Stablecoins have gone from niche assets to critical components of crypto’s onchain economy. We’re also seeing institutions and companies embrace stablecoins rapidly: Stripe acquired stablecoin startup Bridge for $1.1B (largest acquisition crypto history), and companies like JP Morgan have announced plans to integrate stablecoins into corporate treasury functions.

Today, stablecoins function as a passive store of value rather than a productive financial instrument. This is where yield-bearing stablecoins come into the picture. Yield-bearing stablecoin protocols unlock extra returns for users by deploying idle capital to various sources of yield.

This article focuses on csUSDL, a yield-bearing stablecoin created to improve treasury management for onchain businesses and DAOs. We explore how csUSDL works under the hood, where it improves on existing designs, and what csUSDL offers to potential users. Finally, we’ll connect csUSDL to broader movements in the stablecoin industry and show why csUSDL matters to the endgame of crypto-powered finance.

A brief (re)introduction to stablecoins

Stablecoins are cryptocurrencies whose value is pegged 1:1 to an underlying asset. Today, the most popular stablecoins are pegged to fiat currencies like the US dollar or Euro—but even commodities like gold or oil can back stablecoins.

Stablecoins are crypto’s version of an IOU (I Owe You): The issuer holds collateral such as cash, cash equivalents, or other liquid assets in reserve to maintain the peg. Stablecoins can be fully backed, fractionally backed, or overcollateralized. The main consideration, however, is the quality of backing collateral and trust in the issuer.

Tether (USDT) was the first stablecoin to launch in 2014, with several stablecoins (USDC, DAI, PYUSD, and many others) appearing over the next decade. During this period, stablecoins have become popular as a stable medium of exchange and a reliable store of value used across the decentralized finance (DeFi) and traditional finance (TradFi) industries.

The stablecoin market is worth $227B currently but may reach a valuation of $16 trillion by 2030. Some trends underpinning this prediction include the following:

1. Tokenization of real-world assets (RWAs): Stablecoins are crucial to the drive to bring stocks, bonds, real estate, and other assets onchain via tokenization. The RWA industry is worth hundreds of trillions of dollars, and unlocking a mere fraction of this industry would push stablecoins into multi-trillion-dollar territory.

2. Cross-border payments and remittances: Stablecoins eliminate the friction associated with global transactions and appeal to banking institutions and companies that want fast and cheap cross-border payments and settlements.

3. DeFi and lending markets: DeFi lending and borrowing protocols want collateral assets that are liquid and stable in value—features that stablecoins offer. DeFi users rely on stablecoins to transfer liquidity between various protocols and minimize price slippage when executing complex financial strategies.

4. Tokenized money markets: Stablecoins backed by traditional financial instruments (think T-Bills) are a useful alternative to traditional fixed-income products. Among other things, they offer increased efficiency, transparency, and convenience—all because they exist onchain.

5. Institutional adoption: Financial institutions, neobanks, and payment processors are looking to adopt stablecoins and offer them to a broader base than crypto-native users. Payments giant Mastercard has demonstrated interest in making stablecoin payments available, for example.

Asset tokenization—led by stablecoins—is on track to become a multi-trillion dollar market by 2030 (source)

Stablecoins in treasury management and the growing need for yield

As crypto matures, protocols and businesses are increasingly moving their financial assets onchain and leveraging crypto rails for financial management. Lido ($400M), Uniswap ($3B), MakerDAO ($5B), and Optimism ($800M) are some examples of crypto-native organizations with onchain treasuries.

Top 10 crypto treasuries according to total value of assets (source)

Like TradFi, treasury management is essential and demands optimizing capital efficiency, maintaining liquidity, reducing risk, and managing assets securely and efficiently. Onchain treasuries have some advantages over traditional treasuries, including:

• Transparency: Traditional treasuries are closed systems with limited visibility—an arrangement that reduces transparency and increases counterparty risk for stakeholders. Onchain treasuries are transparent by default and can be audited in real time by anyone.
• Operational efficiency: Companies can circumvent the delays and high fees associated with traditional banks by managing vendor payment and employee compensation onchain.
• Financial optimization: DeFi treasuries need not rely on low-yield TradFi instruments and can instead employ a mixture of strategies (DeFi lending, staking, yield-bearing stablecoins, RWAs) to maximize ROI. DeFi allows treasury managers to put idle assets to work while keeping liquidity readily available.
• Regulatory clarity: Many jurisdictions have introduced transparent and precise guidelines on handling tokenized assets. Hence, we’re seeing more businesses and protocols expressing interest in moving more parts of their business onchain. A good example is Coinbase: the company has moved corporate and customer reserves onchain and is mulling plans to offer tokenized securities).

