short-term U.S. Treasuries, repo, and cash equivalents. Those reserves earn interest. The money is real, the cash flows are large, and the question is blunt: who keeps the reserve income—the issuer, the platform, or the user?
Banks understand the stakes because the product doesn’t behave like a speculative token for many people. It behaves like a transaction balance: something you hold to move money, settle trades, and park cash between decisions. Start paying “yield” on that balance and you’ve built a deposit-like instrument that competes with bank deposits without being a bank deposit.
“The argument over stablecoin yield is really an argument over who owns the interest on the collateral.”
— — Pullquote
What follows is less a morality play about innovation than a power struggle over deposit-like money. The policy details—issuer prohibitions, exchange “rewards,” and definitional games—are where the winner gets chosen.
Stablecoins aren’t just tokens; they’re deposit-like balances
Crypto debates often get lost in vocabulary. Start from the user experience instead. For many holders, a stablecoin is the base money of a digital financial system: the asset used for payments, transfers, and as collateral on exchanges and decentralized finance (DeFi). That functional role makes stablecoins “deposit-like” instruments, even when the law does not call them deposits.
Spark’s research frames the core dispute cleanly: stablecoins resemble money instruments held for transactional purposes, backed by reserves that earn interest. When users treat a stablecoin as cash, reserve income begins to look like the interest a bank earns on deposits—except the holder doesn’t automatically receive it. The issuer does.
That deposit-like behavior explains why bank regulators and banking trade groups are wary. The American Bankers Association and allied trades have warned—explicitly—that if stablecoins become mainstream parking places for cash balances, they could drive deposit flight: outflows from bank deposits into stablecoins. Deposit flight isn’t a culture-war talking point; it’s a funding problem. Deposits are a major source of relatively stable bank funding, and losing them can increase banks’ funding costs and reduce capacity to lend.
Spark’s research frames the core dispute cleanly: stablecoins resemble money instruments held for transactional purposes, backed by reserves that earn interest. When users treat a stablecoin as cash, reserve income begins to look like the interest a bank earns on deposits—except the holder doesn’t automatically receive it. The issuer does.
That deposit-like behavior explains why bank regulators and banking trade groups are wary. The American Bankers Association and allied trades have warned—explicitly—that if stablecoins become mainstream parking places for cash balances, they could drive deposit flight: outflows from bank deposits into stablecoins. Deposit flight isn’t a culture-war talking point; it’s a funding problem. Deposits are a major source of relatively stable bank funding, and losing them can increase banks’ funding costs and reduce capacity to lend.
The “printing deposits” thesis, minus the rhetoric
Some critics describe stablecoins as “printing deposits.” The claim is not that stablecoin issuers literally create insured bank deposits. The claim is that an issuer of a $1 stablecoin creates a private $1 liability that can circulate widely, especially in crypto markets, and increasingly as a general-purpose transaction balance.
That is why stablecoins have become a legislative category rather than a mere technical curiosity. Congress is increasingly treating payment stablecoins as a new regulated money instrument. The legal architecture matters because it decides whether deposit-like money can be created outside the banking perimeter—and whether it can share interest with holders.
That is why stablecoins have become a legislative category rather than a mere technical curiosity. Congress is increasingly treating payment stablecoins as a new regulated money instrument. The legal architecture matters because it decides whether deposit-like money can be created outside the banking perimeter—and whether it can share interest with holders.
“Once stablecoins become where people keep their spending money, ‘yield’ stops being a crypto feature and starts being a banking issue.”
— — Pullquote
The prize is reserve income—and the numbers are not subtle
The most important statistic in the stablecoin business is not market cap. It’s the share of issuer revenue that comes from reserves.
Circle, one of the largest stablecoin issuers, put the economics in black and white in an SEC filing: reserve income comprised 95%–99% of total revenue in 2022–2024, and remained similarly high in the first half of 2025. That is not a side hustle. That is the business.
Reserve income is straightforward in concept. Stablecoin holders give the issuer dollars. The issuer invests those dollars in safe, short-duration instruments (typically Treasuries, repo, and cash-like assets). Interest accrues to the issuer. The holder gets price stability and utility, but not necessarily a yield.
Now add distribution. Axios reporting has highlighted that stablecoin economics can include large distribution costs and revenue splits with major exchanges, especially for balances held on-platform. In other words, the stablecoin issuer may earn reserve income, then share part of it with the platforms that drive adoption and custody. The platform can decide whether to keep that share or recycle it into customer “rewards.”
