Yield-bearing stablecoins hit $11B milestone as investors flock to ‘smart money’

Yield-bearing stablecoins have exploded to $11 billion in circulation, now representing 4.5% of the total stablecoin market, according to a new report that underscores a transformative shift in crypto finance.

The growth of these interest-generating digital dollars signals rising demand for decentralized yield, and regulatory clarity may be playing a critical role.

The surge is staggering when compared to just $1.5 billion in circulation at the start of 2024, when yield-bearing stablecoins accounted for only 1% of the market.

Pendle dominate with 30% market share of yield-bearing stablecoins

Leading the charge is Pendle, a decentralized finance (DeFi) protocol that lets users lock in fixed yields or speculate on variable rates. Pendle now controls 30% of all yield-bearing stablecoin total value locked (TVL) — nearly $3 billion, according to figures shared with Cointelegraph.

Pendle’s stablecoin holdings now account for 83% of its $4 billion TVL, a meteoric rise from less than 20% a year ago. By contrast, assets like Ether (ETH), which once made up 90% of the platform’s TVL, now represent less than 10%.

“This is a structural shift in DeFi’s value proposition,” said Vincent Preddy, DeFi analyst at Messari. “Yield-bearing stablecoins are no longer niche. They’re fast becoming a cornerstone of capital-efficient strategies.”

Traditional stablecoins like Tether (USDT) and USD Coin (USDC) do not pass interest to holders. With over $200 billion in stablecoins currently in circulation and U.S. interest rates at 4.3%, Pendle estimates that investors are missing out on more than $9 billion in annual yield.

The report argues this missed opportunity is creating a tailwind for yield-bearing alternatives that are beginning to disrupt legacy digital dollars.

U.S. Regulatory Clarity Accelerates Growth

A major catalyst behind this boom? Regulation — or rather, regulatory approval.

In February, the U.S. Securities and Exchange Commission (SEC) approved yield-bearing stablecoins as “certificates,” subjecting them to securities laws rather than banning them outright. This move opened the door for legitimate, compliant yield-bearing stablecoins to flourish in the U.S. market.

Proposed legislation like the STABLE Act and GENIUS Act are also laying down a favorable framework.

“This is the clearest signal yet that Washington is ready to regulate, not restrict,” said Sheila Warren, CEO of the Crypto Council for Innovation. “Yield-bearing stablecoins are now part of the U.S. financial vocabulary.” Hmmm

Initially known for airdrop farming, Pendle has now repositioned itself as a core infrastructure layer for yield markets in DeFi.

Its primary asset, Ethena’s USDe stablecoin, accounts for around 75% of Pendle’s stablecoin TVL. However, new entrants like Open Eden, Reserve, and Falcon are rapidly gaining traction, growing the non-USDe share from 1% to 26% over the past year.

Pendle is also expanding cross-chain, with plans to support Solana, and integrate with Aave and Ethena’s upcoming Converge blockchain.

Yield-Bearing Stablecoins expected to hit $75B

Looking ahead, Pendle expects the total stablecoin market to double to $500 billion in the next 18 to 24 months. If yield-bearing options capture just 15% of that, it would represent a $75 billion market, up from $11 billion today — a 7x increase.

“The next stage of DeFi won’t be about speculation,” said Alex Svanevik, CEO of Nansen. “It’ll be about sustainable yield — and that’s where these instruments shine.”

On May 19, Franklin, a hybrid payroll provider, announced Payroll Treasury Yield, a blockchain-based service that allows companies to earn interest on idle payroll funds.

This marks yet another step in bringing yield-bearing stablecoins into the institutional arena, closing the gap between traditional finance and crypto-native solutions.

With yield-bearing stablecoins growing at breakneck speed and regulatory approval now in place, the crypto industry is witnessing a shift toward utility, sustainability, and compliant yield. Pendle and its peers are no longer fringe — they’re redefining the future of stable digital assets.

Let me know if you’d like me to generate a news graphic for this article or distribute it across platforms. The Bit Gazette will continue to observe the market and report as events unfold.