Yield-bearing stablecoins have catapulted to prominence, now boasting a staggering $11 billion in circulation and accounting for 4.5% of the total stablecoin market as of May 2025. This marks a dramatic leap from a mere $1.5 billion and a 1% market share at the dawn of 2024. Pendle, a decentralized protocol, emerges as a significant beneficiary of this surge, capturing a hefty 30% of all yield-bearing stablecoin total value locked (TVL), approximately $3 billion, according to a recent disclosure.
Driving Forces Behind the Surge
Pendle’s rise is emblematic of broader shifts within the stablecoin ecosystem. Traditionally dominated by assets like USDt (USDT) and USDC (USDC), which do not pass on interest to holders, the stablecoin landscape is evolving. These conventional stablecoins, with over $200 billion in circulation amid US Federal Reserve interest rates hovering at 4.3%, represent a staggering $9 billion in unrealized annual yields for holders. Pendle’s offering of fixed yields or speculative variable interest rates has clearly struck a chord, with stablecoins now constituting 83% of its $4 billion TVL—a seismic shift from less than 20% a year prior.
Interestingly, Ether (ETH), once the bedrock of Pendle’s TVL, has seen its share dwindle to below 10%. This pivot highlights an industry-wide trend: the pursuit of yield in a market rife with opportunity yet fraught with regulatory challenges. As explored in our recent coverage of Visa and Baanx’s launch of USDC stablecoin payment cards, the integration of stablecoins into mainstream financial products is further evidence of this trend.
Regulatory Winds of Change
Under the administration of President Donald Trump, regulatory frameworks have provided a clearer path for yield-bearing stablecoins. The US Securities and Exchange Commission’s (SEC) decision in February to classify these instruments as “certificates” rather than banning them outright was a watershed moment. This move subjected them to securities regulation, encompassing registration, disclosure, and investor protections—offering a semblance of legitimacy and stability. For a deeper dive into the regulatory implications, see our coverage of the SEC’s latest guidance.
Proposed legislation, such as the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) and the Guiding and Establishing National Innovation for US Stablecoins (GENIUS), further signals an auspicious legislative environment. These initiatives aim to bolster transparency and accountability, which could catalyze further growth in the sector.
What Lies Ahead?
Pendle’s projections are ambitious yet tantalizing. The firm envisions stablecoin issuance doubling to $500 billion within the next 18 to 24 months, with yield-bearing variants capturing a 15% share of this burgeoning market. That translates to a potential $75 billion in issuance—a sevenfold increase from current levels. While this growth trajectory is promising, it raises questions about market saturation and the sustainability of yield rates in an increasingly competitive landscape.
Pendle’s strategic pivot away from airdrop farming toward establishing itself as an infrastructure layer for decentralized finance (DeFi) yield markets underscores its adaptability. Ethena’s USDe stablecoin currently dominates Pendle’s stablecoin TVL, but a slew of newcomers—Open Eden, Reserve, and Falcon—have upped non-USDe assets’ share from 1% to 26% over the past year. Pendle’s expansion plans include supporting networks like Solana and integrating with platforms like Aave and Ethena’s upcoming Converge blockchain, signaling its broader ambitions.
The burgeoning interest in yield-generating strategies is not confined to crypto natives alone. Retail and institutional investors alike are flocking to these opportunities, eager to maximize returns on digital assets. On May 19, Franklin, a hybrid cash and crypto payroll provider, unveiled Payroll Treasury Yield, harnessing blockchain lending protocols to enable firms to earn returns on payroll funds—a testament to the growing mainstream appeal.
Conclusion: The Road Ahead
As yield-bearing stablecoins continue their meteoric rise, the landscape remains in flux. Regulatory clarity, market innovation, and strategic pivots will likely shape the future trajectory. Yet, the question lingers: Can the current growth momentum be sustained amidst evolving market dynamics and potential regulatory hurdles? Only time will tell, but one thing’s for sure—the stablecoin market is anything but static.
Source
This article is based on: Yield-bearing stablecoins surge to $11B, now 4.5% of market: Report
Further Reading
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Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
