With the Genius Act, almost every major bank and financial institution has the ability to issue a stablecoin. These stablecoins are required to be backed by short-term T-Bills, essentially making them a form of T-Bill. However, stablecoin users treat them as if they are dollars. Borrowers pay billions of dollars in fees to borrow these stablecoins on platforms like AAVE and Morpho, creating an additional yield opportunity for the issuers. Isn’t this an opportunity for smart money to earn better returns simply by holding a stablecoin? Let’s explore further:

First of all, I think most of you are aware that the dollars we see in our bank accounts are not backed one-to-one by dollars. So, in the event of a FUD-driven panic (aka “bank run”), even a bank without withdrawal restrictions could go bankrupt, because no one has enough cash liquidity to serve their short-term liabilities (mainly user deposits) in case of a massive withdrawal queue.

This is true for almost all stablecoins — they act like a kind of bank and display wrapped assets on-chain. Policymakers require these stablecoins to be 100% backed by cash or very short-term Treasuries, and in practice, nearly all of them use short-term T-Bills as highly liquid reserve assets. In effect, the new laws have simply turned them into T-Bill wrappers.

In TradFi, it is hard to earn meaningful extra yield on top of T-Bills. But with stablecoins, that changes.

In DeFi, the primary medium of exchange is stablecoins. While some OG users still use ETH or native network tokens, it's increasingly difficult to argue that there's a better alternative than stablecoins. This shift means stablecoins are not just preserving value, they’re generating revenue for holders.

Take AAVE, for example: it protects over $47B in assets and has $19B in total borrows. Today, USDC borrowers pay approximately 5% annual interest to lenders.

Wait, that means you’re effectively allowing a T-Bill wrapper (USDC) to earn an additional 5% yield in one of the largest DeFi markets. That level of low-risk, yield-on-yield is simply not possible in traditional finance.

So the core question remains:

Why hasn't any asset manager partnered with USDC or other "Stablecoin-as-a-Service" protocols to extract value from decentralized lending markets? If this strategy gains traction, we’ll likely see:

• Lower fees on AAVE and other lending protocols, as there will be more available liquidity to be borrowed.

• More capital is flowing into stablecoins

• Larger institutions deploying serious capital onchain

Is it legal for asset managers to pursue on-chain trading and investment strategies? Generally, yes—but only if they comply with the relevant regulatory frameworks, including licensing requirements, custody obligations, KYC/AML rules, disclosures, and derivatives regulations where applicable. The legality of these strategies is highly dependent on jurisdictional specifics and the nature of the activities involved, rather than being a simple yes-or-no determination.

Currently, we have examples of delta-neutral on-chain strategies such as Ethena and Resolv. However, access to these products is typically restricted for U.S. persons—sometimes limited solely to accredited investors—due to existing regulatory complexities. Regarding stablecoins, the SEC staff issued a statement on April 4, 2025, clarifying that fully reserved and 1:1-redeemable "covered stablecoins" that explicitly do not market rights to interest or profits are not considered securities from their perspective. Importantly, this statement does not extend the same assurance to yield-bearing stablecoin structures. Determining whether yield-generating products qualify as securities involves different analysis, particularly influenced by how they are structured and marketed. However, we can clearly confirm that there is no green light from the SEC, at least for now.

In purely business-to-business (B2B) contexts, without retail-facing offerings, revenue-sharing arrangements between asset managers and stablecoin issuers typically constitute commercial agreements rather than securities offerings. Nonetheless, asset managers engaging in these arrangements must still address fiduciary responsibilities, conflict disclosures, custody requirements, and conduct trades exclusively through compliant venues, such as regulated derivatives platforms, rather than offshore perpetual markets.

In summary, on-chain strategies are viable for regulated asset managers, provided careful attention is paid to structural details, counterparties selected, and the marketing practices employed. The Circle–Coinbase USDC agreement, which includes a 50/50 split of interest revenue derived from broader USDC circulation, demonstrates that yield-sharing can effectively be structured within a B2B model, without directly distributing reserve-based interest to end users. The law is still not super clear for asset managers.

But the only real question is: Is that extra 5% a strong enough incentive for asset managers to enter DeFi seriously, are they educated enough to create onchain strategies? These are the questions I can’t answer.

