Key Takeaways:
- The SEC has approved Figure’s YLDS stablecoin, offering a 0.5% annual yield.
- YLDS is registered as a security, placing it in the same category as stocks and bonds.
- KYC verification is required for holders to receive daily interest payouts.
The U.S. SEC has approved YLDS, the first interest-bearing stablecoin registered as a security. Developed by Figure Markets, the digital asset will be pegged to the U.S. dollar and offer an annualized yield of 0.5%.
Unlike popularly employed stablecoins USD Coin (USDC) and Tether (USDT) in some kind of regulatory limbo, YLDS will be under the SEC’s jurisdiction, along with stocks and bonds. This provides regulators something to examine and provides a fresh tool in the money world, blending cryptocurrency components and old fashioned securities.
Figure’s CEO, Mike Cagney, highlighted the revolutionary character of this progress, indicating users could possibly eliminate the use of banks if they are able to hold and use an asset that earns interest.
Stablecoins on the Rise
The SEC’s endorsement comes at a time when stablecoins are making inroads in both cryptocurrency and mainstream finance. The market capitalization of the total stablecoin market reached around $225 billion, and established players in the market, including Ripple and PayPal, entered the market, releasing their iterations.
However, USDT remains the dominant player, with a market cap exceeding $140 billion. Tether has capitalized on its reserves’ interest earnings, generating an estimated $13 billion in profit in 2024, rivaling financial giants like Mastercard.
Unlike its competitors, YLDS differentiates itself by returning a share of its yield to holders. Whereas Tether and USDC gain from owning them without returning profits, YLDS provides users with a compliant means to gain passive income. This and SEC regulation could position it to be a force to be reckoned with in the market for stablecoins.
Compliance and User Requirements
Figure’s stablecoin will require holders to undertake the know-your-customer (KYC) screening to earn the daily interest payouts. This compliance falls into the regulation to evade fraud and money laundry.
If YLDS are transferred to a non-verified KYC holder, they are locked and earn no interest, and so only the verified users are the recipients of the return.
The SEC’s decision paves the way to greater acceptance of the incorporation of digital assets into mainstream monetary frameworks, potentially leading to other regulation-compliant cryptocurrency developments. Figure anticipates releasing YLDS to users starting Thursday, bringing about a new generation in the future of stablecoins.
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