Reserve yield is the interest a stablecoin issuer earns by investing the money that backs its tokens. When a customer hands over one US dollar and receives one token, the issuer does not leave the dollar idle. It places it in short-term, low-risk assets such as government bills, overnight loans backed by government bonds and bank deposits, and keeps the interest. For the largest fiat-backed issuers this income is almost the whole business.
The term is about the issuer's earnings, not the holder's. It is different from a yield-bearing stablecoin, which passes some return on to the people who hold it, and from yields earned by lending tokens out on crypto platforms. In the United States and the European Union, the main rulebooks now let issuers keep reserve income but forbid them from paying interest to holders simply for holding the coin.
Reserve yield in plain terms
Think of a coat check at a theatre that, instead of coats, holds cash. Thousands of people leave a dollar each and take a ticket that can be swapped back for that dollar at any time. If the attendant puts the pile in a safe, interest-paying account until people come back, the interest belongs to the coat check.
A stablecoin issuer works the same way. The ticket is the token, the pile of dollars is the reserve, and the interest is the reserve yield. When interest rates are high, a large pile earns a great deal of money with very little effort. When rates fall close to zero, the same pile earns almost nothing, and the issuer has to find other ways to pay its bills.
Where the yield comes from
Issuers that promise one-for-one redemption need assets that keep their value and can be sold quickly. Reserve portfolios therefore look much like a government money market fund. The main sources of income are:
- Short-dated government debt. Treasury bills pay close to the risk-free rate and can be sold in large amounts within a day.
- Repurchase agreements. In a repo, the issuer lends cash overnight against Treasury collateral and earns a rate close to SOFR.
- Bank deposits and money market fund shares. These earn a little less but give same-day access to cash for redemptions.
Because almost all of these assets mature within weeks, reserve yield moves closely with central bank policy rates such as the federal funds rate.
Formula and example
A simple estimate of annual reserve income is:
Here average reserves are the assets held against tokens in circulation over the year, and average yield is the blended annual return on those assets, written as a decimal. Net income then subtracts what the issuer pays out:
Suppose an issuer holds an average of $60 billion in reserves earning a blended 4.2\% a year. Reserve income is billion dollars. If it pays $1.1 billion to exchanges and other partners that distribute the token and spends $0.6 billion running the business, net reserve income is billion dollars. At 3.2\%, gross income would fall to $1.92 billion.
Reserve yield at the largest issuers
The two biggest dollar stablecoins show how large the income can be. Tether, issuer of USDT, reported net profit of about $13 billion for 2024, of which roughly $7 billion came from its US Treasury and repo holdings; much of the rest came from gains on gold and bitcoin. Circle, issuer of USDC, disclosed in its 2025 listing documents that reserve income was about $1.7 billion in 2024, around 99 percent of its revenue.
Circle's filings also show where the money goes. Under its agreement with Coinbase, a large share of USDC reserve income is paid to the exchange, and distribution costs absorbed most of the 2024 total. Issuers publish monthly reserve reports and attestations from accounting firms, which are the main way outsiders can check the size and make-up of the reserves; they are narrower than a full audit or a proof of reserves on a blockchain.
Rules on keeping and sharing the yield
In the United States, the GENIUS Act, signed on 18 July 2025, requires payment stablecoins to be backed one-for-one by cash, insured deposits, Treasury bills maturing in 93 days or less, Treasury-backed repo and government money market funds. It also bars issuers from paying holders any form of interest or yield for simply holding the coin. The issuer keeps the reserve income. Whether exchanges and other affiliates may pass on rewards funded by that income has been one of the main disputes as regulators write the implementing rules.
In the European Union, the Markets in Crypto-Assets Regulation (MiCA) likewise forbids issuers of e-money tokens and asset-referenced tokens from granting interest to holders. Both regimes treat a stablecoin as a payment instrument rather than a savings product, partly to limit competition with bank deposits.
Risks and criticism
Critics argue that holders bear the risk of a depeg while the issuer keeps all of the return. Others warn that chasing a higher yield can push issuers toward longer or riskier assets, which is exactly what reserve rules try to prevent. Supporters say the income pays for compliance and redemption at par. For issuers, the main business risk is simple: a sharp cut in interest rates shrinks revenue even if the number of tokens keeps growing.