Circle, one of the largest stablecoin issuers, put the economics in black and white in an SEC filing: reserve income comprised 95%–99% of total revenue in 2022–2024, and remained similarly high in the first half of 2025. That is not a side hustle. That is the business.
Reserve income is straightforward in concept. Stablecoin holders give the issuer dollars. The issuer invests those dollars in safe, short-duration instruments (typically Treasuries, repo, and cash-like assets). Interest accrues to the issuer. The holder gets price stability and utility, but not necessarily a yield.
Now add distribution. Axios reporting has highlighted that stablecoin economics can include large distribution costs and revenue splits with major exchanges, especially for balances held on-platform. In other words, the stablecoin issuer may earn reserve income, then share part of it with the platforms that drive adoption and custody. The platform can decide whether to keep that share or recycle it into customer “rewards.”
95%–99%
Circle disclosed reserve income comprised 95%–99% of total revenue in 2022–2024, and stayed similarly high in early 2025.
Why “yield” is a control point
Normalize stablecoin yield and you change the bargaining dynamics of the entire stack:
- Issuer-first model (today’s default): issuer captures reserve income; users get utility.
- Platform-mediated sharing: exchanges and apps return part of economics to users as “rewards.”
- Pass-through pressure: if users come to expect yield, issuers and platforms compete by sharing more of the spread.
The headline “APY” is marketing. The underlying fight is who controls the spread between reserve returns and what the user receives—a spread that, by issuer admission, drives nearly all revenue.
- Issuer-first model (today’s default): issuer captures reserve income; users get utility.
- Platform-mediated sharing: exchanges and apps return part of economics to users as “rewards.”
- Pass-through pressure: if users come to expect yield, issuers and platforms compete by sharing more of the spread.
The headline “APY” is marketing. The underlying fight is who controls the spread between reserve returns and what the user receives—a spread that, by issuer admission, drives nearly all revenue.
“When 95%–99% of revenue is reserve income, ‘yield’ isn’t a perk—it’s the profit model.”
— — Pullquote
Congress tried to shut the door: the GENIUS Act’s yield prohibition
The clearest attempt to draw a line runs through the GENIUS Act. Congress.gov lists S.1582 (GENIUS Act) in the 119th Congress. The bill has been widely summarized by legal and industry observers as containing a basic rule: payment stablecoin issuers may not pay interest or yield to holders simply for holding the stablecoin.
Skadden’s June 2025 analysis, for example, describes the GENIUS framework as prohibiting stablecoin issuers from paying interest. The logic is plain. If stablecoins can pay interest like a deposit or money-market fund, they compete more directly with banks, and regulators inherit a new category of deposit-like liabilities that might scale quickly.
But the issuer-level prohibition didn’t end the argument. It relocated it.
Skadden’s June 2025 analysis, for example, describes the GENIUS framework as prohibiting stablecoin issuers from paying interest. The logic is plain. If stablecoins can pay interest like a deposit or money-market fund, they compete more directly with banks, and regulators inherit a new category of deposit-like liabilities that might scale quickly.
But the issuer-level prohibition didn’t end the argument. It relocated it.
The “issuer ban, platform yield” problem
Banking trade groups have argued that focusing only on issuers misses how the market actually works. Distribution often runs issuer → exchange or intermediary → user. If the issuer shares economics with the intermediary—through a revenue split or other arrangement—the intermediary can offer “rewards” that look and feel like yield even if the issuer never pays interest directly to the holder.
The American Bankers Association has been explicit in press statements tied to crypto market structure negotiations: yield language that ignores intermediary programs can function as a loophole. Users don’t experience “issuer yield” versus “platform rewards” as separate categories. They experience money in an account that earns something.
That makes “yield” a definitional contest as much as a policy contest. Legislators can ban interest from issuers and still end up with interest-like outcomes in the retail experience.
The American Bankers Association has been explicit in press statements tied to crypto market structure negotiations: yield language that ignores intermediary programs can function as a loophole. Users don’t experience “issuer yield” versus “platform rewards” as separate categories. They experience money in an account that earns something.
That makes “yield” a definitional contest as much as a policy contest. Legislators can ban interest from issuers and still end up with interest-like outcomes in the retail experience.
Key Insight
Issuer bans can leave a loophole: intermediaries can translate distribution revenue splits into “rewards” that feel identical to yield for users.
The legal baseline: stablecoins as regulated money instruments, not bank deposits
A second piece of the story lives in the U.S. Code. 12 U.S. Code § 5902 lays out rules about who may issue payment stablecoins and restrictions on offering or selling them to U.S. persons after a post-enactment period. The details signal something important: lawmakers are constructing a distinct perimeter around payment stablecoins.
