How to Earn Interest on Stablecoins

At a Glance

• Can You Earn Interest on Stablecoins?
• Your Options for Earning Interest on Stablecoins
• Why Can Stablecoins Earn More Interest Than Banks?
• The Risks of Earning Interest on Stablecoins
• How to Earn Interest on Stablecoins with Ledn
• FAQs

Stablecoins are at the centre of a growing debate in Washington. These digital assets facilitate trillions in transactions each year, from DeFi trading to cross-border payments. Some policymakers see them as a way to strengthen the U.S. dollar’s global role, while others warn about financial risks and regulatory gaps. With competing bills in Congress, stablecoin rules may soon shift. For now, they remain a powerful tool for earning passive income.

Interest rates on stablecoins are significantly higher than traditional savings accounts. But not all platforms are the same. Some offer stronger security, while others take higher risks to generate bigger returns. Whether you’re lending through CeFi platforms, exploring DeFi yield farming, or using exchange-based interest accounts, it’s importsnt to understand how these options work, the risks involved, and how regulation might impact them.

Here’s how to earn interest on stablecoins, which methods offer the most security, and what to watch for as new rules take shape.

Can You Earn Interest on Stablecoins?

Yes. Platforms like Ledn allow you to earn interest on stablecoins like USDC and USDT by lending them to institutional borrowers. Other options include CeFi lending platforms, DeFi protocols, and liquidity pools. Each method offers different rates and security measures.

With Washington debating how to regulate stablecoin issuers, the future of stablecoin interest accounts may depend on how Congress reconciles competing regulatory proposals. The Stablecoin Transparency and Accountability Act (STABLE Act) and the GENIUS Act propose strict reserve requirements, potentially reshaping how platforms operate.

Read more: USDT vs USDC

Ways to Earn Interest on Stablecoins

Crypto Lending Platforms

How it Works: Deposit stablecoins with a lending platform, which then lends them to institutional borrowers who pay interest.

Crypto lending platforms like Ledn allow you to deposit stablecoins such as USDC and USDT to earn interest. These platforms lend your assets to institutional borrowers (such as trading firms and market makers) who pay interest on their loans. The platform then shares a portion of that interest with you.

Read more: Stablecoin Lending: The Ultimate Guide

While this is a straightforward way to generate passive income, it carries counterparty risk. If borrowers default or the platform faces liquidity issues, your funds could be impacted. Potential upcoming U.S. stablecoin regulations could improve transparency by enforcing 1:1 reserves and stricter oversight for stablecoin issuers.

Typical Interest Rate: 5%–10% APY

Stablecoin Savings Accounts

How it Works: You deposit stablecoins into an interest-bearing savings account, where the platform lends them to vetted borrowers to generate returns.

Stablecoin savings accounts work like traditional savings accounts but tend to offer higher interest rates. Unlike banks, these accounts are not insured, meaning platform security is really important. With Congress debating stablecoin reserve rules, regulated issuers may become a safer choice for depositors in the future.

Typical Interest Rate: 3%–8% APY

Read more: Best USDC Interest Rates for Passive Income

DeFi Yield Farming

How it Works: You provide liquidity to DeFi protocols and earn rewards in return.

Yield farming in decentralized finance (DeFi) allows you to deposit stablecoins into liquidity pools, where they are used for lending or trading. In return, you receive interest or rewards.

Some DeFi platforms offer higher returns than centralized lenders, but they also come with significant risks, such as:

• Smart contract vulnerabilities
• Platform exploits
• Impermanent loss

Regulatory uncertainty adds another layer of risk. The GENIUS Act proposes a state vs. federal oversight model, leaving open the question of how U.S. stablecoin issuers operating in DeFi will be regulated.

Typical Interest Rate: 5%–20%+ APY (higher but more volatile)

CeFi Lending Services

How it Works: You deposit stablecoins with a centralized lender, earning fixed or variable interest rates.

Centralized finance (CeFi) lenders, such as Ledn, work like traditional banks but offer higher yields due to crypto market demand. Unlike DeFi, CeFi lenders operate through a centralized entity, offering greater transparency and regulatory oversight.

With Congress pushing for stablecoin legislation, CeFi platforms that adhere to new regulatory standards may gain a competitive advantage over riskier alternatives.

Typical Interest Rate: 5%–12% APY

Why Do Stablecoins Earn More Interest Than Banks?

Stablecoins typically earn more interest than traditional savings accounts because of institutional demand and the lack of banking reserve requirements. However, with U.S. lawmakers debating strict reserve mandates, the regulatory landscape may soon change.

Institutional Borrowing Demand

Market makers and trading firms borrow stablecoins for liquidity, arbitrage, and leverage, driving up interest rates.

Fewer Regulatory Restrictions (For Now)

Traditional banks are restricted by central bank policies, while stablecoin lenders operate in a more flexible environment. New laws like the STABLE Act could tighten oversight on stablecoin issuers.

