The U.S. Securities and Exchange Commission granted the crypto industry a victory on Tuesday, approving an application for an interest-bearing stablecoin for the first time.
The stablecoin, called YLDS and developed by the digital assets firm Figure Markets, will be pegged to the U.S. dollar and offer users a yield similar to that of cash held in a savings account, which is now 3.85% and changes based on interest rates. And while other leading stablecoins like USD Coin and Tether operate in regulatory limbo, YLDS will be officially registered with the SEC as a security, Figure CEO Mike Cagney told Fortune in an interview, putting it in the same financial category as stocks or bonds.
A filing on the SEC’s website reflects an approval of Figure’s application on Tuesday. A spokesperson for the agency did not immediately respond to a request for comment.
“We think this is a hugely transformative play,” Cagney, who was previously CEO of the publicly traded financial company SoFi, told Fortune. “If I can hold this, if I can self-custody this, if it pays me interest, and I can actually use it to transact, what do I need a bank for?”
The SEC’s approval of the stablecoin comes more than a year after Cagney and his company, the digital assets subsidiary of the fintech Figure Technology, filed for approval with the regulator. It also comes amid a boom in demand for stablecoins, as the total market capitalization for all stablecoins has almost doubled from a crypto bear market low to about $225 billion, according to data from DefiLlama.
Stablecoin explosion
Cryptocurrencies are often volatile and swing in price. Stablecoins are designed, as their name suggests, to not fluctuate in value. Issuers achieve this by pegging a stablecoin’s value to an existing asset and backing the stablecoin with equivalent reserves. In most cases, this asset is the U.S dollar, and the reserves are U.S. Treasuries. Stablecoins are typically used as substitutes for dollars in crypto trading and different decentralized applications, though non-crypto companies and financial institutions are beginning to adopt them for cross-border payments.
Stablecoins have become an increasingly popular product in crypto, with competitors from Ripple to PayPal launching their own versions. The market leader is USDT. Issued by Tether, a crypto firm headquartered in El Salvador, USDT’s total market capitalization has grown past a record $140 billion, according to CoinGecko. Tether has reaped the rewards. In 2024, it generated $13 billion in unaudited profit, according to its most recently released financials. That’s on par with Mastercard, which reported about $12.9 billion in net income in 2024.
Tether generates its profits through the interest it reaps from its stablecoin reserves, or the U.S. Treasuries and other assets it holds that generate yield. The company doesn’t share that yield with users and neither does USDC, the second-most popular stablecoin, which has a total market capitalization of $56 billion.
This is why Cagney, the CEO of Figure Markets, believes YLDS has a chance to compete. The stablecoin will give holders a daily interest rate of 0.5%. While there are other yield-bearing stablecoins on the market, they either operate outside the U.S. or without regulatory clarity. The SEC has previously explored legal action against non-registered stablecoins, including Binance’s now-defunct version. The SEC dropped the investigation in 2024. Bills that would create supervisory frameworks for stablecoins are making their way through Congress, though the various legislative proposals designate different agencies as the primary regulator.
Amid the uncertainty, Cagney said he believes that the SEC approval will give his product an edge. “There’s a lot of skepticism about the ability for them to support withdrawals,” he said, in reference to consumers’ ability to cash out unregulated yield-bearing stablecoins for U.S. dollars.
Because YLDS will be issued as a public security, purchasers will have to go through a know-your-customer process, or when financial companies check users’ identities to prevent fraud, money laundering, and other illegal activities.
If YLDS is transferred to another user who hasn’t gone through Figure Markets’ KYC process, that user can hold the stablecoin but won’t receive the daily yield, Cagney said. Figure plans to make YLDS available to users on Thursday.
Correction, Feb. 20, 2025: A previous version of this article misstated the amount of yield holders would glean from YLDS.
