Stablecoin yields that surpass Treasury yields are not extra "risk-free returns" but compensation for the additional risks you accept. Treasury yields are the risk-free benchmark; the extra return on stablecoins comes from risk premiums like collateral, market volatility, or protocol subsidies. Different stablecoins have entirely different sources for this premium.
Step 1: The Benchmark and the Premium Are Not the Same
What this step does: Break down the yield structure of stablecoins using Treasury yields as the anchor.
How to do it: Split the stablecoin yield into two layers:
Treasury yield (benchmark): Current short-term U.S. Treasury bill yields are around 4.25%–4.5%. This portion is the interest earned by the stablecoin issuer using your funds to buy T-bills, without taking on extra risk.
Extra premium (excess return): Anything above the Treasury yield must come from some other risk exposure.
A typical example to illustrate the difference: A RWA stablecoin like USYC yields around 3%–4%, almost entirely from the underlying Treasury bond coupons. Meanwhile, sUSDe's yield is currently also near 4%, but its underlying structure is entirely different—its returns come from perpetual contract funding rates, which are highly volatile and closely tied to market sentiment.
High-risk warning: If you see a stablecoin yield more than 2% above Treasury rates, ask first: "Where is this money coming from?" If it's from protocol token subsidies, it's unsustainable; if from staking or lending yields, there's liquidation risk. High yield = high risk holds true for stablecoins as well.
Step 2: Breaking Down the Three True Sources of "Excess Returns"
What this step does: Identify the three common sources of extra yield and judge whether they are sustainable.
How to do it: Check against the following categories:
A. Crypto Asset Staking Yield (Represented by Ethena's sUSDe)
Underlying logic: Users deposit ETH/stETH as collateral, and the protocol simultaneously opens an equal short position on centralized exchanges to hedge. Returns mainly come from funding rate payments from long positions to short positions in perpetual contracts.
Source of excess: In the 2024 bull market, funding rates stayed positive, pushing sUSDe annualized yields above 47%. After the market turned, they dropped to around 4%—the yield directly follows market sentiment. That's why Ethena recently moved 48% of its backing assets to DeFi lending, trying to reduce reliance on derivatives markets.
B. RWA Yield Redistribution (Represented by MakerDAO/sUSDS)
Underlying logic: The protocol buys RWA assets like U.S. Treasuries and redistributes the interest income to token holders. MakerDAO's 8% deposit rate (EDSR) was a one-time promotion, essentially using protocol profits to subsidize users to boost demand.
Source of excess: Subsidies from the protocol's own profits, which gradually decrease as deposits increase—this is not a long-term sustainable mechanism.
C. Protocol Token Subsidies (Represented by Early Liquidity Mining)
Underlying logic: The protocol uses its own issued tokens as extra incentives to attract liquidity.
Source of excess: The token's value comes from market valuation of the protocol. At its peak in 2024, USDe's market cap exceeded $12.5 billion, and sUSDe APY once surpassed 30%. But if the token price falls or subsidies stop, yields quickly plummet to zero.
A common mistake: Many people confuse "protocol subsidy yield" with "underlying asset yield," thinking high yields are sustainable. In reality, subsidies are temporary, while underlying asset yield is the part you can rely on in the long run.
Step 3: Judge by "Yield Sustainability," Not "Current APY"
What this step does: When comparing different yield-bearing stablecoins, prioritize sustainability above all else.
How to do it: Use three questions to evaluate:
Is the yield source verifiable? If it's on-chain lending interest or Treasury yields, verifiability is high; if it's protocol subsidies or governance token incentives, it's unsustainable.
How volatile is the yield? USYC's 3% and sUSDe's 4% might look similar, but the former stays steady year-round, while the latter has swung between 3% and 47% over the past year.
Where is capital flowing? In Q2 2026, sUSDe's supply dropped by roughly $1.8 billion, while USYC saw inflows of $1.4 billion and sUSDS $1.2 billion. Capital is voting with its feet, moving from volatile synthetic yields to predictable RWA yields.
Go to Token Terminal and check the specific stablecoin's "yield source breakdown." If the platform doesn't clearly separate this data, that's itself a red flag. Compare the stablecoin's APY curve over the past 6 months—if the yield has swung by more than 5x, you're earning from market sentiment, not Treasury interest.
