Second-generation stablecoins separate yield from principal, enabling holders to earn returns while keeping liquidity and turning static dollars into productive assets.
Opinion
Opinion by: Reeve Collins, co-founder of Tether and chairman of STBL
Stablecoins have become the universal backbone of digital markets. Every month, trillions of dollars flow through them. Globally, they clear trades, settle remittances and provide a safe harbor for cash onchain. Yet despite their broad adoption, the original design has barely changed since 2014.
The first generation of solved one problem: how to put a reliable digital dollar on the blockchain. Tether USDt (), and later USDC (), delivered precisely that. Simple, fully reserved and redeemable, they gave crypto the stability it needed to grow. But they were also static, like dollars locked in a vault. Holders earned nothing while issuers captured all the yield. That structure fit the market 10 years ago. In 2025, it is no longer enough.
We are now witnessing a decisive shift. If the first wave digitized the dollar, the second financializes it. Yield is no longer trapped on the balance sheets of issuers. Principal and income are split into two programmable streams.
The digital dollar remains liquid and usable for payments or decentralized finance (DeFi), while the yield becomes its own asset, something to hold, trade, pledge or reinvest. A simple payment token becomes a valid financial instrument, a savings vehicle for the digital era.
The proof points
Early evidence is already here. Franklin Templeton’s onchain money market fund declares income daily and pays monthly. BlackRock’s BUIDL fund crossed $1 billion in its first year, distributing dividends entirely onchain. DeFi protocols now let borrowers retain Treasury yield while unlocking liquidity. These are no longer experiments at the fringe; they are the beginnings of a financial system where liquidity and income can finally coexist.
takes this further with a dual token structure. Instead of embedding yield into the stablecoin, the system separates it, tokenizing both the dollar and the yield. One token functions as the spendable digital dollar, while the other represents the income stream from the underlying collateral.
This makes yield a currency in its own right, transparent and transferable, while the stablecoin remains liquid and usable as cash. At the same time, the collateral base is evolving. It is no longer limited to dollars sitting in a bank account but can draw from a diversified basket of high-quality real-world assets now coming onchain, including treasuries, money market funds, tokenized credit, bonds and other institutional-grade instruments.
This dual innovation, unbundling principal from yield while broadening the range of secure collateral, transforms a static digital dollar into programmable, community-owned money with stronger foundations and broader utility.
Why it matters
The implications are sweeping. Minters can create a stablecoin that spends like cash while capturing the returns from the collateral backing it. Institutions can move beyond simply parking assets in tokenized Treasurys, instead turning them into dynamic, transparent and compliant tools that deliver liquidity and yield. Governments and enterprises can issue branded stablecoins backed by Treasurys, money markets or other high-quality collateral, unlocking a new source of value that traditional fiat could never provide.
Related:
Consider a large institution managing hundreds of millions of dollars in payments across its ecosystem. When those flows run through fiat, the money moves but generates no incremental revenue. With Stablecoin 1.0, the institution gains efficiency from blockchain rails, achieving faster settlement, lower costs and fewer intermediaries, but the economic value still accrues to the issuer rather than them.
2.0 changes that equation entirely. Now the institution can issue its own stablecoin, decide what collateral backs it and capture all the yield on the reserves circulating within its network. Every dollar that moves becomes a medium of exchange and a productive asset.
Regulatory tailwinds
Regulators around the world are moving from pilots to full frameworks. Europe’s Markets in Crypto-Assets regime has gone live with licensed issuers, while Hong Kong and Singapore are opening the door to commercial use.
In the United States, bipartisan proposals signal that stablecoin legislation is no longer a question of if but when. At the same time, the largest asset managers are tokenizing reserves, giving institutions a way to hold and verify collateral onchain. These shifts create a foundation of trust and legitimacy that positions stablecoins as core financial infrastructure.
In the identical way credit cards reshaped commerce and electronic trading reshaped markets, stablecoins are set to redefine how money moves and who reaps the rewards.
The bigger picture
For consumers, this means holding a digital dollar that finally works for the network, not just the issuer. For institutions, it means turning idle balance sheet cash into transparent, compliant, income-earning tools. For governments, it means issuing national or enterprise currencies that preserve sovereignty while retaining value. And for the DeFi ecosystem, it means composable building blocks with built-in yield, powering everything from derivatives to remittances.
The story of stablecoins mirrors the story of money itself. The first chapter digitized it.
The second makes it productive, transparent and programmable. That shift is underway.
Opinion by: Reeve Collins, co-founder of Tether and chairman of STBL.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