That perimeter does two things at once.
First, it acknowledges the deposit-like function without granting deposit status. Payment stablecoins are being treated as a category that can circulate widely and be held as a balance for transactions, but they do not become insured bank deposits by default.
Second, it sets up a long-running dispute about what features are allowed inside the perimeter. If a stablecoin is meant to be “payment” money, should it behave like cash (no yield), like a money-market fund (yield), or like a bank account (yield plus a broader regulatory regime)?
That perimeter does two things at once.
First, it acknowledges the deposit-like function without granting deposit status. Payment stablecoins are being treated as a category that can circulate widely and be held as a balance for transactions, but they do not become insured bank deposits by default.
Second, it sets up a long-running dispute about what features are allowed inside the perimeter. If a stablecoin is meant to be “payment” money, should it behave like cash (no yield), like a money-market fund (yield), or like a bank account (yield plus a broader regulatory regime)?
What the perimeter can and cannot solve
Regulation can decide who is allowed to issue and what reserves are required. Regulation struggles more with distribution, product design, and marketing—especially when the same economic outcome can be delivered through different mechanisms.
If policymakers want to stop “yield” entirely, they have to regulate not only the issuer’s direct payments, but also the ways platforms can turn reserve economics into consumer rewards. If policymakers want to allow yield safely, they need to decide what consumer protections attach—disclosures, risk limits, and the line between a payment instrument and an investment product.
If policymakers want to stop “yield” entirely, they have to regulate not only the issuer’s direct payments, but also the ways platforms can turn reserve economics into consumer rewards. If policymakers want to allow yield safely, they need to decide what consumer protections attach—disclosures, risk limits, and the line between a payment instrument and an investment product.
Editor's Note
This article’s core tension: policymakers can regulate issuers and reserves, but “yield” can reappear via distribution, routing, and marketing structures.
How “yield-bearing stablecoins” work in the real world
“Stablecoin yield” is not one product. It’s a family of mechanisms that can be engineered to feel similar to a user and very different to a regulator.
Spark’s taxonomy is useful because it maps product design to policy friction. Eco’s explanations also break out the mechanics in plain terms. Three patterns show up repeatedly:
Spark’s taxonomy is useful because it maps product design to policy friction. Eco’s explanations also break out the mechanics in plain terms. Three patterns show up repeatedly:
1) Value-accruing wrappers (price goes up, not balance)
These products don’t “pay interest” in the traditional sense. Instead, the token’s value rises relative to a dollar over time because it represents a claim on an underlying pool earning yield. Spark points to sDAI-like structures as an example of a value-accruing wrapper.
From a user perspective, it can feel like yield. From a compliance perspective, it can be positioned as an asset whose price changes—an important distinction if a law targets “interest payments” rather than economic equivalence.
From a user perspective, it can feel like yield. From a compliance perspective, it can be positioned as an asset whose price changes—an important distinction if a law targets “interest payments” rather than economic equivalence.
2) Rebasing interest stablecoins (balance increases)
A rebasing design increases the number of tokens in a user’s wallet periodically. Eco describes this as a mechanical method of paying holders directly. If lawmakers want a bright line for “yield,” rebasing is the bright line: the holder’s balance rises.
That clarity cuts both ways. Rebasing is transparent, but it is also the easiest to characterize as “interest on a payment stablecoin,” which is precisely the behavior some legislation aims to prevent at the issuer level.
That clarity cuts both ways. Rebasing is transparent, but it is also the easiest to characterize as “interest on a payment stablecoin,” which is precisely the behavior some legislation aims to prevent at the issuer level.
3) Platform-mediated yield (rewards and routing)
The most politically charged category is platform-mediated yield—exchange “rewards” or app programs that route balances into money markets or DeFi strategies. Eco lists these as a common way stablecoin yield reaches consumers.
This category is also the most adaptable. If issuers can’t pay interest, platforms can fund rewards through distribution deals, promotional budgets, or product bundling. Users still see a percentage return. Regulators see a compliance puzzle.
This category is also the most adaptable. If issuers can’t pay interest, platforms can fund rewards through distribution deals, promotional budgets, or product bundling. Users still see a percentage return. Regulators see a compliance puzzle.
