Figure Markets YLDS: SEC Approves First Interest-Bearing Stablecoin in the US

The Securities and Exchange Commission (SEC) has given a nod to the first interest-bearing stablecoin to be registered as a security in the United States

The Securities and Exchange Commission (SEC) has approved the first interest-bearing stablecoin to be registered as a security in the United States, according to sources. The Figure Markets YLDS stablecoin, which is pegged to the U.S. dollar and offers a 3.85% yield, is now able to launch with SEC oversight.

The stablecoin, which is expected to reshape the industry with its SEC oversight, will pay interest to holders on a daily basis. This differs from major stablecoins such as Tether (USDT) and USD Coin (USDC), which generate interest from their reserves but do not pass it on to holders.

Figure Markets CEO Mike Cagney said the innovation could challenge the role of traditional banks, which currently offer savings accounts with yields around 0.01%. He suggested that digital assets may be able to offer the same benefits, such as capital preservation and liquidity, with higher yields.

Backed by assets similar to prime money market funds, YLDS has its yield pegged to the Secured Overnight Financing Rate (SOFR) minus 0.50%.

Users who wish to earn interest will have to complete a Know Your Customer (KYC) process, although transfers to non-KYC users will still be permitted, albeit without the interest benefits.

The stablecoin, which is positioned as a compliant alternative to offshore stablecoins, will operate on the Provenance Blockchain. It will allow holders to redeem for U.S. dollars or other stablecoins, with fiat off-ramps available during U.S. banking hours.

In a related move, the SEC has also created the Cyber and Emerging Technologies Unit (CETU), which will be tasked with addressing fraud related to AI, blockchain, and social media scams. The unit will work closely with the Crypto Task Force to identify and investigate fraud involving these emerging technologies.

The approval of YLDS comes amid increasing regulatory attention to stablecoins. In contrast to other regions such as the EU, Hong Kong, and Singapore, the U.S. is still playing catch-up in establishing clear guidelines for stablecoin issuers.

However, legislative efforts such as the STABLE Act, which was introduced by Republican Representatives French Hill and Bryan Steil, are paving the way for regulatory clarity, although some areas still require further definition.

The stablecoin market currently has a total capitalization of over $230 billion, with Tether accounting for more than $140 billion and USDC at $56 billion. These figures highlight the potential for stablecoins to generate interest, but also present challenges in ensuring that holders directly benefit from it.

In response, YLDS is emerging as a regulated, yield-bearing option that could set a new standard, potentially influencing similar ventures such as the anticipated Pi Protocol from Tether co-founder Reeve Collins.

Cagney anticipates that YLDS will play critical roles beyond straightforward investments, such as facilitating exchange collateral, enabling cross-border transactions, and integrating into payment networks.

While specific user sign-up figures are not being disclosed, Figure Markets anticipates strong demand, considering the lack of other regulated yield-bearing stablecoins and spotlighting YLDS as a compliant, transparent, and attractive option compared to unregulated alternatives.

Initially, the stablecoin will be accessible to verified users, but there are plans to expand access in the future, which could lead to a broader user base for YLDS.