Stablecoins were once viewed primarily as a tool for liquidity and trading. Today, they’ve evolved into yield generating assets with a growing range of opportunities across traditional finance and decentralized finance (DeFi). From conservative exposure to U.S. Treasury bills to higher-risk private credit and advanced DeFi lending strategies, investors can now tailor stablecoin yield strategies to match their risk tolerance. This article explores the core “set-and-forget” approaches, T-bills, private credit, and DeFi lending; along with more advanced techniques for those seeking enhanced returns.
Lending For Stablecoin Yield: T-Bills, Private Credit, and DeFi Lending
Passive investors seeking yield on stablecoins typically have three “set-and-forget” options: Treasury bills, private credit and DeFi lending. Each offers a distinct risk-return profile, and the appropriate choice depends on the investor’s overall portfolio risk tolerance.
Stablecoin Yield via T-Bills
Lending is among the simplest ways to earn yield on stablecoins, but the sources of that yield vary widely. Capital allocation ultimately depends on a portfolio’s risk profile. More conservative investors, particularly those without a decentralized finance strategy, often turn to centralized platforms such as Coinbase to generate stablecoin returns. In those cases, the yield is typically derived from short-term U.S. Treasury bills rather than on-chain lending activity.
Investors seeking a DeFi strategy without sacrificing the stability of U.S. Treasury yields have an alternative: tokenized T-bills. These products, typically limited to accredited and institutional investors, offer exposure to short-term government debt onchain. Retail investors generally can’t mint tokenized T-bills directly, but they can gain access by purchasing them in secondary markets onchain.
If you’re an institutional investor seeking access to minting and redemption, RWA.xyz is a recommended resource for researching available options. Retail investors typically do not have access to minting and redemption but can buy and sell on decentralized exchanges at any time, with sUSDe among the most widely used for yield and leverage.
Stablecoin Yield via Private Credit
Private credit is carving out a role on the blockchain. Some institutions and family offices are putting their crypto holdings to work, borrowing against digital assets to finance other investments. Others are pledging operating businesses or real-world assets as collateral to secure loans denominated in stablecoins. For investors, the trade-off is clear: private credit offers the potential for higher yields on stablecoins than passive exposure to tokenized Treasury bills, albeit with greater risk.
Yield-bearing stablecoins are structured in markedly different ways. Consider three examples and the sources of their returns. sUSDs generate yield from a mix of crypto-backed loans, US Treasurys, AAA-rated corporate debt and private credit. SyrupUSDC and SyrupUSDT derive returns primarily from crypto-backed lending to institutional borrowers. sUSDai, by contrast, earns yield from loans to AI data centers, where borrowers finance GPU purchases and the hardware itself serves as collateral.
While each product relies on private credit to generate returns, the underlying risk exposures vary significantly. Investors must assess those risks carefully and determine whether the potential returns adequately compensate for the possibility of capital loss.
Stablecoin Yield via DeFi Lending
Lending capital through DeFi protocols such as Aave is among the simplest ways to generate yield in decentralized finance. These platforms provide transparency around the collateral backing loans, allowing investors to assess risk before committing funds.
Stablecoin Fixed Yields in DeFi
Variable interest rates work for most investors, but some prefer the certainty of fixed rates. In DeFi, there are two primary ways to achieve this.
One approach is through undercollateralized lending on protocols like Wildcat, where investors provide loans to institutions at fixed interest rates. Some loans have a set maturity date, while others are open-ended.
The other option is using platforms such as Pendle, an automated market maker for yield. Unlike traditional bonds, fixed-yield products on Pendle don’t pay periodic interest. Instead, investors receive both principal and interest in a lump sum at maturity.
Liquidity Providing: Stablecoin Pairs Only
One of the most effective ways to earn stablecoin yields is by acting as a liquidity provider for traders. With a growing number of stablecoins in circulation, both investors and traders frequently move in and out of different tokens to capture market opportunities.
Take the two largest stablecoins (USDT & USDC) as an example. By providing capital to a USDC/USDT pair on a decentralized exchange, you earn trading fees whenever users swap between these coins.
Decentralized exchanges compete for liquidity and trading volume, often offering emissions of their native tokens to attract providers. These token rewards function like a marketing expense for the exchange and an additional source of yield for you. You can either manually claim and convert these tokens into stablecoins or use a protocol like Beefy to automatically compound your earnings.
Advanced DeFi Strategies For Stablecoin Yield
The best stablecoin yields are typically generated through advanced decentralized finance strategies, which carry commensurately higher risk. Such approaches are best suited to long-term investors seeking higher returns on stablecoin holdings. The lessons below will be concise and focused, designed to deliver essential insights efficiently.
Leveraging Yield-Bearing Stablecoins For Higher Returns
This strategy relies on three protocols: Pendle, Aave, and Morpho. The framework is straightforward, repeatable, and adaptable across opportunities, even when denominated in different stablecoins.
Search the market on Pendle for yield-bearing stablecoins offering high fixed yields. Research each candidate’s yield mechanism and associated risks using resources such as DeFiLlama and CoinGecko. If the opportunity aligns with your risk profile, proceed to lending protocols to determine whether Aave or Morpho supports a lending market for the stablecoin’s maturity date.
Once you have identified a yield-bearing stablecoin, a fixed-yield position on Pendle, and a corresponding lending market on Aave or Morpho, execute the strategy as follows: purchase the fixed-yield Pendle position; deposit the tokens received from Pendle into the lending market; borrow stablecoins; reinvest the borrowed stablecoins into additional fixed-yield positions; and repeat the process to achieve your target yield.
Leveraging Crypto Collateral For Stablecoin Yield
Leveraging crypto collateral to generate stablecoin yield is one of the most fundamental strategies in decentralized finance. While commonly associated with bitcoin and ether, the approach extends well beyond volatile crypto assets. It can also be applied to stablecoins, yield-bearing stablecoins, tokenized Treasury bills, and gold-backed tokens.
The mechanics are straightforward: deposit assets into a lending protocol, borrow stablecoins against that collateral, and deploy the proceeds into one of the stablecoin yield strategies outlined above. If the assets are not supported on Aave, Morpho, or Fluid, DeFiLlama is the most reliable resource for identifying alternative lending venues.