Stablecoins are useful for treasuries that want to minimize exposure to price fluctuations and ensure financial stability in all market conditions. A stablecoin-based treasury is a no-brainer for any crypto-native organization that wants to manage financial operations efficiently onchain.

However, traditional stablecoins like USDC and USDT are problematic for treasury management as they fail to generate yield. Without proper yield-generation strategies, stablecoins cannot efficiently store value on a long timescale—especially with inflation and the opportunity cost of idle capital eroding the value of dollar-pegged assets.

Yield-bearing stablecoins solve this problem by allowing treasuries to earn passive income on reserve assets. While all yield-bearing stablecoins offer yield in some form, they differ on several axes, like decentralization, DeFi integrations, capital efficiency, etc. The following section explores different types of designs for yield-bearing stablecoins and highlights the various tradeoffs protocol designers make.

Types of yield-bearing stablecoins

Yield-bearing stablecoins take different approaches to generating yield and can be divided into two broad categories: RWA-backed yield-bearing stablecoins and DeFi-native yield-bearing stablecoins.

RWA-backed yield-bearing stablecoins

Stablecoins in this category generate yield from investing in traditional financial instruments (like short-term US Treasury securities and interest-bearing accounts) and redistributing interest income to holders. Examples: USDY (Ondo), BUIDL (BlackRock), USDL (Paxos), and USD0 (Usual).

Demand for RWA-backed stablecoins has exploded in recent years. For example, the chart below shows that RWA-backed stablecoins grew from $142 million to $3.1 billion in 2024.

Source: DefiLlama

DeFi-native stablecoins

Stablecoins in this category generate yield by deploying funds into DeFi protocols and earning returns via onchain mechanisms such as lending and staking. DeFi-native stablecoins can fall into two categories:

• Lending-based stablecoins: These stablecoins earn yield by supplying liquidity on lending protocols like Morpho, Aave, and Compound. Interest payments from borrowers are redistributed as yield to holders. Examples: Coinshift’s csUSDL and Curve’s scrvUSD.
• Staking-based stablecoins: These stablecoins generate yield by accruing staking rewards from Proof of Stake (PoS) consensus. Issuers typically hold staked ETH and other PoS assets and redistribute PoS rewards to holders as yield. Examples: sUSDe and raiUSD.

RWA-backed stablecoins provide stable, predictable, and—in some cases—regulatory-compliant returns. But they’re often permissioned and may lack deep integrations with DeFi lending and borrowing protocols. Other RWA-backed stablecoins (like USD0) may also implement governance-driven redemption mechanisms that could cause depegs.

Lending-based yield-bearing stablecoins are permissionless and fully composable with DeFi protocols. They may also provide higher returns by assessing sources of interest and dynamically routing capital to accrue maximum ROI. However, the yield depends on market conditions, interest rate fluctuations may negatively affect returns, and they may not always comply with regulations.

Staking-based stablecoins earn yield from staking rewards and provide decent returns for those who don’t want exposure to lending markets or RWAs. Returns are tied to staking demand and may fluctuate, however. Risky yield generation processes are another problem for stablecoins in this category: for instance, USDe incorporates delta-neutral hedging and off-exchange custody to provide more yield, which is far riskier than lending- or RWA-based strategies for producing stablecoin yield.

Finding the right yield-bearing stablecoins typically requires trading off one or more desirable qualities (accessibility, stability, composability, or capital efficiency). The csUSDL stablecoin mitigates these tradeoffs through a unique design combining DeFi-level composability, attractive yields, and minimal volatility.

