FSI Briefs
 | 
No
27
 | 

23 October 2025

Highlights

  • Some cryptoasset service providers (CASPs) offer yield-bearing products based on payment stablecoins, even though these stablecoins are not inherently designed to generate on-chain returns to holders. Yield generation often involves re-lending to borrowers, margin pools, arbitrage/derivatives collateral or facilitating their use in decentralised finance (DeFi) lending protocols. In other cases, yields are provided through loyalty programmes that are directly funded by CASPs.
  • These practices may blur the lines between payment instruments and investment products. They may compete with bank deposits but are often provided without equivalent prudential oversight, deposit insurance and transparency, exposing users to consumer protection gaps and losses.
  • Yield-bearing products based on stablecoins can exacerbate some general risks that stablecoins pose, for example, those related to their runnability and interaction with traditional banks. Multifunction CASPs that conduct yield-bearing lending, custody and other activities can create operational interdependencies and trigger conflicts of interest.
  • Regulatory approaches to stablecoin-related yields differ across jurisdictions. Payment stablecoin issuers are uniformly prohibited from remunerating balances. CASP-provided yields, however, are subject to three different approaches: (i) complete prohibitions; (ii) restricted prohibitions that ban products for retail users and set conditions for professional investors; and (iii) no explicit prohibition.
  • Addressing the risks posed by these arrangements may require a framework that extends beyond issuers to cover CASPs’ stablecoin-related activities, close regulatory gaps and safeguard end users’ protection and financial stability.

The views expressed in this publication are those of the authors and not necessarily those of the BIS.