Introduction

Earning sizable returns on dollars is back, but this time it’s happening through crypto. Stablecoins, digital assets pegged to the U.S. dollar, now let investors earn high annual yields without taking on wild volatility.

While bank savings accounts still pay less than 1 percent, stablecoin holders are quietly collecting monthly payouts that rival bond returns.

What Makes Stablecoin Yields Different

Stablecoins hold a steady $1 value, acting like digital dollars that move instantly and earn yield. Returns come from three main sources: lending markets where borrowers pay for liquidity, trading fees from providing liquidity to exchanges, and institutional platforms sharing revenue from their operations.

As demand for liquidity rises, yields increase. When demand cools, rates fall. It’s the same supply-and-demand dynamic as traditional finance but just faster and more efficient.

Centralized Platforms

Coinbase

Coinbase offers one of the easiest ways to earn on stablecoins. USDC holders earn 4.1% APY (4.5% for One members) with no lockups or complex steps. Businesses earn the same rate and can withdraw anytime.

Recently, Coinbase added a DeFi lending integration, giving users onchain access to yields up to 10%, a hybrid between simple savings and DeFi exposure.

GalaxyOne

GalaxyOne, launched by Galaxy Digital, pays 4% APY on FDIC-insured cash deposits. Accredited investors can tap into Galaxy Premium Yield for up to 8% APY. While Galaxy doesn’t directly offer stablecoin yields due to regulatory limits, its cash yield serves a similar purpose for conservative investors.

The platform merges crypto and traditional finance, with the option to automatically reinvest earnings into assets like Bitcoin, Ethereum, or Solana for compounding growth.

DeFi Protocols

Aave

Aave remains one of the most trusted DeFi lending protocols. Its dynamic rate model adjusts in real time based on asset utilization, creating a fair balance between yield and risk. Depositors automatically accrue interest as markets fluctuate.

Yields for stablecoins typically range from 5% to 10%, depending on demand. Given its an open protocol, Aave is transparent and every rate, position, and risk parameter is visible onchain.

Curve and Convex

Some Curve pools offer up to 20% APR through sophisticated yield optimization strategies. By staking CRV tokens through Convex, users can access boosted rewards without the complexity of managing multiple positions. However, these higher yields come with increased gas costs and smart contract risks.

Why Borrowing Beats Selling

Sophisticated investors rarely sell their assets, they borrow against it. Selling triggers taxes and ends your upside; borrowing keeps your exposure while unlocking liquidity. If your Bitcoin appreciates faster than your loan’s interest rate, you’re effectively earning on both sides of the trade.

Arch Lending

Arch lets you borrow against Bitcoin, Ethereum, or Solana, with fixed rates and high loan-to-value ratios.

For example:

• You bought Bitcoin at $20,000

• It’s now worth $100,000

• Selling triggers a large tax bill

• Borrowing lets you access liquidity tax-free while staying exposed to further gains

It’s a strategy built for patient investors who think long term and understand the math behind leverage and compounding.

Risk Management

Platform Risk Spectrum

Low Risk (4-6% APY):

• FDIC-insured options like GalaxyOne

• Regulated platforms like Coinbase

• Simple holding strategies

Medium Risk (6-10% APY):

• Proven DeFi protocols such as Aave

• Diversified stablecoin portfolios

Higher Risk (10%+ APY):

• New or experimental protocols

• Leveraged yield farming

• Unregulated or offshore platforms

The Depegging Problem

Stablecoins aren’t risk-free. USDC briefly fell below $0.90 during the Silicon Valley Bank collapse, and DAI has wobbled during extreme volatility. The solution is simple: diversify across multiple stablecoins and platforms. Never assume a $1 peg is guaranteed.

The Regulatory Shift

The GENIUS Act, passed in July 2025, gave stablecoins a formal U.S. regulatory framework. It brought much-needed clarity but also introduced limits. Yield-bearing stablecoins are now banned, pushing companies to repackage yields through reward products.

Here’s what it means for investors:

• Greater legal protection and transparency

• Clearer standards for regulated issuers

• New, compliant yield models

• More institutional adoption and competitive rates

Conclusion

Stablecoin yields have turned idle cash into a productive asset class. While banks still pay next to nothing, crypto markets reward those willing to take a small step beyond the status quo.

That doesn’t mean chasing the highest yield. Often the smartest move is earning steady returns on stablecoins while borrowing against appreciating assets, keeping your upside, minimizing taxes, and generating income at the same time.

Frequently Asked Questions

Q: Are these yields sustainable long-term? A: Yields fluctuate with market conditions. During high demand periods, rates spike. In bear markets, they compress. The key is that even "low" crypto yields typically beat traditional savings rates by 5-10x.

Q: What's the main risk I should worry about? A: Platform insolvency remains the biggest threat in CeFi. For DeFi, smart contract bugs are the primary concern. Diversification across both reduces single points of failure.

Q: How are stablecoin yields taxed? A: In the U.S., stablecoin interest is typically taxed as ordinary income. Consult a crypto-savvy tax professional, as regulations continue evolving.

Q: Should I put my emergency fund in stablecoins? A: Only a portion. Keep 1-2 months of expenses in traditional banking for immediate access. The rest can earn higher yields in stablecoins, but ensure you can access funds within 24-48 hours.

About Arch

Arch is building a next-gen wealth management platform for individuals holding alternative assets. Our flagship product is the crypto-backed loan, which allows you to securely and affordably borrow against your crypto. We also offer access to bank-grade custody, trading and staking services.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Cryptocurrency investments are volatile and risky. Always conduct your own research before making investment decisions.