The First Interest-bearing Stablecoin in the U.S. Is Born

On Feb. 18, 2025, Figure Markets became the first company in the United States to receive approval for an interest-bearing stablecoin (CryptoBriefing). Their $YLDS stablecoin, pegged to the US dollar and operating as a fixed-price digital asset on the Provenance blockchain, was integrated into the Solana blockchain on Feb. 25, 2025, and is the first yield-bearing stablecoin to be registered as a public security with the US Securities and Exchange Commission (SEC).

To understand the significance of Figure Markets' approval, we first need to break down what stablecoins are and how they function.

What is a Stablecoin?

A stablecoin is a type of cryptocurrency designed to maintain a stable value by being anchored or “pegged” to another asset, such as gold or the US dollar. Stablecoins aim to provide the functional benefits of cryptocurrency while avoiding the high price volatility that makes many cryptocurrencies, including Bitcoin (BTC), less practical for everyday transactions. Most stablecoins don’t have their own independent blockchain, but instead are issued on existing networks like Ethereum, Binance Smart Chain, and Solana. 

Stablecoins were first introduced in 2014 with the launch of BitUSD, a decentralized, algorithmic stablecoin that was backed by cryptocurrency collateral rather than traditional fiat reserves. In 2015, Tether (USDT) emerged as the first widely adopted fiat-backed stablecoin, setting the standard for fiat-collateralized digital assets and paving the way for others like Circle (USDC) and Binance USD (BUSD). Pegged 1:1 to the U.S. dollar, Tether remains the largest stablecoin by market capitalization, though its reserve practices have been a topic of debate.

How do Stablecoins Make Money—and Why Do They Need To?

Unlike Bitcoin, which relies on mining rewards for network security and issuance, stablecoins often need structured revenue streams to manage reserves and maintain stability. Since their primary function is to maintain a fixed value rather than appreciate like traditional cryptocurrencies, stablecoins must cover operational costs, ensure liquidity, and manage reserves to maintain their peg.

To generate revenue, fiat-backed stablecoins like USDT and USDC typically hold reserves in cash equivalents such as bonds, treasury bills, or savings accounts (Benzinga). These reserves earn interest income, which issuers retain as profit. Stablecoin providers may also charge transaction and redemption fees when users buy, sell, or trade them on exchanges. Additionally, stablecoin issuers can generate income through partnerships, integrations, and lending activities in decentralized finance (DeFi).

Algorithmic stablecoins, on the other hand, do not rely on traditional reserves. Instead, they use automated mechanisms such as supply adjustments and arbitrage incentives to maintain their peg. Some algorithmic models attempt to generate revenue by issuing governance tokens, while others rely on transaction fees within their ecosystem. However, these models have historically been more fragile, with some failing under extreme market conditions, as seen in the collapse of TerraUSD (UST) in 2022.

The Benefits of Stablecoins

Stablecoins provide some of the best aspects of cryptocurrency: they’re often fast, cheap, borderless, and irreversible. Some have no lockup requirements, enabling unrestricted withdrawals and transfers, while more decentralized ones allow transactions without personal information.

Powerful tool for cross-border transactions

Their growing use in everyday payments and peer-to-peer (P2P) transfers makes them a powerful tool for cross-border transactions. Unlike traditional remittance services, which are slow and costly, stablecoins enable fast, low-cost international payments. International workers can send money home more affordably, and businesses are using them to settle international invoices efficiently.

Store of value among economic instability or inflation

In regions with economic instability or high inflation, stablecoins serve as a reliable store of value. Pegged to assets like USD, they help individuals and businesses protect purchasing power and access a stable financial system. This is especially valuable in emerging markets, where traditional banking options are limited.

Latin America and Sub-Saharan Africa, in particular, have embraced stablecoins for remittances, savings, and access to decentralized finance (DeFi) services like lending and staking (Chainalysis). Their practicality and stability make them an essential financial tool in these economies.

The Risks of Stablecoins

Like other cryptocurrencies, stablecoins face regulatory uncertainty, cybersecurity threats, and potential blockchain disruptions. However, they also carry unique risks tied to their stability and management.