Three common “yield” mechanisms
Before
- Value-accruing wrappers — token price rises; can be framed as price movement
After
- Rebasing & platform rewards — balance/reward payouts look like direct interest
Why banks are fighting: funding, not philosophy
The banking industry’s posture is often caricatured as reflexive hostility to crypto. The public record suggests something more specific: fear of a new competitor for transaction balances.
The ABA and other trade groups have linked their concerns to market structure and yield language in current negotiations. Their argument runs like this:
- Stablecoins already function like cash balances for many users.
- Adding yield makes them behave like interest-bearing deposits.
- If large sums move from banks to stablecoins, banks lose a key funding source.
- Higher funding costs can constrain lending and shift risk elsewhere in the system.
That’s not a claim that stablecoins are inherently unsafe. It’s a claim about the distribution of money and the price of funding. Banks want stablecoin rules that prevent a deposit-like product from offering deposit-like benefits without deposit-like regulation.
The ABA and other trade groups have linked their concerns to market structure and yield language in current negotiations. Their argument runs like this:
- Stablecoins already function like cash balances for many users.
- Adding yield makes them behave like interest-bearing deposits.
- If large sums move from banks to stablecoins, banks lose a key funding source.
- Higher funding costs can constrain lending and shift risk elsewhere in the system.
That’s not a claim that stablecoins are inherently unsafe. It’s a claim about the distribution of money and the price of funding. Banks want stablecoin rules that prevent a deposit-like product from offering deposit-like benefits without deposit-like regulation.
The counterargument: consumers already know what’s happening
Stablecoin advocates respond that users aren’t being tricked. They know stablecoins are not FDIC-insured bank deposits. They choose them for speed, global transferability, and integration with trading venues and DeFi.
From that view, prohibiting yield looks less like consumer protection and more like incumbent protection: a rule that ensures reserve income remains concentrated at issuers and intermediaries, while consumers get none of the return generated by their own dollars.
Both arguments can be true at the same time. Stablecoins can be useful, and they can still reshape bank funding in ways regulators treat as systemically important.
From that view, prohibiting yield looks less like consumer protection and more like incumbent protection: a rule that ensures reserve income remains concentrated at issuers and intermediaries, while consumers get none of the return generated by their own dollars.
Both arguments can be true at the same time. Stablecoins can be useful, and they can still reshape bank funding in ways regulators treat as systemically important.
How each side frames “yield”
Pros
- +Consumers share reserve income; competition for cash balances; better on-chain cash management
Cons
- -Deposit flight; bank funding costs rise; payment instruments start acting like investment products
Practical implications: what to watch if you hold stablecoins
Readers don’t need to pick a side to protect themselves. They need to understand where yield comes from, who owes what to whom, and what could change quickly if Congress tightens definitions.
If you see “stablecoin yield,” ask three questions
- Who is paying it? Issuer, exchange, or a third-party strategy?
- What is the mechanism? Rebasing, value-accruing wrapper, or platform rewards?
- What backs it? Reserves earning Treasury rates, or riskier lending/DeFi activity?
The GENIUS Act-style issuer prohibition, as summarized by Skadden and others, targets one channel: issuer-paid yield “just for holding.” That still leaves room for platforms to offer rewards funded by distribution economics—exactly the loophole banks are warning about.
- What is the mechanism? Rebasing, value-accruing wrapper, or platform rewards?
- What backs it? Reserves earning Treasury rates, or riskier lending/DeFi activity?
The GENIUS Act-style issuer prohibition, as summarized by Skadden and others, targets one channel: issuer-paid yield “just for holding.” That still leaves room for platforms to offer rewards funded by distribution economics—exactly the loophole banks are warning about.
A quick “yield” due diligence checklist
- ✓Identify the payer (issuer vs platform vs strategy)
- ✓Name the mechanism (rebasing vs wrapper vs rewards)
- ✓Trace the backing (Treasuries/cash equivalents vs lending/DeFi routing)
- ✓Separate marketing APY from underlying spread and risks
Case study logic: issuer economics meet platform incentives
Circle’s SEC disclosure that 95%–99% of revenue has come from reserve income explains why issuers guard the spread. Axios reporting on exchange distribution economics explains why platforms might share some of it with users: rewards are an acquisition tool, and stablecoin balances are sticky.
If lawmakers clamp down on platform-mediated yield, expect the product to migrate to wrappers, points systems, fee rebates, or other structures that deliver similar economics without using the word “interest.” If lawmakers allow yield under a defined regime, expect a wave of products that look more like regulated cash-management accounts.
