In the brave new world of stablecoins, yield generation has become a hotbed of innovation and debate—offering users passive returns on low-risk assets while grappling with risks like depegging, regulatory scrutiny, and sustainability. Although the rise of yield-bearing stablecoins promises to bridge traditional finance and DeFi, questions remain about their long-term viability. Additionally, McKinsey's recent report revealed that banks have real concern about the disintermediation risk posed by yield bearing stablecoins. McKinsey's recent report In this interview, the CTO of STBL Harsh Patel offered valuable insights into the financialization of stablecoins and  STBL’ s unique approach to stablecoins’ yield generation. Harsh Patel It's nice to meet you, Patel. Can you briefly tell us about yourself and your journey to web3? My journey into Web3 began over a decade ago when I first encountered Bitcoin’s whitepaper. With a background in information systems, finance, and security, I was drawn to the cryptographic principles that blockchain introduced. My early research on decentralized exchanges, presented at Financial Cryptography 2014, and on scaling solutions, published at IEEE Beijing, shaped my understanding of blockchain’s potential. Over the years, I have built zero-knowledge authentication tools, conducted smart contract audits, and contributed to protocol infrastructure. Now, as CTO of STBL, I apply this decade of experience to solving one of DeFi’s most pressing challenges: making yield accessible while maintaining stability. Stablecoins are no longer a fringe asset class. How do you describe this evolution and what does it mean for the future of finance? Stablecoins have evolved from a trading convenience to the core rails of global finance. They have matured from simple collateralized models to sophisticated yield-generating instruments. Today’s $300-billion stablecoin market is about programmable money that moves seamlessly across borders, earns yield, and integrates with financial applications. This is the evolution of money, creating a hybrid system where stablecoins connect traditional and decentralized finance, making capital flows more efficient, transparent, and accessible. Yield-bearing stablecoins are prohibited under the MiCA and GENIUS Act regulations. Was this prohibition motivated by competitive pressures, or were there other primary factors at play? These restrictions are primarily driven by concerns about systemic risk and consumer protection rather than competition. Regulators are cautious about bank-like activities operating without equivalent oversight. However, this also opens the door to innovation. We have addressed these concerns by separating yield from stability through a dual-token architecture. This approach is about building within regulations and creating transparent systems that still deliver value to users. How do you see the debate around centralization in yield generation playing out—especially with protocols relying on treasuries or oracles? The centralization debate is complex. Treasury-backed yields offer predictability and lower risk but introduce counterparty exposure. Similarly, oracle systems, even decentralized ones, often depend on centralized data sources. We believe the future lies in hybrid models that balance decentralization with reliability. Diversifying yield sources and implementing redundant oracle systems is key. Transparency is key, too. Users should always know where their yield originates and what risks they are taking. Decentralization is a spectrum, and we are continually improving along it. How might advancements in DeFi composability enhance or complicate stablecoin yield strategies over the next few years? DeFi composability brings both opportunity and complexity. It enables powerful strategies such as automated yield routing across lending, liquidity, and staking opportunities. At the same time, it creates dependencies and risk layers. In the coming years, I expect we will see modular, risk-isolated yield architectures with standard interfaces for yield-bearing tokens, which will simplify integration. The main challenge will be to maintain simplicity for users while managing complex backend systems. Can you explain what STBL's dual stablecoin mechanism entails, especially how it ties simultaneously into yield generation and other use case? STBL’s innovation lies in separating the traditional yield-bearing stablecoin into two instruments: USST, a 1:1 USD-pegged stablecoin, and YLD, a yield-bearing NFT. This separation allows users to choose their preferred risk profile. USST remains stable, while YLD represents the yield component. This enables new use cases such as yield tokenization, where YLD can be traded, collateralized, or integrated into other DeFi protocols without affecting the stability of USST. What unique tech stack does STBL use to generate and distribute yields, and how does it mitigate common stablecoin risks like depegging? Our system uses a multi-collateral architecture backed by yield-bearing assets such as tokenized Treasury bills, including USDY, OUSG, and BUIDL. A dynamic risk engine adjusts collateralization ratios in real time to prevent depegging. In addition, our redemption mechanism ensures that USST maintains a value of one dollar, with YLD holders absorbing any yield volatility. This structure protects stability while ensuring consistent yield distribution. As CTO, what were the biggest engineering challenges in building STBL's yield infrastructure, and how did you address them? Our biggest challenge was balancing yield optimization with stability. We built a hybrid on-chain and off-chain system that keeps core operations on-chain while offloading computationally heavy tasks to off-chain verifiers using cryptographic proofs. Another challenge was designing YLD NFTs to represent yield claims accurately without creating accounting overhead. We solved this through a timestamped accrual system that supports batch processing. Security was a top priority. We have completed multiple audits and continue to run a bug bounty program. What's on the roadmap for STBL in terms of scaling yields or integrating with new blockchains, and how do you plan to evolve with market trends? Our near-term focus is on expanding yield sources and partnering with institutions to bring tokenized treasury assets on-chain. We are launching a new staking system and deepening integrations with projects such as iBenji and BUIDL. We are also enhancing our risk management systems and exploring multi-chain interoperability. Over the long term, our goal is to become the yield infrastructure layer for all of DeFi. Any parting words? We are at a turning point where stablecoins are becoming the default medium of exchange for the internet economy. Yet, current models often force users to choose between stability and yield. To other builders, my message is simple: focus on solving real problems rather than following trends. The infrastructure we build today will shape the financial system of tomorrow. The best time to build in crypto was ten years ago; the second best time is now.

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The Financialization of Stablecoin: Exclusive Interview With STBL's CTO Harsh Patel

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