Overview: Market-Linked Yield
Stablecoin yields track short-term market rates via reserve assets, while bank APY reflects funding strategies and margin management. Users see the spread, which raises rate sensitivity.
Reserves: Short Duration and Quality
Quality, short-duration reserves (e.g., T-bills) minimize duration risk and pass through market rates more directly to yield programs.
Bank APY: Why It Lags
Banks pay APY below asset yields to sustain net interest margins; APY changes slowly and depends on competitive pressures.
Design: Rewards, Rebates, Compliance
Where interest classification restricts consumer yield, programs use rebates or fee discounts to preserve user value while complying. Clear disclosures and audited statements support trust.
Risk Considerations
Transparency, audits, and redemption mechanics are essential. Avoid duration mismatch and monitor issuer disclosures.
Examples and Comparisons
Compare APY against bank rates for similar risk profiles, factoring settlement speed and access. Merchants often prefer faster cash flow and fewer disputes even at similar nominal yields.
Conclusion
Stablecoin yields often beat savings APY due to market-rate alignment and product design. Users should weigh yield, risk, and settlement advantages holistically.