After Stricter Regulation of Stablecoin Yield Products: What Alternative Options Do Users Have?
The era of passive stablecoin yield is being phased out by regulation, but 'yield' itself hasn't disappeared—it has simply shifted from 'holding passively' to 'active participation' to earn returns.The core logic for users is transitioning from 'Hold-to-Earn' to 'Use-to-Earn,' moving from passively collecting interest to actively engaging in protocol activities for rewards.
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What Exactly Does the Regulation Ban? What Does It Not Ban?
To understand the alternatives, we must first clarify the regulatory boundaries.
The GENIUS Act(effective July 2025) initially banned stablecoin issuers from directly paying interest to users. However, it left a loophole: intermediaries like exchanges could still pass on Treasury yields to users as 'rewards' through revenue sharing with issuers—Coinbase used this mechanism to pay USDC holders 3.5%-5% annualized rewards.
The CLARITY Act(approved by the Senate Banking Committee on May 14, 2026) is closing this loophole. According to Section 404,all 'digital asset service providers' (including exchanges, brokers, and their affiliates) are prohibited from paying passive yields based on 'idle balances.'
However, the Act preserves compliance space for three types of 'activity-based rewards':
| Reward Type | Compliance Prerequisite | Specific Activities |
|---|---|---|
| Platform Activities | Active user participation | Loyalty programs, promotional draws, subscription discounts, trading rebates |
| Transactions & Spending | Stablecoins are actually used | Payments, transfers, cross-border remittance settlements, etc. |
| On-Chain Infrastructure Contribution | User assumes risk/performs labor | Participating in protocol validation, staking, governance voting, or providing liquidity |
Core Boundary: If yield is 'given away for free' (automatically distributed based on balance), it is prohibited. If users earn it by assuming specific risks or performing specific labor, it is considered 'Payment for Service' and is compliant.
Alternative 1: DeFi Native Yield Stablecoins
USDe (Ethena)
USDe is a 'synthetic dollar' that does not rely on bank reserves but maintains value and generates yield through adelta-neutral hedging strategy.
There are two sources of yield, both falling under the Act's definition of 'activity-based rewards':
Staking Yield: Holding liquid staking tokens like stETH to earn Ethereum consensus rewards—this qualifies as 'participating in validation or staking,' a compliant activity.
Funding Rates: Opening equivalent short perpetual contract positions on exchanges to collect funding fees paid by long positions—this qualifies as an 'activity reward for risk management and hedging operations.'
Because USDe's yield is volatile and carries counterparty and smart contract risks, it is legally not a 'deposit equivalent' but rather 'returns from an active strategy.'
USDS (Sky, formerly MakerDAO)
Users deposit USDS into the Sky protocol, which deploys it into lending protocols or liquidity pools, distributing protocol income and RWA yields to users. This model is classified as rewards for 'providing liquidity,' not 'interest payments.'
Alternative 2: Structured Yield Protocols
The following protocols are explicitly recognized as compliant beneficiaries under the CLARITY Act framework:
Pendle: Yield Splitting and Fixed Income
Pendle splits yield-bearing assets intoPrincipal Tokens (PT)andYield Tokens (YT). Holding PT locks in a fixed annualized yield, while holding YT allows betting on yield fluctuations. The entire process involves 'active trading and liquidity provision,' not passive holding for interest. PT/YT trading has been classified under CFTC commodity derivatives regulation.
Real-world example: The Apollo Credit Fund (ACRED), tokenized via Securitize and wrapped by the Ember protocol, launched on Pendle in April 2026. Holding PT-eACRED allows one-click allocation to Apollo's entire credit portfolio, including direct corporate lending, asset-backed lending, and structured credit.
Morpho: On-Chain Prime Broker
Morpho enables customizable lending markets with risk parameters. Following the Act, strategy firms like Gauntlet and Steakhouse can set upcompliant permissioned poolswith custom collateral ratios, oracles, position limits, and KYC requirements. Stablecoin funds pushed out of passive wealth management can flow into Morpho pools, earning compliant yields through active lending activities.
Maple Finance & Centrifuge: On-Chain Credit and RWA Issuance
Maple Finance: Focuses on institutional lending pools with rigorously vetted borrowers. Its Syrup pool has integrated with Morpho, enabling cross-protocol credit portfolio allocation.
Centrifuge: Operates upstream in RWA tokenization, where private credit, commercial paper, and structured credit tranches can be packaged as on-chain tokens, seamlessly integrating into the broader DeFi ecosystem.
Alternative 3: Bank-Grade Tokenized Deposits (Institutional Path)
If the DeFi paths above carry too much risk, there is an emerging 'institutional channel':tokenized bank deposits.
JPMorgan's deposit token went live on the Base chain in late 2025. Such products:
Fall outside the GENIUS Act scope (they are not 'stablecoins' but on-chain representations of traditional deposits)
Have full bank-grade regulation and deposit insurance
Yield typically comes from traditional bank credit operations
This path is more suitable for institutions or high-net-worth individuals; retail investors currently face high barriers to entry.
Risk and Suitability Comparison of Alternatives
| Alternative | Yield Source | Risk Level | Suitable For |
|---|---|---|---|
| USDe (Ethena) | Funding rates + staking rewards | Medium (risk of negative funding rates, exchange risk) | Users familiar with perpetual contracts and comfortable with yield volatility |
| USDS (Sky) | Protocol income + RWA yields | Medium-low (protocol risk, RWA credit risk) | Users preferring relatively stable, governance-driven returns |
| Pendle PT | Fixed yield (locked) | Medium (smart contract + underlying asset risk) | Users wanting locked-in deterministic returns, less concerned with liquidity |
| Pendle YT | Directional yield speculation | High (wrong direction could lead to zero) | Advanced traders |
| Morpho Lending | Active lending rates | Medium (counterparty credit + liquidation risk) | Users willing to actively manage positions with some DeFi experience |
| Tokenized Deposits | Traditional credit returns | Low (with deposit insurance and bank regulation) | Institutions or high-net-worth individuals |
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Checklist
Before choosing an alternative, confirm the following:
Do I clearly understand that the yield from this option comes from an 'active activity,' not from 'holding a balance'?
Do I understand the main risks of this option (smart contract risk, counterparty risk, funding rate risk)?
Do my actions (e.g., staking, providing liquidity, participating in lending) align with the 'activity-based' definition under the CLARITY Act?
Can I accept yield volatility or temporary zero returns?
Risk Reminder: All DeFi yield protocols carry inherent risks such as smart contract bugs, oracle failures, and stablecoin de-pegging. The CLARITY Act only clarifies regulatory boundaries; it does not eliminate these investment risks. Additionally, the underlying asset price volatility of high-APY products often exceeds the yield itself, especially during bear markets.
