JPMorgan: "Yield-Generating Stablecoins Could Expand Market Share up to 50%" (feat. USDe, BUIDL)

# Yield-Bearing Stablecoins Could Capture Up to 50% of the Stablecoin Market, Says JP Morgan Yield-bearing stablecoins, which currently account for approximately 6% of the stablecoin market, might expand their share to as much as 50%, JP Morgan projected in a recent report. The investment bank noted that such stablecoins are emerging as attractive alternatives for investors by offering interest-like returns similar to traditional financial products, especially in today’s high-interest-rate environment, drawing parallels to money market funds. According to the cryptocurrency-focused media outlet The Block, Nikolaos Panigirtzoglou, Managing Director at JP Morgan, stated in the report that, following the U.S. presidential election, the market capitalization of the top five yield-bearing stablecoins surged from $4 billion to over $13 billion. These stablecoins include Ethereum-based USDe, SkyDollar(USDS), BlackRock’s BUIDL, Usual Protocol’s USD0, and Ondo Finance’s USDY. # Key Drivers Behind the Growth of Yield-Bearing Stablecoins JP Morgan’s report identifies three primary factors fueling the rapid growth of yield-bearing stablecoins: 1. **Appealing Passive Yields**: Investors can earn interest income without engaging in additional risk-related transactions or transferring assets, making these stablecoins particularly attractive. 2. **Institutional Endorsements**: Major exchanges like Deribit and FalconX have started recognizing tokenized Treasury bonds as collateral, integrating yield-bearing assets into derivatives trading. 3. **Shift from DeFi**: As decentralized finance (DeFi) yields have declined significantly since peaking in 2022, investors are increasingly turning to yield-bearing stablecoins as an alternative. Projects such as Frax Finance, which has adopted tokenized Treasuries for its own reserves, further illustrate the expanding use cases for these assets within the industry. # Regulatory Hurdles and Competition with Traditional Stablecoins Despite their growth potential, yield-bearing stablecoins face significant regulatory challenges. The classification of these assets as “securities” under U.S. securities law imposes stringent oversight, potentially limiting their appeal to retail investors. For example, YLDS, issued by Figure Markets, was recently approved by the U.S. Securities and Exchange Commission (SEC) as a security, exposing it to increased regulatory scrutiny. Meanwhile, traditional stablecoins like Tether(USDT) and Circle’s USD Coin(USDC), which do not offer interest to users, continue to dominate the $220 billion stablecoin market. Their strengths include high liquidity, low transaction fees, and fast transfer speeds, making them the preferred choice for many users. # Market Outlook JP Morgan anticipates that yield-bearing stablecoins could further solidify their position in the crypto market by serving as collateral for derivatives, funding for decentralized autonomous organization (DAO) treasuries, liquidity pool contributions, and standby capital for crypto funds. The bank also highlighted the possibility of idle capital currently tied up in traditional stablecoins gradually migrating to yield-bearing options as their appeal grows. While yield-bearing stablecoins face obstacles, particularly on the regulatory front, their potential to reshape investor behavior and redefine segments within the crypto market is undeniable. As institutional endorsement builds and adoption broadens, they could represent a significant evolution in the stablecoin ecosystem.