The post Idle Stablecoins and the On-Chain Yield Paradox appeared on BitcoinEthereumNews.com.

Most stablecoins on public blockchains sit idle, earning zero yield for holders. Issuers and custodians collect the interest instead. This disconnect between on-chain ownership and off-chain income exposes a structural flaw in DeFi. Let us explore why capital remains unproductive, what new models are emerging, and how unlocking stablecoin yield could define the next phase of crypto finance. What It Means for Stablecoins to Be Idle Stablecoins are meant to represent programmable dollars. They can move freely across blockchains, power liquidity pools, and serve as DeFi’s settlement layer. Yet for most users, these tokens simply sit still. They do not earn interest. They do not compound. In most cases, they never touch yield protocols unless the holder takes extra steps. Meanwhile, the companies that issue these tokens invest the reserves backing them and earn yield from Treasury bills and other instruments. Holders receive none of that benefit. This is the on-chain yield paradox in plain terms. The capital is digital and borderless, but the income it generates remains off-chain. The Scale of the Idle Capital Problem Galaxy Research estimates that more than 80 percent of all stablecoins earn no yield for owners. Circle and Tether together made billions of dollars in 2024 from interest on their reserves. None of that reached stablecoin holders. If one hundred billion dollars in stablecoins earned only four percent per year, that would mean four billion dollars of lost potential income. The difference between idle and active capital is too large to ignore. The result is a DeFi ecosystem that appears liquid but is still capital-inefficient. Why Capital Remains Idle Custodial and Regulatory Barriers Issuers label stablecoins as payment instruments, not investment products. Paying yield could cause regulators to classify them as securities or deposit accounts. Most issuers prefer to avoid that risk. Fragmentation and…

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Filed under: News - @ October 20, 2025 8:28 am