Coin Metrics said in a new report that the on-chain stablecoin market has surpassed $290 billion, and investors are increasingly parking capital in lending venues such as Aave and Morpho to earn interest in a way that resembles traditional fixed-income investing. The report’s main conclusion is less flattering for DeFi yield: stablecoin lending returns have not consistently beaten the 1-year U.S. Treasury.
According to the study, more than $8.6 billion in stablecoins is deposited across Aave v3 and Morpho, where lenders earn yield from borrowers. Coin Metrics compared on-chain fixed-income products, Treasuries and volatile crypto assets in one framework to examine what compensation stablecoin lenders are actually receiving for the risks they take.
On-chain yield is now competing directly with traditional fixed income
The report noted that the U.S. Treasury market trades about $1.2 trillion a day. Short-dated Treasuries and money market funds have long been used to generate income with relatively limited risk exposure. As the stablecoin market has expanded, holders can now seek similar income through on-chain lending protocols.
Beyond lending deposits in DeFi, the market also includes yield-bearing stablecoins and tokenized Treasuries. Coin Metrics cited Franklin Templeton’s money market fund BENJI and BlackRock USD Institutional Digital Liquidity Fund BUIDL as examples of tokenized Treasury products. Those instruments bring features such as instant settlement, programmability and composability on-chain, but they also carry smart contract risk as well as redemption or liquidity risk.
The report said that if on-chain products carry extra layers of risk relative to traditional fixed income, they should in theory offer a higher return. In practice, that premium is not consistently there.
The same stablecoin can produce very different returns across protocols
Returns for the same stablecoin diverge sharply between Morpho and Aave v3. Since January 2026, average USDC deposit yields on the two protocols have differed by 1.59%. Coin Metrics linked that gap to differences in protocol design.
Morpho uses isolated lending markets for each collateral-borrow pair, which creates different borrowing and supply rates across markets. Aave uses a pooled design, where assets in the same market share the same borrowing and supply rate. Those structures lead to different risk-adjusted returns.
The report also referred to the April 2026 KelpDAO exploit, after which some analysts argued that investors in lending pools were not being paid enough for the risks they were taking. Stablecoin lenders still face depegging risk, oracle manipulation and smart contract vulnerabilities.
In Aave Core’s USDC market, returns have been volatile, which highlights how different these deposits are from traditional fixed-rate products. On average, USDC on Aave yielded 31 basis points less than the 1-year Treasury. For 78% of 2026, the annualized USDC yield on Aave remained below the 1-year Treasury yield.
In Morpho v2 vaults, the median return for USDC averaged 65 basis points above the 1-year Treasury yield, but annual volatility was about 3.3 times higher. Coin Metrics said lending rates are driven by supply and demand and can move at any time, while Treasury yields are shaped more by Federal Reserve policy and tend to shift more gradually.
Yield spreads also appear among stablecoins on the same platform
The report said lending rates are set according to supply and borrowing conditions inside each pool, so even stablecoins with similar reserves can generate different returns within the same protocol.
On Aave, USDC and USDT are the two largest stablecoins by deposits, and the average spread between them is 90 basis points. Over the past 90 days, USDC’s average utilization rate was 10% higher, which the report identified as one reason for the gap.
Coin Metrics also pointed to PYUSD, whose supply rate briefly rose after lenders pulled available liquidity, pushing utilization higher and lifting rates for both borrowers and depositors.
Morpho shows similar dispersion. As liquidity rotated into v2 vaults and the remaining liquidity altered deposit conditions in the market, rates in Morpho v1 vaults could be more volatile. In Morpho v2 vaults, the average yield difference between USDC and USDT reached 126 basis points.
The report said the four stablecoins discussed all publish attestation reports, invest in cash and short-term Treasuries, and support distribution across multiple networks. Even so, differences in DeFi integration, regulation, demand and protocol design lead to different yield expectations.
Governance, curators and yield-bearing stablecoins widen the range of outcomes
Coin Metrics said on-chain yields are shaped not only by protocol architecture or the underlying asset, but also by governance decisions and vault curator behavior.
In Aave, governance can adjust lending curves based on the community’s assessment of asset risk. On Morpho, returns partly depend on how vault curators allocate capital. The report described curators as investment-manager-like actors who route deposits across lending markets to seek better returns.
Over the past 90 days, the median yield for USDC deposited in USDC vaults was 4.79%. A small number of high-yield outliers lifted the average vault return to about 5.31%. Coin Metrics said this showed that curators can raise returns through allocation choices even without direct protocol intervention.
Stablecoin issuers can also bypass intermediary lending markets and distribute rewards directly to holders to encourage adoption. Users can natively stake Sky-issued USDS and Aave-issued GHO to receive governance-managed rewards.
More than 66% of circulating USDS has been staked into sUSDS, which currently offers a floating rate of about 3.52%. Users who stake GHO receive sGHO and a fixed 4.25% yield.
Stablecoins have offered steadier income than volatile crypto assets
Coin Metrics said that while stablecoins do not always compare well with traditional fixed-income peers, they have historically produced steadier returns than more volatile lending assets in crypto.
If an investor had deposited assets into Aave in 2024, USDC would have delivered a higher total return than lending ETH, according to the report. Even though ETH posted an 8.9% price return, its income from Aave was about $940 less than USDC’s.
WBTC showed a different return mix. Only 0.1% of its total return came from yield, while the other 86.9% came from price appreciation, because it was used mainly as collateral.
On Morpho, if capital had been placed in vaults from 2025, the Steakhouse USDT vault would have returned 4.5%, while the Steakhouse ETH vault would have lost 1.9%. Excluding price return, Steakhouse USDT still outperformed Steakhouse ETH by 2%.
Coin Metrics’ conclusion was that stablecoins remain a relatively stable source of on-chain yield. They do not always produce competitive results against traditional fixed-income products, but compared with other crypto assets, their return profile helps explain why more than $8.6 billion in stablecoins is still deployed to capture on-chain yield.