Our next section dives deep into csUSDL and explains how it balances these tradeoffs to create an efficient, sustainable, and flexible model for generating yield on stablecoin holdings.

csUSDL: A treasury-optimized yield-bearing stablecoin

Coinshift USDL (csUSDL) is a yield-bearing stablecoin that produces returns for holders by deploying capital into DeFi lending markets and accruing yield from RWAs (real-world assets). csUSDL provides an alternative to non-yield-bearing stablecoins and offers treasuries an opportunity to earn income on stablecoin assets that would otherwise remain unproductive.

The issuers of csUSDL (Coinshift) have previously built a popular treasury management solution and applied insights from working with 350+ crypto-native organizations to manage capital onchain to create the optimal treasury asset: a yield-bearing, stable store of value. As we’ll see later, csUSDL is designed to mitigate several tradeoffs associated with existing yield-generating stablecoins—making things easier for treasury managers everywhere.

How does csUSDL work?

The foundation of csUSDL is USDL, an RWA-backed stablecoin that earns yield from short-term US Treasury securities. USDL redistributes yield via rebasing: instead of the stablecoin’s price increasing above $1—at which point the user has to claim or stake yield—the user receives additional tokens according to the interest rate. This mechanism allows users to earn passive income on holdings without having to manually claim or reinvest rewards.

csUSDL integrates with Morpho, a DeFi lending optimizer that programmatically routes capital to high-interest lending markets. csUSDL’s Morpho integration automates yield optimization and ensures holders have access to the best sources of yield without the stress of manual rebalancing. This increases capital efficiency and fixes a significant issue for RWA-backed stablecoins (limited access to DeFi markets).

Users mint csUSDL by wrapping USDL into wUSDL and depositing into the Coinshift USDL vault on Morpho.

Why wUSDL and not USDL? Not all DeFi protocols support rebasing tokens like USDL, but wrapped USDL (wUSDL) is compatible with major dapps in the DeFi ecosystem. Users can also mint csUSDL by supplying collateral assets (blue-chip tokens like cbBTC and wstETH), borrowing wUSDL from the Coinshift USDL markets, and minting csUSDL to accrue additional yield.

csUSDL is designed to be an ERC-4626 token that represents a proportional claim on RWA and DeFi-generated yields. This unlocks two income streams for csUSDL holders:

• Regulated RWA yields: USDL is backed by US Treasury securities and guarantees a stable, regulatory-compliant source of yield.
• DeFi yield: Morpho automatically routes stablecoin deposits to high-yield lending markets and generates income from interest paid by borrowers on borrowed assets.

What role does SHIFT play in csUSDL?

Coinshift has designed the csUSDL to balance stability, robust governance, and capital efficiency. SHIFT (Coinshift’s native token) is crucial to cUSDL governance and gives holders the power to vote on key parameters that influence risk management, capital allocation, and incentives for various actors in the system.

Here are some of the key parameters that SHIFT governance controls:

Treasury management

Coinshift currently uses specialized third-parties called “Curators” who advise on treasury management decisions—like how to prioritize allocation of csUSDL reserves to various yield sources (RWAs, onchain lending, new DeFi integrations, etc.). However, once SHIFT is live, tokenholders will be able to veto the decisions of Curators when the situation calls for it.

Lending market parameters

SHIFT holders will be able to vote on how much SHIFT rewards people can earn for supplying liquidity to csUSDL markets on DeFi protocols like Balancer. Governance will also influence protocol fee structure (how much people pay to mint, redeem, and use csUSDL) and interest rate model (how much interest people earn on their collateral assets).

Risk parameters

Managing risk is important for lending-based stablecoin protocols. SHIFT holders can vote to adjust risk controls for csUSDL—such as liquidation thresholds and loan-to-value (LTV) ratios—and implement security procedures for dealing with in emergency situations (e.g., circuit breakers).

How does csUSDL compare to existing yield-bearing stablecoins?

csUSDL combines the strengths of RWA-backed and DeFi-native yield-bearing stablecoins while addressing their weaknesses. By choosing csUSDL, treasuries no longer have to choose between RWA-based and DeFi-based yield generation—or trade off regulatory compliance and guaranteed stability for permissionless access, DeFi composability, and yield maximization.

