🚨 BIS maps stablecoin yield models as interest bans zero in on the lower-risk reserve-based version 🚨
The BIS has drawn a clean line between two ways stablecoins can generate yield for holders: reserve-based payouts and activity-based rewards. The distinction matters because current U.S. and EU interest bans mostly target the model that looks more like cash management and carries less direct risk for users.
🔑 Key highlights:
🔹️ The BIS identifies two stablecoin remuneration models on centralized exchanges: reserve-based and activity-based.
🔹️ Reserve-based remuneration passes reserve asset returns through to holders, with Coinbase’s USDC yield cited as the main example.
🔹️ Activity-based remuneration comes from exchanges deploying customer stablecoins into lending and trading operations, with Binance used as the example.
🔹️ BIS data shows Coinbase’s USDC yield has tracked the federal funds rate closely since 2023.
🔹️ Activity-based yields can spike much higher during crypto rallies, with Binance USDT borrowing rates reaching 40% to 50% in 2024.
🔹️ The article says reserve-based yields are the lower-risk model, while activity-based yields introduce more counterparty and commingling risk.
🎯 Bottom Line: The BIS is effectively saying that stablecoin interest bans may be aimed at the wrong target if the goal is to reduce holder risk.
https://www.ledgerinsights.com/bis-maps-stablecoin-yield-models-do-interest-bans-target-the-right-one/