YLDS Stablecoin Guide: The First SEC-Registered Yield-Bearing Stablecoin

# YLDS Stablecoin Guide: The First SEC-Registered Yield-Bearing Stablecoin

Stablecoins have a dirty secret: they generate billions in yield from the reserves backing them, but holders don't see a dime of it. Circle earned over $1.6 billion in revenue from USDC reserves in 2023 — none of which was shared with the people actually holding the token.

YLDS changes that equation. Launched in February 2025 by Figure Markets, YLDS is the first stablecoin to be registered with the SEC as a security — and the first to pass yield directly through to holders. It pays interest based on the Secured Overnight Financing Rate (SOFR) minus 0.50%, accrued daily and paid monthly.

This isn't a DeFi yield farming play or an algorithmic experiment. It's a regulated financial product that happens to run on blockchain. And it's quietly becoming a cornerstone of the crypto lending ecosystem.

How YLDS Works

The Basics

YLDS maintains a $1.00 peg, just like USDC or USDT. The difference is what happens behind the scenes:

• Backing: YLDS is backed by the same types of securities held by prime money market funds — Treasury bills, repurchase agreements, and agency debt
• Yield: Holders earn interest at SOFR minus 0.50%, accrued daily and paid monthly. As of early 2026, this translates to approximately 3.8-4.0% APY
• Registration: YLDS is registered with the SEC as a security under the Securities Act. This is not a workaround or a gray area — it went through the formal registration process
• Availability: Initially launched on Provenance Blockchain, YLDS has expanded to Solana and Sui

SOFR-Based Yield

SOFR (Secured Overnight Financing Rate) is the benchmark rate used throughout the US financial system — it's what replaced LIBOR. For YLDS holders, this means your yield tracks the risk-free rate. When the Fed raises rates, your YLDS yield goes up. When rates drop, so does your yield.

The "minus 0.50%" spread is how Figure Markets covers operational costs and earns its margin. At a 4.3% SOFR, you'd earn approximately 3.8% on YLDS — still significantly more than the 0% you earn holding USDC or USDT.

How Interest Accrues

• Interest accrues daily based on the SOFR rate
• Payments are distributed monthly
• Your YLDS balance stays at $1.00 per token — yield is paid as additional YLDS tokens
• No staking, locking, or claiming required — it's automatic

YLDS vs Traditional Stablecoins

The critical difference: USDC and USDT keep all reserve yield for themselves. Circle and Tether earn billions from the Treasury bills backing their stablecoins. Holders get price stability but zero yield. YLDS passes that yield through.

Why Not Just Lend USDC on Aave?

You could earn yield on USDC by depositing it into Aave or Compound (currently 2-4% APY). But there's a key difference in risk:

• USDC on Aave: Your yield comes from crypto borrowers. Risk includes smart contract exploits, borrower liquidation cascades, and protocol governance changes
• YLDS: Your yield comes from US government securities (T-bills, repos). Risk is primarily credit risk of the US government and Figure Markets' operational execution

YLDS yield is lower ceiling but lower risk. When you then deposit YLDS into Democratized Prime's HELOC pool, you layer on additional yield (~9%) from real mortgage borrower payments — a different and diversified risk profile from crypto-native lending.

YLDS in the Democratized Prime Ecosystem

YLDS isn't just a standalone stablecoin — it's the native currency of Figure's Democratized Prime lending marketplace.

The typical flow:

1. Purchase YLDS — convert USD or other stablecoins to YLDS on Figure Markets
2. Earn base yield — immediately start earning ~3.8% APY from SOFR-based interest
3. Deposit into a Democratized Prime pool — earn additional yield (e.g., ~9% from the HELOC pool) on top of the base YLDS yield
4. Or stake for PRIME — deposit YLDS via Hastra on Solana to receive the PRIME liquid staking token, which can be used across DeFi

This layered approach means your capital can earn yield at every step: base SOFR yield as YLDS, plus marketplace yield from Democratized Prime, plus DeFi composability via PRIME.

Institutional Validation

Several data points signal institutional trust in YLDS:

• Ondo Finance invested $25 million in YLDS to back its own OUSG and USDY products. Ondo is the leading tokenized Treasury platform — their investment validates YLDS's approach
• AAA S&P rating on Democratized Prime's HELOC pool (which uses YLDS as the lending currency) — the first AAA rating for a blockchain-native lending pool
• $464 million in balance as of February 2026, showing significant adoption in under a year
• SEC registration — the most rigorous regulatory approval path available for a crypto-native product

Risks and Considerations

YLDS is lower-risk than many crypto products, but it's not risk-free:

• Interest rate risk: If SOFR drops significantly (e.g., in a rate-cutting cycle), YLDS yields will fall accordingly. In a zero-rate environment, YLDS would yield approximately -0.5% (though Figure would likely adjust the spread)
• Issuer risk: YLDS depends on Figure Markets' operational integrity and solvency. While the parent company is publicly traded and profitable, it's still a single point of failure
• Regulatory risk: SEC registration is a strength, but the regulatory landscape for digital securities is evolving. Future rule changes could affect YLDS
• Liquidity risk: With ~$464M in balance, YLDS is far smaller than USDC (~$35B) or USDT (~$120B). Large redemptions could face delays
• Chain risk: Provenance Blockchain is less battle-tested than Ethereum. The Solana and Sui deployments expand accessibility but add bridge risk
• Not FDIC insured: Despite being backed by Treasury securities, YLDS is not a bank deposit and has no FDIC protection

Who Should Consider YLDS?

Crypto-native investors holding stablecoins: If you're sitting on USDC or USDT earning nothing, YLDS offers ~4% just for holding. The SEC registration adds a layer of regulatory protection that most crypto yield products lack.

DeFi users seeking real-world yield: Via the PRIME token on Solana, you can access institutional-grade yields within the DeFi ecosystem without leaving your preferred chain.

Income-focused investors: YLDS + Democratized Prime HELOC pool is a compelling yield stack for those comfortable with the platform risk: ~4% base + ~9% HELOC pool = a diversified, asset-backed yield profile.

NOT for: Traders who need the deepest liquidity (USDC/USDT win on volume and trading pairs), or DeFi users who need maximum composability on Ethereum (YLDS isn't on Ethereum mainnet yet).

The Yield-Bearing Stablecoin Category

YLDS isn't the only yield-bearing stablecoin, but it is the only SEC-registered one:

Each has a different risk profile. YLDS is the most conservatively positioned — regulated, government-security-backed, and institutional-grade. Ethena's USDe offers much higher yields but carries synthetic derivative risk. Spark's sDAI is DeFi-native with variable rates set by governance.

Further Reading

• Figure's Democratized Prime — How the on-chain warehouse lending marketplace works
• Stablecoin Lending Guide — Compare yields across all stablecoins
• Figure Technologies Review — Full review of Figure's HELOC product
• Tokenized Treasuries Guide — How to earn government bond yields on-chain
• RWA Lending Guide — How real-world assets power DeFi loans