A scalable, transparent, permissionless, and capital-efficient yield-generating stablecoin is exactly what DeFi treasuries need as the onchain financial landscape continues to evolve. Below are some ways csUSDL improves on existing approaches to generating stablecoin yield:

Stable yields

Certain DeFi-based stablecoins rely on complex market mechanics—sUSDe shorts ETH perpetuals to hedge volatility, for example—and cannot always provide predictable returns for holders. csUSDL avoids overexposure to market movement by incorporating low-risk yield sources (US Treasury securities) into its income model.

DeFi composability

Traditional RWA-backed stablecoins may lack composability with DeFi because they are permissioned. csUSDL is widely integrated throughout DeFi (Spectra, Contango, Balancer, and many more) and allows users to allocate capital to various protocols for maximum returns. Depositing csUSDL into Spectra markets for extra yield is an example strategy that’s only possible because csUSDL is permissionless and composable with DeFi.

By blending TradFi-grade stability with DeFi composability, csUSDL offers a more flexible and efficient solution for treasuries, DAOs, and institutional users looking to earn yield while maintaining full capital efficiency. This balance also improves csUSDL’s approach to the stablecoin trilemma and makes it easier to address the key trade-offs that other models struggle with.

Efficient redemption mechanisms

Some yield-bearing stablecoins rely on governance-driven redemption mechanisms, where a DAO determines how a stablecoin is redeemed for underlying assets. This may reduce confidence among users and trigger stablecoin depegs in worst-case scenarios—like we saw happen with the Usual (USD0) stablecoin.

csUSDL implements a transparent, structured, and predictable redemption model. First, it is is backed by USDL which maintains a peg to US Treasury securities and follows strict reserve requirements. csUSDL inherits a stable redemption framework since USDL itself does not rely on governance-controlled redemption mechanisms.

Moreover, csUSDL’s DeFi composability ensures holders can exit their positions via secondary markets (DEXes, liquidity pools, and lending protocols). Redeeming for USDL via the Coinshift Morpho vault is usually preferable, but some users may appreciate having another way to redeem their stablecoin assets.

csUSDL and the stablecoin trilemma

The stablecoin trilemma outlines the space of tradeoffs that issuers and protocol designers must navigate when designing stablecoins:

1. Decentralization: Decentralization is the extent to which a stablecoin is free from unilateral control by a single party. Highly decentralized stablecoins like LUSD have reduced counterparty risk but have poor capital efficiency. Low adoption of maximally decentralized stablecoins like LUSD v1 and RAI show the difficulty of scaling and maintaining liquidity for a highly decentralized stablecoin.
2. Capital efficiency: Capital efficiency measures how well a stablecoin utilizes its reserves to generate liquidity and sustain its peg. Algorithmic stablecoins optimize for maximum capital efficiency but cannot guarantee stable pegs. For example, Terra (UST) crashed in 2022 after flawed protocol mechanisms caused an unprecedented depeg.
3. Price stability: Price stability refers to a stablecoin’s capacity to remain pegged 1:1 to the dollar. Fiat-backed stablecoins like USDC and USDT offer strong price stability but have more centralization vectors and rely on failure-prone traditional banking infrastructure. Overcollateralized models like DAI guarantee price stability and decentralization but trade off capital efficiency.

Stablecoins must be capable of providing yield without sacrificing decentralization, stability, and efficiency to evolve beyond basic store-of-value assets. csUSDL meets those demands by combining DeFi’s decentralization and capital efficiency and TradFi’s institutional-grade stability in one product.

csUSDL eliminates the need for overcollateralization by leveraging U.S. Treasuries for base yield and enhances capital efficiency by lending deposits to borrowers. At the same time, backing csUSDL’s value with high-quality RWA reserves ensures a stable, transparent peg and preempts the risks of algorithmic stablecoins.

