The Bank for International Settlements’ Financial Stability Institute (FSI) published an FSI Brief analysing how cryptoasset service providers (CASPs) are offering yield-bearing products based on payment stablecoins and how regulators are responding. The brief argues these arrangements can blur the boundary between payment instruments and investment products, creating consumer protection gaps and potentially amplifying financial stability risks. Yield generation is commonly based on re-lending user stablecoins to borrowers, margin pools, arbitrage and derivatives strategies, or routing funds into decentralised finance lending protocols, alongside some CASP-funded loyalty schemes. The brief highlights risks linked to limited prudential oversight, absence of deposit insurance, weak transparency on sources of yield, run dynamics, and operational interdependencies and conflicts of interest at multifunction CASPs, with insolvency outcomes often determined by contractual terms that may leave users as unsecured creditors. Across the jurisdictions reviewed, payment stablecoin issuers are uniformly prohibited from remunerating balances, but approaches to CASP-provided yields diverge across (i) outright prohibitions (European Union and Hong Kong SAR), (ii) restricted regimes that ban retail access while allowing certain activity for professional or non-retail users subject to conditions (Singapore), and (iii) no explicit prohibition (United States), where the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act bans issuer interest payments but does not expressly restrict CASPs. The brief notes that the GENIUS Act directs the US Treasury Secretary and regulators to issue additional rules within one year of enactment, and that ongoing Congressional work on the Digital Asset Market Clarity Act of 2025 could still address stablecoin yield activity by intermediaries.
Bank for International Settlements - Financial Stability Institute 2025-10-23
Bank for International Settlements Financial Stability Institute reviews regulatory approaches to stablecoin-related yields
The Bank for International Settlements’ Financial Stability Institute published an FSI Brief on yield-bearing products offered by cryptoasset service providers based on payment stablecoins, warning that these can blur the line between payment instruments and investment products, create consumer protection gaps, and heighten financial stability risks. The brief outlines key vulnerabilities, including limited prudential oversight, lack of deposit insurance, opaque sources of yield, run risk, and conflicts of interest at multifunction providers, and contrasts regulatory approaches ranging from outright prohibitions in the European Union and Hong Kong SAR to restricted regimes in Singapore and the absence of explicit bans in the United States, while noting that pending U.S. legislation may lead to further rules on stablecoin yield activities.