If lawmakers clamp down on platform-mediated yield, expect the product to migrate to wrappers, points systems, fee rebates, or other structures that deliver similar economics without using the word “interest.” If lawmakers allow yield under a defined regime, expect a wave of products that look more like regulated cash-management accounts.
A reader’s bottom line
Stablecoin yield isn’t free money. It’s a reallocation of reserve income or a payment for taking additional risk. The more “deposit-like” the promise sounds, the more you should demand clarity on the legal and economic structure behind it.
The future of stablecoins will be written in distribution deals and definitions
Legislation can ban issuers from paying interest. It can’t easily ban competition for cash balances—especially when the competition is built into how money moves online.
Stablecoins now sit at a hinge point. Congress is crafting a regulated category for payment stablecoins, reflected in the structure of S.1582 (GENIUS Act) and the emerging statutory framework in 12 U.S.C. § 5902. Banks are lobbying to prevent yield from sneaking back through intermediaries. Issuers are defending a reserve-income model that, by their own disclosures, represents nearly all revenue. Platforms are incentivized to rebate economics to users as rewards.
The “stablecoin yield” fight will be decided less by slogans than by definitions: what counts as interest, who counts as the payer, and whether a payment instrument is allowed to behave like an investment product. The more stablecoins resemble the place people keep their everyday money, the less optional those definitions become.
Stablecoins now sit at a hinge point. Congress is crafting a regulated category for payment stablecoins, reflected in the structure of S.1582 (GENIUS Act) and the emerging statutory framework in 12 U.S.C. § 5902. Banks are lobbying to prevent yield from sneaking back through intermediaries. Issuers are defending a reserve-income model that, by their own disclosures, represents nearly all revenue. Platforms are incentivized to rebate economics to users as rewards.
The “stablecoin yield” fight will be decided less by slogans than by definitions: what counts as interest, who counts as the payer, and whether a payment instrument is allowed to behave like an investment product. The more stablecoins resemble the place people keep their everyday money, the less optional those definitions become.
$1
A payment stablecoin issuer creates a private $1 liability that can circulate widely as a transaction balance—driving the political stakes of “yield.”
S.1582
The GENIUS Act is widely summarized as prohibiting payment stablecoin issuers from paying interest/yield simply for holding the stablecoin.
12 U.S.C. § 5902
A statutory perimeter is emerging for payment stablecoins—acknowledging their money-like role without making them insured bank deposits by default.
T
About the Author
TheMurrow Editorial is a writer for TheMurrow covering business & money.
Frequently Asked Questions
Why do stablecoins generate yield in the first place?
Most major payment stablecoins are backed by interest-earning reserves such as short-term U.S. Treasuries, repo, and cash equivalents. Those assets generate income while the stablecoin is outstanding. The central policy question is who keeps that income—issuers, intermediaries, or users—and whether passing it through makes the stablecoin too similar to a bank deposit.
What does the GENIUS Act do about stablecoin interest?
The GENIUS Act (S.1582, 119th Congress) has been widely summarized by legal analysts as prohibiting payment stablecoin issuers from paying interest/yield to holders simply for holding the stablecoin. The prohibition targets issuer-paid yield, but does not automatically eliminate yield-like rewards that may be offered by exchanges or other intermediaries.
If issuers can’t pay yield, how do exchanges still offer “rewards”?
Banking trade groups argue the market often works as issuer → exchange/intermediary → user. Issuers may share economics with platforms through distribution arrangements, and platforms can choose to return some of that value to users as “rewards.” The user experiences it as yield even if the issuer never labels it interest.
Are yield-bearing stablecoins always risky?
Not always, but they are not all the same. Research distinguishes mechanisms like value-accruing wrappers, rebasing designs, and platform-mediated rewards. Some approaches are funded by reserve income; others may involve lending or DeFi routing. The key is to identify the source of returns and whether the program adds credit, liquidity, or smart-contract risk beyond holding a plain payment stablecoin.
Why do banks care so much about stablecoin yield?
Banks and their trade groups warn that yield-bearing stablecoins could accelerate deposit flight—money moving from bank deposits into stablecoin balances. Deposits are an important funding source for banks. If stablecoins become a mainstream place to park cash and also pay something like a money-market return, banks could face higher funding costs and reduced lending capacity.
What should I look for before using a stablecoin yield product?
Start with three checks: who pays (issuer vs platform), how it’s delivered (rebasing, wrapper, or rewards), and what backs it (reserve assets vs lending/DeFi strategies). Also watch for regulatory changes: issuer-level prohibitions may not cover platform rewards, but future rules could tighten definitions to capture yield by any name.
