Stablecoins, RWA & LSTs Narrow Crypto-TradFi Yield Gap
A new report by RedStone Oracles, Gauntlet, Stablewatch and the Tokenized Asset Coalition finds that stablecoins, real-world assets (RWA) and liquid staking tokens (LST) are rapidly narrowing the yield gap between crypto and traditional finance. Currently only 8%–11% of crypto assets offer passive income, versus 55%–65% in TradFi. Yet crypto yields generated by stablecoins and RWA have surged since the US GENIUS Act set clear collateral rules and anti-money laundering standards. RWA tokens, which represent bonds or funds, also offer on-chain yields that appeal to institutions. Ethereum and Solana LSTs are key drivers. Ethereum LST supply climbed from 6 million to 16 million tokens over two years, adding $34 billion in nominal value. Solana LSTs doubled from 20 million to 40 million tokens, with 67% of SOL now staked. These tokens boost capital efficiency by enabling stakers to trade or deploy tokens in DeFi. In response to rising demand for crypto yields, new protocols launch monthly to capture opportunities. The report predicts exponential growth in yield-generating crypto assets. Enhanced regulatory clarity and product innovation may close the passive income gap with TradFi and attract more institutional capital.
Bullish
Narrowing the yield gap between crypto and TradFi, driven by stablecoins, RWA and LSTs, signals growing demand for decentralized yield products. Regulatory clarity from the GENIUS Act further de-risks stablecoin collateral and AML compliance, making yield-bearing crypto assets more attractive to institutions. Historical trends show that yield opportunities drive inflows and price support in DeFi. In the short term, demand for LSTs and RWA tokens will likely push staking yields higher and increase trading volumes. Over the long term, expanding product diversity and higher capital efficiency should cement on-chain finance as a viable alternative to TradFi yields, reinforcing a bullish market outlook for yield-oriented tokens.