With the Genius Act, almost every major bank and financial institution has the ability to issue a stablecoin. These stablecoins are required to be backed by short-term T-Bills, essentially making them a form of T-Bill. However, stablecoin users treat them as if they are dollars. Borrowers pay billions of dollars in fees to borrow these stablecoins on platforms like AAVE and Morpho, creating an additional yield opportunity for the issuers. Isn’t this an opportunity for smart money to earn better returns simply by holding a stablecoin? Let’s explore further:

First of all, I think most of you are aware that the dollars we see in our bank accounts are not backed one-to-one by dollars. So, in the event of a FUD-driven panic (aka “bank run”), even a bank without withdrawal restrictions could go bankrupt, because no one has enough cash liquidity to serve their short-term liabilities (mainly user deposits) in case of a massive withdrawal queue.

This is true for almost all stablecoins — they act like a kind of bank and display wrapped assets on-chain. Policymakers require these stablecoins to be 100% backed by cash or very short-term Treasuries, and in practice, nearly all of them use short-term T-Bills as highly liquid reserve assets. In effect, the new laws have simply turned them into T-Bill wrappers.

In TradFi, it is hard to earn meaningful extra yield on top of T-Bills. But with stablecoins, that changes.

In DeFi, the primary medium of exchange is stablecoins. While some OG users still use ETH or native network tokens, it's increasingly difficult to argue that there's a better alternative than stablecoins. This shift means stablecoins are not just preserving value, they’re generating revenue for holders.

Take AAVE, for example: it protects over $47B in assets and has $19B in total borrows. Today, USDC borrowers pay approximately 5% annual interest to lenders.

Wait, that means you’re effectively allowing a T-Bill wrapper (USDC) to earn an additional 5% yield in one of the largest DeFi markets. That level of low-risk, yield-on-yield is simply not possible in traditional finance.

So the core question remains:

Why hasn't any asset manager partnered with USDC or other "Stablecoin-as-a-Service" protocols to extract value from decentralized lending markets? If this strategy gains traction, we’ll likely see:

• Lower fees on AAVE and other lending protocols, as there will be more available liquidity to be borrowed.

• More capital is flowing into stablecoins

• Larger institutions deploying serious capital onchain

Is it legal for asset managers to pursue on-chain trading and investment strategies? Generally, yes—but only if they comply with the relevant regulatory frameworks, including licensing requirements, custody obligations, KYC/AML rules, disclosures, and derivatives regulations where applicable. The legality of these strategies is highly dependent on jurisdictional specifics and the nature of the activities involved, rather than being a simple yes-or-no determination.

Currently, we have examples of delta-neutral on-chain strategies such as Ethena and Resolv. However, access to these products is typically restricted for U.S. persons—sometimes limited solely to accredited investors—due to existing regulatory complexities. Regarding stablecoins, the SEC staff issued a statement on April 4, 2025, clarifying that fully reserved and 1:1-redeemable "covered stablecoins" that explicitly do not market rights to interest or profits are not considered securities from their perspective. Importantly, this statement does not extend the same assurance to yield-bearing stablecoin structures. Determining whether yield-generating products qualify as securities involves different analysis, particularly influenced by how they are structured and marketed. However, we can clearly confirm that there is no green light from the SEC, at least for now.

In purely business-to-business (B2B) contexts, without retail-facing offerings, revenue-sharing arrangements between asset managers and stablecoin issuers typically constitute commercial agreements rather than securities offerings. Nonetheless, asset managers engaging in these arrangements must still address fiduciary responsibilities, conflict disclosures, custody requirements, and conduct trades exclusively through compliant venues, such as regulated derivatives platforms, rather than offshore perpetual markets.

In summary, on-chain strategies are viable for regulated asset managers, provided careful attention is paid to structural details, counterparties selected, and the marketing practices employed. The Circle–Coinbase USDC agreement, which includes a 50/50 split of interest revenue derived from broader USDC circulation, demonstrates that yield-sharing can effectively be structured within a B2B model, without directly distributing reserve-based interest to end users. The law is still not super clear for asset managers.

But the only real question is: Is that extra 5% a strong enough incentive for asset managers to enter DeFi seriously, are they educated enough to create onchain strategies? These are the questions I can’t answer.