Opinion by: Reeve Collins, co-founder of Tether and chairman of STBL
Stablecoins have emerged as the essential framework for digital markets. Each month, trillions of dollars flow through them, facilitating trade, settling remittances, and serving as a secure refuge for cash on-chain. Despite widespread adoption, their original design has seen little change since 2014.
The first generation of stablecoins addressed a single issue: how to create a dependable digital dollar on the blockchain. Tether USDt (USDT) and later USDC (USDC) fulfilled that requirement. They were simple, fully backed, and redeemable, providing crypto with the stability necessary for growth. However, they were also static, like dollars locked away in a vault. Holders earned nothing while issuers profited from all the yield. This setup suited the market a decade ago, but in 2025, it is insufficient.
A significant transformation is now taking place. While the first wave digitized the dollar, the second wave financializes it. Yield is no longer confined to issuers’ balance sheets; principal and income have been separated into two programmable streams.
The digital dollar remains liquid and usable for payments or decentralized finance (DeFi), while the yield evolves into its own asset—something to hold, trade, pledge, or reinvest. A basic payment token transforms into a legitimate financial instrument, serving as a savings vehicle for the digital age.
The proof points
Initial evidence is already visible. Franklin Templeton’s on-chain money market fund declares income daily and pays monthly. BlackRock’s BUIDL fund surpassed $1 billion within its first year, distributing dividends entirely on-chain. DeFi protocols now allow borrowers to keep Treasury yield while unlocking liquidity. These are no longer fringe experiments; they signify the beginnings of a financial system where liquidity and income can coexist at last.
Stablecoin 2.0 advances this concept with a dual-token structure. Rather than embedding yield within the stablecoin, it separates yield, tokenizing both the dollar and the income stream. One token serves as the spendable digital dollar, while the other represents the income from the underlying collateral.
This approach makes yield a currency in its own right—transparent and transferable—while the stablecoin retains liquidity and usability as cash. Meanwhile, the collateral base is evolving. It is no longer restricted to dollars in a bank account but can now include a diversified array of high-quality real-world assets entering the blockchain, such as treasuries, money market funds, tokenized credit, bonds, and other institutional-grade instruments.
This dual innovation, unbundling principal from yield while broadening the range of secure collateral, converts a static digital dollar into programmable, community-driven money with sturdier foundations and wider utility.
Why it matters
The implications are extensive. Minters can establish a stablecoin that functions like cash while also accruing returns from the underlying collateral. Institutions can transcend merely parking assets in tokenized Treasuries, transforming them into dynamic, transparent, and compliant tools that deliver liquidity and yield. Governments and enterprises can issue branded stablecoins backed by Treasuries, money markets, or other quality collateral, unlocking new sources of value that traditional fiat has never provided.
Related: Stablecoin 2.0: Reeve Collins on making digital money transparent and productive
Imagine a large institution managing hundreds of millions of dollars in payments across its ecosystem. When those flows traverse fiat, the money moves without generating additional revenue. Using Stablecoin 1.0, the institution achieves efficiency through blockchain technology, enabling quicker settlements, lower costs, and fewer intermediaries, but the economic benefits still benefit the issuer.
Stablecoin 2.0 completely changes this dynamic. Now, the institution can issue its own stablecoin, dictate the collateral backing it, and capture all the yield from the reserves circulating within its network. Every dollar that moves becomes both a medium of exchange and a productive asset.
Regulatory tailwinds
Regulators worldwide are transitioning from pilot programs to comprehensive frameworks. Europe’s Markets in Crypto-Assets regime is now operational with licensed issuers, while Hong Kong and Singapore are paving the way for commercial applications.
In the United States, bipartisan initiatives indicate that stablecoin legislation is a matter of when, not if. Concurrently, the largest asset managers are tokenizing reserves, allowing institutions to hold and verify collateral on-chain. These developments lay a foundation of trust and legitimacy, establishing stablecoins as essential financial infrastructure.
Just as credit cards revolutionized commerce and electronic trading transformed markets, stablecoins are poised to redefine how money is transferred and who benefits from it.
The bigger picture
For consumers, this translates to holding a digital dollar that genuinely serves the network, not just the issuer. For institutions, it means converting idle cash on the balance sheet into transparent, compliant, income-generating assets. For governments, it allows the issuance of national or enterprise currencies that maintain sovereignty while preserving value. And for the DeFi ecosystem, it provides composable building blocks with embedded yield, facilitating everything from derivatives to remittances.
The narrative of stablecoins reflects the broader story of money. The first chapter digitized it.
The second makes it productive, transparent, and programmable. That transformation is already in motion.
Opinion by: Reeve Collins, co-founder of Tether and chairman of STBL.
This article is for informational purposes only and is not intended as legal or investment advice. The views, thoughts, and opinions expressed belong solely to the author and do not necessarily reflect the views or opinions of Cointelegraph.
