Yield-bearing crypto assets poised to grow after regulatory clarity, report says
A representation of the virtual cryptocurrency Bitcoin is seen in this picture illustration taken June 14, 2021. REUTERS/Edgar Su/Illustration
Yield-bearing assets in the cryptocurrency market are expected to grow rapidly as institutional adoption accelerates after the passage of the GENIUS Act, blockchain firm RedStone said in a report on Wednesday.
CONTEXT
The U.S. has enacted the GENIUS Act, a stablecoin law that creates a regulatory framework for dollar-pegged cryptocurrencies, sparking a surge in interest-bearing stablecoins.
However, institutional investors have remained cautious despite tokenization making transactions cheaper and faster, largely due to the absence of clear risk metrics.
WHY IT MATTERS
Unlike traditional finance, where capital routinely earns interest, most crypto assets do not provide any returns beyond their rise in prices. Yield-bearing crypto assets could unlock significant funds and encourage major financial firms to enter the space as regulations improve.
BY THE NUMBERS
The market size of interest-bearing stablecoins has jumped 300 per cent over the past year as new projects emerge to compete with Tether and Circle, the report said.
"Yield-generating assets make up just 8 per cent to 11 per cent of crypto, compared to 55 per cent to 65 per cent of traditional finance," underscoring how underdeveloped crypto's yield infrastructure remains, the report said.
While crypto's total market capitalization was about $3.55 trillion, only $300 billion to $400 billion of those assets generated any yield, the report added.
This gap is crypto's "greatest opportunity," the report said.
