Unmasking Stablecoin Yields: Why the Source Matters for Risk

Not All Stablecoin Yields Are the Same. Why the Source Matters for Risk and the Financial System

Stablecoins have moved well beyond simple payment tools. Many now offer yields to holders, turning them into potential savings or funding vehicles. But the source of that yield changes everything about the risk involved and how these instruments could affect the broader financial system.

A new BIS Bulletin from June 2026 examines exactly how centralised exchanges pay yields on stablecoins. The key finding is clear: there are two fundamentally different models at work, and they create very different economic realities for holders and potentially for markets.

The Two Ways Exchanges Pay You to Hold Stablecoins

Reserve-based remuneration (exemplified by Coinbase with USDC)
The yield comes directly from the return on the stablecoin issuer’s reserve assets, mostly short-term Treasuries and similar low-risk instruments. When the Federal Reserve changes policy rates, these yields move in tandem, though with some lag. They behave like yields on money market funds or high-quality cash management products: relatively stable and closely tied to benchmark rates.

Activity-based remuneration (exemplified by Binance with USDT and sometimes USDC)
The exchange generates the yield from its own market activities, such as lending stablecoins out, facilitating leveraged trading, market-making, and arbitrage. When crypto markets heat up and borrowing demand for stablecoins surges, yields can spike dramatically. When activity cools or financial conditions tighten, yields can drop sharply or stay flat even when policy rates move.

In 2024, for example, USDT borrowing rates on Binance reached 40 to 50 percent during crypto rallies. Holders earning through Binance’s activity-based product saw yields above 20 percent. That kind of movement is almost unheard of in traditional cash-like instruments.

Why the Source of the Yield Changes the Risk Profile

Under the reserve-based model, your yield is essentially a pass-through of safe, short-term government-backed returns. The main variables are monetary policy and the quality of the issuer’s reserves.

Under the activity-based model, your yield is tied to the exchange’s ability to profit from crypto market activity. This creates two important differences.

First, activity-based yields are more volatile. They react strongly to crypto-specific conditions such as Bitcoin returns, trading volumes, and leverage demand. They can move independently of, or even in the opposite direction from, traditional interest rates.

Second, there is greater counterparty exposure. When an exchange uses customer stablecoins to fund its own lending or trading activities, holders are indirectly exposed to the exchange’s balance sheet risks. This differs from a model where reserves sit safely with the issuer.

The BIS researchers demonstrate this through yield decomposition. On Binance, crypto market activity is the dominant driver of holding yields, while benchmark Treasury yields often act as a dampener.

What This Means If Stablecoins Scale

This distinction is not just academic. If stablecoins grow significantly larger and more integrated into everyday finance, the remuneration model could influence several macro outcomes.

Under reserve-based remuneration, demand for stablecoins could closely follow the interest rate cycle, rising and declining as policy rates change benchmark yields. Activity-based stablecoins could experience sharper boom-bust patterns driven by crypto sentiment and leverage demand. Large, sudden redemptions could pressure the markets for the underlying reserve assets, including Treasuries and bank deposits.

Widespread shifts between bank deposits and reserve-based stablecoins could also affect how banks fund themselves and how policy rate changes pass through to lending. Activity-based models might instead influence how much cheap funding is available for crypto-related leverage, creating a separate channel.

Activity-based remuneration effectively turns customer balances into a funding source for the exchange’s risky activities. This resembles aspects of shadow banking, where customer funds support leveraged intermediation outside traditional regulatory boundaries.

Practical Takeaways for Holders and Observers

If you hold stablecoins for yield, ask a simple question. Where is this yield actually coming from?

If it closely tracks the federal funds rate or Treasury yields with low volatility, you are likely in something closer to a cash-management product. If the yield spikes during crypto rallies and moves with borrowing demand or Bitcoin returns, you are participating in the exchange’s market-making and lending business.

This distinction also matters for anyone thinking about the future of digital money. The most successful stablecoins so far have combined credible reserves with strong distribution. As more institutions and traditional finance players enter, the choice between these two remuneration philosophies will help determine whether stablecoins function mainly as efficient payment and settlement rails or also as meaningful competitors or complements to bank deposits and money market funds.

The BIS analysis shows that the technical design of how yields are generated is not neutral. It shapes both the risk that individual holders take and the potential systemic footprint if these instruments continue to grow. Understanding the difference between activity-based and reserve-based models is one of the more useful lenses available for evaluating where this market is heading.

Source: BIS Bulletin No 125, “Stablecoin remuneration on centralised exchanges,” by Wenqian Huang, Nikola Tarashev and Xinyi Wang, 19 June 2026.