Market-Driven Rates

Unlike traditional banks, stablecoin rates fluctuate based on supply and demand. If new legislation increases reserve requirements, yields may stabilize at lower rates.

Risk-Adjusted Returns

Higher rates reflect market, counterparty, and liquidity risks. Stablecoin issuers that comply with new federal standards may be seen as safer choices.

The Risks of Earning Interest on Stablecoins

While earning interest on stablecoins can be lucrative, regulatory uncertainty and market risks remain key factors.

Counterparty Risk

If a lending platform becomes insolvent, your funds could be affected.

Regulatory Risk

New laws like the STABLE Act and GENIUS Act may reshape the market, affecting stablecoin issuers and lenders.

Market Risk

Stablecoins can depeg under stress, as seen in the TerraUSD (UST) collapse. Choosing regulated issuers with 1:1 reserves is crucial.

Liquidity Risk

Some platforms restrict withdrawals during crises. New laws may enforce stricter liquidity requirements, making withdrawals more reliable.

Why Choose Ledn to Earn Interest on Stablecoins?

Ledn is a secure, transparent, and well-regulated platform for earning up to 8.5% interest on stablecoins. Unlike platforms engaged in high-risk lending, Ledn only lends on a fully collateralized basis, ensuring that borrowers provide assets as security. 

As Washington debates who should oversee stablecoin issuers, Ledn’s strong compliance framework and proof-of-reserves audits make it a leading choice for stablecoin holders looking for passive income with minimized risk.

Read more: Proof of Reserves in Crypto, Explained

How to Earn Interest on Stablecoins with Ledn

1. Open a Ledn Account

Sign up on the Ledn website and complete the identity verification process.

2. Deposit Stablecoins

Navigate to the Growth section in your Ledn dashboard.

Transfer USDC or USDT to your Ledn Growth Account.

3. Start Earning Interest

Once your deposit is confirmed, interest accrues automatically.

Ledn pays out interest monthly, and your earnings are compounded for higher returns.

4. Monitor Your Earnings

Check your balance and interest accrual in the Ledn dashboard.

View Ledn’s Open Book report for transparency on how funds are managed.

5. Withdraw or Reinvest

Withdraw your stablecoins at any time.

Keep your assets in the Growth Account to continue earning passive income.

Start Earning Interest on your Stablecoins

Your stablecoins don’t need to sit idle. You can use them to earn passive income with higher returns than traditional savings accounts. However, the landscape is changing. As Congress debates new regulations, stablecoin issuers and lending platforms may soon face stricter reserve requirements and oversight.  

If you’re looking for a secure and transparent way to earn interest, Ledn is a strong option. With fully collateralized lending, regular proof-of-reserves audits, and a compliance-first approach, Ledn is built to withstand market shifts and regulatory developments.

Competitive yields without exposure to speculative lending. Sign up for a Ledn account and start earning interest on USDC and USDT. No hidden fees, full transparency.

FAQs About Earning Interest on Stablecoins

How do I know stablecoins will hold their value?

Most stablecoins, like USDC and USDT, are backed by fiat reserves held in regulated financial institutions. Issuers provide audits and attestations to verify that each stablecoin is backed 1:1 by cash or short-term government securities. However, stablecoins are not risk-free. Some have lost their peg due to poor management or market stress. Choosing transparent, fully backed stablecoins is key to minimizing risk.

What is the difference between CeFi and DeFi interest accounts?

CeFi (Centralized Finance): Platforms like Ledn manage lending through a centralized entity. They conduct KYC verification, oversee risk, and offer predictable interest rates.

DeFi (Decentralized Finance): Platforms like Aave and Compound use smart contracts to automate lending and borrowing. DeFi offers higher potential yields but comes with smart contract risks, exploits, and no customer support.

What is the typical interest rate for stablecoins?

Interest rates vary based on market demand, platform, and risk factors. On average:

• CeFi platforms offer 5%–10% APY
• DeFi platforms range from 3%–15% APY, depending on liquidity pools and incentives
• Traditional banks offer 0.01%–0.50% APY on dollar deposits

Rates fluctuate based on institutional borrowing demand, platform risk exposure, and market conditions.

Is earning interest on stablecoins safe?

Earning interest on stablecoins comes with some risks, including platform insolvency, regulatory uncertainty, and market volatility. To minimize risk:

• Use trusted platforms with fully collateralized lending (e.g., Ledn)
• Choose stablecoins with 1:1 reserve audits (e.g., USDC, USDT)
• Diversify holdings across multiple platforms
• Stay updated on stablecoin regulations, as laws may impact lending availability

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Sponsored by 21 Technologies Inc. and its affiliates (“Ledn”). All reviews and opinions expressed are based on my personal views.