Price decoupling

A major concern is the stability of the peg. Fiat-backed stablecoins rely on reserves, which must be properly managed and transparently audited—if reserves are insufficient, mismanaged, or become inaccessible due to banking issues or regulatory actions, the peg can break. Algorithmic stablecoins are even more vulnerable, as their stability mechanisms can fail under market stress, leading to devaluation or collapse.

Regulatory scrutiny and counterparty risk 

Regulatory scrutiny and counterparty risk also pose challenges. Governments may impose restrictions that limit trading, freeze assets, or force delistings, affecting liquidity and availability. Additionally, centralized stablecoins depend on private issuers to manage reserves responsibly—if an issuer becomes insolvent or mismanages funds, holders could face losses. While stablecoins offer many advantages, understanding these risks is essential for informed use.

Significant Stablecoin Hacks and Scams

According to Chainalysis'2025 Crypto Crime Trends, through 2021, BTC was unequivocally the cryptocurrency of choice among cybercriminals, likely due to its high liquidity. Since then, there has been a steady diversification away from BTC, with stablecoins now occupying the majority of all illicit transaction volume (63% of all illicit transactions). 

Stablecoins are designed for stability, but several high-profile failures have exposed their risks, leading to billions in losses and increased calls for regulation. Some of the most notable incidents include::

• The 2022 Collapse of TerraUSD (UST) – UST, an algorithmic stablecoin, lost its peg due to a flawed stability mechanism, triggering a massive sell-off and wiping out over $40 billion in value.

• The 2021 Fei Protocol Attack – Fei, a decentralized stablecoin project, suffered price manipulation exploits, leading to losses and a major restructuring of the protocol.

• The 2022 Celo Dollar (cUSD) De-Pegging – cUSD briefly lost its peg due to market conditions and liquidity issues, raising concerns about the stability of DeFi-based stablecoins.

These and similar events have underscored the risks involved in stablecoin projects, especially those that rely on complex algorithms or centralized control, and have sparked calls for stronger regulation and transparency in the sector.

The Future of Stablecoins

Stablecoins are growing at an unprecedented pace. In 2024, Citi reported that stablecoin transactions reached $5.5 trillion, surpassing Visa’s $3.9 trillion in processed payments (UNLOCK Media). This rapid adoption has caught the attention of traditional financial institutions. On Feb. 26, 2025, Bank of America CEO Brian Moynihan announced plans to launch a USD-pegged stablecoin, pending regulatory approval. This move signals a broader shift, as banks and legacy financial firms increasingly explore crypto-backed digital assets.

With Figure Markets’ $YLDS stablecoin securing SEC approval, stablecoins are entering a new phase—one where regulation and institutional adoption reshape the landscape. As they continue to evolve, they could redefine how money moves globally, offering new efficiencies but also raising fresh challenges. Whether they become a cornerstone of mainstream finance or face regulatory roadblocks, their impact on the financial system is only beginning.

Choose Ballet: Stable Cold Storage for Stablecoins

While there’s no definitive way to avoid the risks of stablecoins if you choose to use them, you can avoid the risk of online threats by storing your stablecoins on a Ballet REAL Series Cold Storage card. 

Ballet’s cold wallets are not only 100% offline, but are also non-electronic and require no firmware updates or account setup—just scan the card with the Ballet companion app and load crypto onto the card. With multicurrency support for hundreds of different coins and tokens, Ballet’s REAL Series cards allow you to buy, swap, and hedge your crypto investments freely. 

Why Choose Ballet?

• Secure: 100% offline cold storage ensures peace of mind. 

• Reliable: Trusted by crypto professionals and pioneers, Ballet cold wallets have secured over $800 million in digital assets worldwide.

• Beginner-Friendly: No account setup or technical expertise required—perfect for newcomers looking for a straightforward storage solution.

• Industry-Leading Technology: Ballet uses two-factor private key generation based on BIP38 open-source standards for enhanced security.

• Seamless Gifting: Easily load cryptocurrency onto the wallet and share it with family members as a gift or inheritance.

Start your journey today: Shop Ballet’s Cold Storage Wallet. 

Useful Links: 

Ballet Official Online Store

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Download Ballet Crypto App

 

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