Notwithstanding regulatory uncertainty, stablecoins that kick out cash to customers are here and vying for the many trillions held in money-market funds and dollar deposits globally.
Their usefulness in payments is fairly obvious: They seek to replicate a conventional currency like the U.S. dollar or euro in a blockchain-powered form, serving as digital stand-ins for something consumers are already comfortable with.That money is invested in assets considered supremely safe like U.S. Treasuries, earning billions of dollars a year in yield for those companies. This makes them crypto-era versions of an old product in traditional finance: money-market funds.
To be fair, regulations prohibit stablecoin issuers from returning yield to users in the U.S., and the soon-to-arrive Markets in Crypto-Asset regime will do the same in Europe. The coming years could see a decoupling of the payment capability of stablecoins from the yield-generating capability of money-market funds, according to PayPal SVP and head of blockchain, Jose Fernandez da Ponte.