The csUSDL stablecoin is further down the decentralization spectrum than maximally decentralized stablecoins like LUSD v1 and RAI, especially since the underlying asset (USDL) is regulated. still achieves some level of decentralization since csUSDL itself is permissionless and can be used freely throughout DeFi.

[Graphic Idea: A stablecoin trilemma triangle showing where different stablecoins fall, highlighting how csUSDL balances all three factors.]

How treasuries and DeFi users benefit from csUSDL

The appeal of csUSDL comes from integrating RWA yield with DeFi lending yields. This combination unlocks a range of financial management strategies for DAOs, crypto-native businesses, and individual users. It also addresses several pain points for onchain treasuries by enhancing capital efficiency and safeguarding the value of capital.

Let’s walk through some scenarios to illustrate how csUSDL can offer practical benefits:

1. Simple savings and yield optimization

Alice wants to earn predictable returns on her stablecoin holdings, so she swaps her USDC for USDL to gain exposure to US Treasury securities. She deposits wUSDL into the Coinshift USDL vault on Morpho and mints csUSDL. Alice now earns yield through multiple sources:

• T-bill yields
• DeFi lending returns from supplying wUSDL liquidity to lending markets via Morpho
• Additional rewards from protocol emissions (MORPHO rewards and SHIFT emissions)

Alice has successfully maximized returns without taking on excessive risk. More importantly, she can quickly access liquidity anytime she wants by completing the redemption process and swapping back to the original asset (USDC) on CoW Swap with a minimal slippage of 2-3%, even for large swaps of $1M.

2. Borrowing against collateral for enhanced capital efficiency

Bob holds wstETH (wrapped stETH) in his treasury and wants to unlock liquidity while earning Ethereum staking rewards. He uses wstETH as collateral to borrow wUSDL (wrapped USDL) before depositing wUSDL into Coinshift to mint csUSDL. This gives Bob exposure to multiple yield sources:

• Staking-backed yield from holding wstETH
• RWA-backed yield from USDL
• DeFi-backed lending yield through Morpho
• MORPHO rewards and SHIFT token incentives

Bob optimizes capital efficiency using csUSDL and unlocks additional liquidity (through extra rewards) without selling his stETH holdings.

3. Refinancing expensive stablecoin debt

Charlie has an outstanding high-interest wstETH/DAI loan on SparkFi and wants to lower his borrowing costs. To achieve this goal, he deposits wstETH as collateral into the wstETH/wUSDL lending market on Morpho and borrows wUSDL at a more favorable rate.

He then:

• Swaps wUSDL to DAI
• Pays off his high-interest loan
• Deposits remaining funds into Coinshift to mint csUSDL and earn passive yield

This strategy reduces Charlie’s borrowing costs to around 5% and shows how csUSDL can optimize existing DeFi debt positions and improve overall treasury efficiency.

4. Leveraged yield stacking with stablecoin recycling

David wants to maximize yield generation opportunities using a leveraged approach. He starts by borrowing wUSDL against wstETH previously supplied as collateral in Morpho’s lending market. He deposits borrowed wUSDL into Coinshift’s USDL vault on Morpho and mints csUSDL.

This strategy allows David to earn:

• Base RWA yield from USDL
• Lending yield from Morpho
• Additional returns from protocol incentives

David walks away with a net positive yield after settling borrowing costs, meaning that he effectively got paid to borrow. When managed properly, this approach allows sophisticated investors to reuse stablecoin liquidity to generate additional yield without increasing risk exponentially.

5. Providing liquidity for additional rewards

Eve holds csUSDL and wants to deploy her stablecoin capital to generate additional yield. She deposits her csUSDL into the Coinshift USDC-USDL boosted pool on Balancer V3 and receives rewards from:

• Trading fees generated by pool swaps
• Boosted lending and yield optimization
• Coinshift and Balancer LP incentives

The BPT (LP) token from the pool can be further farmed on Aura Finance to maximize earnings for this strategy. This makes Eve’s strategy an attractive, low-risk approach to increasing returns from holding stablecoins in a protocol’s treasury.

