Australia’s Next Chapter in Digital Money: Why Yield-Bearing Stablecoins Matter

Yield-bearing stablecoins generate income by investing reserves in interest-bearing assets like US Treasuries, unlike traditional static stablecoins.
Australia’s forthcoming 2025 legislation will require full reserve backing, clear ownership disclosure, and guaranteed redemption rights for stablecoins.
Australian companies like Catena Digital and AUDC are developing domestic stablecoins (AUDM and AUDD) with regulatory approval and multi-blockchain support.
The Reserve Bank of Australia’s Project Acacia trials tokenised assets and settlement systems, positioning Australia as a global leader in digital finance innovation.

Stablecoins have long been considered the quiet workhorses of crypto, yet the market is anything but. Today, the total market capitalisation has exceeded US$283 billion, with Tether’s USDT alone accounting for more than US$168 billion, per data from DefiLlama.

What began as a mechanism for traders to hedge volatility has evolved into a global market for digital dollars — and the next phase is already taking shape.

In Australia, the shift could be even more pronounced. According to the Reserve Bank of Australia, more than one in four Australians now hold digital assets. At the same time, Canberra is preparing to introduce the country’s first comprehensive licensing regime for crypto providers. This unique mix of adoption and regulation sets the stage for Australia to play a defining role in the next generation of stablecoins.

From static to yield-bearing

Traditional stablecoins are designed to hold value but do not share returns from the reserves backing them. Yield-bearing stablecoins — or tokenised yield certificates — are changing that. By allocating reserves into interest-generating assets such as US Treasuries, these products pass income directly to holders.

And investors are paying attention. Recent JPMorgan research showed yield-bearing stablecoins could grow from 6% of the market to as much as 50% in the years ahead. For Australians, this evolution means stepping up from passive digital holdings to assets that combine yield and transparency, offering a safer alternative to offshore lending schemes that have previously burned investors.

Trust through transparency

Trust remains the cornerstone of Australia’s regulatory approach. The draft legislation expected in 2025 will require these assets to be fully backed by cash or cash-equivalent reserves, clear ownership disclosures, and guaranteed redemption rights. These steps are designed to reassure Australians that stablecoins are not just easy to buy and sell, but also responsibly managed.

For yield-bearing stablecoins, the bar is even higher. If the underlying reserves include government securities, then token holders deserve clarity on how income is generated and distributed.

Furthermore, projects that provide proof-of-reserve reporting and operate under regulated custody frameworks will be better positioned to meet both investor and regulator expectations. In practice, transparency is not just a regulatory requirement. It is the foundation of credibility in a market where confidence determines adoption.

More than just yield

Yield-bearing stablecoins should not just be considered as higher-interest versions of digital cash. Their integration into broader ecosystems creates additional value.

On exchanges, they can be used for margin and collateral. In decentralised finance, they unlock liquidity pools and structured products. In remittance corridors, they combine stability with income potential. This level of utility makes them far more versatile than stablecoins that only serve as a parking spot for capital.

Australia’s home-grown momentum

The momentum is already visible at home. Catena Digital is developing AUDM, an Australian dollar-backed stablecoin with regulatory approval under an Australian Financial Services Licence. Meanwhile, AUDD, issued by AUDC Pty Ltd, is live across multiple blockchains, offering real-time settlement and low-cost transfers.

Both point to a future where Australians can hold stablecoins denominated in their own currency, subject to domestic oversight.

Public-sector innovation is also keeping pace, with the Reserve Bank of Australia and the Digital Finance CRC advancing Project Acacia — one of the world’s most ambitious trials of tokenised assets and settlement. The project involves banks, fintechs, and exchanges, testing how stablecoins, deposit tokens, and even pilot CBDCs interact across fundamental markets.

Taking these initiatives together, it is clear that Australia is not waiting for global trends to arrive; it is actively shaping them.

Bridging finance, centralised and decentralised

Yield-bearing stablecoins are emerging as a bridge between traditional finance, centralised platforms, and decentralised protocols, blending legacy systems’ yield with crypto’s interoperability. For institutions, they function like tokenised money market funds; for retail users, they are familiar digital dollars that grow in value, and for regulators, they create a more transparent framework for oversight in an asset class long seen as grey.

Stablecoins are no longer just a way to move money between fiat and crypto. They are becoming the building blocks of digital money. With rising adoption and incoming legislation, Australia is well placed to pilot these innovations. If designed with openness and sound governance, yield-bearing stablecoins could give Australians better tools for managing wealth and shape global standards for the future of money.

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