From rental homes to government bonds, investors have always looked for ways to earn while they sleep. Now, crypto has joined the list. In 2025, a new trend is catching attention: yield-bearing stablecoins.
These tokens do more than mirror the value of the dollar. They also deliver a steady return while sitting in your wallet. That mix of stability and income is making them one of the most talked-about tools in the digital economy.
What Are Yield-Bearing Stablecoins?
Yeald-bearing stablecoins are designed differently from Traditional stablecoins like USDT or USDC that are linked to the dollar but do not reward holders. They pass on income from assets or strategies directly to the tokenholder. This can happen through rebasing, where balances rise daily, or by each token becoming worth more over time.
There are three main types. Tokenized treasuries and money market funds are backed by safe assets like short-term U.S. Treasurys or bank deposits. Holders earn yield similar to cash funds but on the blockchain. Ondo Finance’s USDY, for example, reflects Treasury yields and is only available to non-U.S. users.
DeFi savings wrappers offer another model. MakerDAO, now called Sky, allows users to wrap Dai into sDAI. This wrapper grows at a variable savings rate set by governance. It is common across DeFi apps, and its growth rate is set by protocol rules
The third category is synthetic stablecoins. They use market strategies like derivatives or staking instead of cash reserves. Ethena’s sUSDe is one example. It balances long spot crypto with short futures positions, passing returns from funding rates and staking rewards back to holders.
How Do You Earn Passive Income?
The process starts with picking the type of stablecoin that matches your risk comfort. Safer options include treasury-backed tokens. For those comfortable with DeFi risk, sDAI is popular. Higher-risk investors might choose synthetic models like sUSDe, which offer bigger but less certain returns.
Next comes buying or minting. Tokens can be bought on exchanges, often with Know Your Customer checks. Some can be minted directly through issuers, though minting is usually limited to banks, payment firms, or qualified investors. For instance, Circle only allows approved partners to mint USDC directly.
Once acquired, yield-bearing stablecoins can simply sit in a wallet to earn returns. Some increase balances, others raise the value of each token. Investors can also use them in DeFi to earn more through lending or liquidity pools. Although this bring more risk, it is an option for those seeking higher returns.
Background helps explain their rise. Stablecoins began as simple dollar tokens for payments and trading. DeFi later added lending and staking options. Now, yield-bearing versions combine both ideas, turning stablecoins into tools for saving and income.
Rules, Taxes, and Risks
Regulation has been playing a big role in 2025. For instance, in the United States, the GENIUS Act banned issuers from paying interest on stablecoins directly. This means tokens like USDC or PayPal USD cannot offer yield to retail users. At the same time, yield-bearing products must now be offered as securities, limited to qualified investors or offshore buyers.
Europe’s MiCA framework follows the same idea. E-money tokens cannot pay interest and are treated as payment instruments only. While the United Kingdom is still finalizing its rules, it has signaled a similar stance. The message is clear: stablecoins are for payments, not savings.
Taxes add another layer. In the U.S., rewards from rebases are taxed as regular income, and selling later can bring capital gains tax. Exchanges must now issue Form 1099-DA to track this. Meanwhile, in the EU, new rules under DAC8 and CARF will begin in 2026. The UK also treats DeFi rewards as income, while selling tokens is taxed as a capital gain.
Risks remain despite the appeal. Regulations can change suddenly, shutting off products or limiting who can use them. Market risks affect synthetic models, where funding rates can vanish overnight. Smart contract bugs or governance issues pose operational risks. Liquidity can also be restricted, with some tokens only redeemable by certain users.
Also Read: What Is Liquidations Data in Crypto Trading?