6. Advanced strategies through yield tokenization

A more sophisticated approach for achieving increased returns on stablecoin is to split csUSDL into Principal Tokens (PTs) and Yield Tokens (YTs) using interest rate derivative (IRD) protocols like Pendle. YTs grant the right to claim future yield over a set period, while PTs grant the right to redeem the base token at the end of that period (i.e., maturity). This separation unlocks unique DeFi strategies and goes beyond the basic lending and borrowing scenarios described previously. Although Pendle integration for csUSDL is still in the works, Spectra already supports csUSDL yield tokenization for users who want to explore these tactics right now.

(i). Speculating on

higher yields with YT tokens

Fred is bullish on csUSDL’s overall yield potential—especially the impact of SHIFT emissions. Rather than opting for a stable return, he purchases YT-csUSDL with a leverage factor (e.g., 20x), meaning each YT exposes him to the yield of multiple csUSDL tokens. If the final APY exceeds the implied rate (around 15%), Fred collects oversized gains. If yields underperform, he risks losses. This high-reward strategy suits those expecting SHIFT emissions and other yield drivers to surpass conservative estimates.

(ii). Locking in fixed returns with PT tokens

Hannah prefers predictable and sustainable over fluctuating interest rates, so she purchases PTcsUSDL—a token representing the discounted principal value of csUSDL redeemable at maturity. By converting 1,000 csUSDL into 1,050 PT-csUSDL, Hannah secures a fixed APY (about 15%) until July 23, 2025. Upon maturity, her PT tokens are redeemed for 1,050 csUSDL, guaranteeing steady returns and eliminating rate fluctuations.

If SHIFT emissions boost yields significantly, Hannah might miss out on extra upside, but she values certainty over potential gains. csUSDL-based PTs effectively mirror a fixed-interest financial instrument in DeFi form.

These scenarios aren’t just theoretical—Spectra already enables csUSDL holders to mint PTs and YTs, letting them pick between stable returns, speculative yield trading, or a blend of both. Meanwhile, a Pendle integration for csUSDL is on the horizon, promising larger liquidity. Whether you lean toward Fred’s or Hannah’s preference, yield tokenization pushes csUSDL beyond ordinary stablecoin usage and underscores the breadth of DeFi’s composability.

csUSDL and the future of onchain finance

Institutions are moving treasuries onchain to improve transparency, streamline operations, increase capital efficiency, and bypass geographical barriers to business expansion. Stablecoins are playing a key role in this shift and provide a liquid and stable medium of exchange for crypto-native organizations doing business onchain.

However, traditional stablecoins lack the means to produce yield and have hamstrung attempts to optimize treasury management for higher capital efficiency. Companies, institutions, and even everyday users need stablecoin solutions that provide stable, transparent returns while preserving the core value proposition of stablecoins (liquidity and price stability).

csUSDL is a next-generation yield-bearing stablecoin that supercharges treasury management with a dual-token design that guarantees maximum exposure to returns on holdings. Treasuries that adopt csUSDL can enjoy risk-adjusted yield without making undesirable tradeoffs.

Retail users can harness csUSDL’s features to unlock sustainable returns in a straightforward, low-risk fashion. And thanks to csUSDL’s deep DeFi integrations, it is possible for sophisticated investors and high-net-worth individuals to calibrate risk profiles and deploy csUSDL via advanced strategies to increase stablecoin yield.

We can expect the distinction between TradFi and DeFi to blur as the onchain financial landscape expands. We might even see products like csUSDL heralding the next phase of stablecoin evolution—one where stablecoins are fully integrated into institutional and retail markets and function as powerful financial tools worldwide.

The transition to onchain capital management will only continue to accelerate. We can expect treasuries (corporate organizations, DAOs, sovereign wealth funds) to rely on stable, yield-generating assets to power onchain financial operations. The future of finance is onchain, programmable, and global—and csUSDL is poised to contribute.

Disclaimer:

1. This article is reprinted from [2077Research]. All copyrights belong to the original author [Arbnom and Emmanuel Awosika]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
2. Liability Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute any investment advice.
3. The Gate Learn team does translations of the article into other languages. Copying, distributing, or plagiarizing the translated articles is prohibited unless mentioned.