The crypto industry markets stablecoin returns as "yield" with the implication that the user is earning income in some structural sense. That framing obscures what is actually happening. The bulk of so-called stablecoin yields are pass-throughs of net interest margin — issuer-earned income on the underlying Treasury reserves — that are now being competed back to depositors as the stablecoin landscape becomes more contested. Calling that a yield is closer to marketing than economics, and the category would benefit from honest terminology.
The mechanics are not subtle. Tether and Circle hold the bulk of their reserves in short-duration U.S. Treasuries. Those Treasuries currently yield somewhere between 4% and 4.75% depending on the curve point. Until 2024, both issuers retained essentially all of that yield as operating profit. Then the competitive landscape shifted: smaller stablecoin issuers launched with revenue-share mechanisms that paid depositors a portion of the underlying Treasury yield. PayPal's PYUSD followed. Coinbase began rebating USDC yields to its custodial users. The competitive equilibrium has shifted from "issuer keeps 100% of NIM" toward "issuer shares some fraction of NIM with depositors." That shift is what is being marketed as "yield."
The distinction is more than terminological. A genuine yield, in the financial-product sense, comes from real economic activity — lending, market-making, tokenized real estate cash flows — that produces income for the holder of a claim on that activity. Pass-through of NIM is structurally different: it is competed-back issuer profit, and its level is determined by competitive pressure on issuers rather than by economic productivity in the underlying asset. The two look identical to the user but behave very differently in stress scenarios. NIM compresses when interest rates fall; real yields can persist or even rise depending on the underlying activity.
The recent CEA paper estimating that a stablecoin "yield ban" would cost consumers $800 million annually is a useful illustration of how the framing matters. Read carefully, the paper is estimating that a ban on competition would cost consumers in the form of higher implicit issuer margins. That is a perfectly defensible policy position, but it is not the same as defending "passive yield" as a structural primitive. The honest framing — yields here are price competition for deposits — would clarify the regulatory conversation considerably. Banning competition is a debate the industry can win on the merits. Defending magical money-creation is a debate it cannot.
The industry's counterargument is that NIM-pass-through is no less "real" than the deposit interest paid on a checking account, which is also funded by NIM on the bank's loan book. There is a fair point here. Bank deposit interest is, structurally, exactly the same kind of yield-as-NIM-passthrough, and nobody complains that those rates are mislabeled. The difference is that banks operate within a deposit-insurance and supervisory framework that makes the implicit risk transparent to depositors. Stablecoin issuers do not, and the absence of that framework means depositors are bearing reserve-composition risk that bank depositors are largely insulated from. The yield framing obscures exactly that risk.
Honest framing — yields here are price competition for deposits — would clarify the regulatory conversation, even if it would also strip away some of the marketing magic. The next eighteen months will see meaningful regulatory engagement on this topic, both in the U.S. through the GENIUS Act implementation and in the EU through MiCA's stablecoin-yield rules. The industry should approach those debates with terminology that matches reality. Defending the consumer interest in retaining competitive issuer margins is a winnable argument. Defending "stablecoin yield" as a magical phenomenon is not, and the more time the industry spends on the latter, the harder it will be to win the former when it actually counts.