Stablecoins have splintered from cash-backed dollars into Treasury, basis-trade, and tranched designs. Here’s a guide to the new models and their risks.
A few years ago, "stablecoin" meant one thing: a digital IOU for a dollar. You handed an issuer a dollar, it parked that dollar in a bank, and it gave you a token redeemable 1:1.
They were simple, legible, and boring by design.
But in recent years, the definition has expanded dramatically. In June, Synthetix moved to retire sUSD (sUSD), one of the original crypto-backed stablecoins, freezing the contract and paying holders back in vested SNX (SNX) (more on this later).
Synthetix’s sUSD successor won't be propped up by a buffer of volatile collateral. Instead, it will be backed by the basis trade, a market-neutral strategy that earns yield by holding an asset and shorting futures against it. That single swap captures where the whole category has gone.
What a Stablecoin Used To Be
The original model was custodial and cash-like. An issuer holds reserves, you hold a claim, and arbitrage keeps the price at $1: if the token slips below $1, someone buys it cheap and redeems it for full value, nudging the price back up.
The reserves earned interest, but that interest stayed with the issuer. Holders received stability and nothing else. This helped make Tether one of the most profitable companies on Earth, while elevating Circle to a $17.4 billion valuation.
Most of the market still works this way. What changed is everything built on top.
Treasury Bills Are in Vogue
The biggest evolution is also the most conservative. The largest new stablecoins are backed by short-term US Treasury bills, the same government debt that money market funds hold. Two camps have formed around what to do with the yield those bills throw off.
The giants opt to keep it. USDC (USDC) and Tether (USDT) park a large chunk of their reserves in Treasuries and related instruments, and pocket the return. Tether's scale here is hard to overstate. Its Q1 2026 attestation reported roughly $141 billion in direct and indirect Treasury exposure, making it the 17th-largest holder of US government debt in the world, ahead of many countries. It also began its first full independent audit this year.
A second camp passes the yield through to holders. These stablecoins behave like tokenized money market funds, and the income reaches holders in one of three ways:
- Rebasing, where the holder’s token balance grows a little each day — i.e., Mountain's USDM (USDM) and Ondo's rUSDY (rUSDY).
- Dividend distribution, where the fund pays out while the token holds at $1 — i.e. BlackRock's BUIDL (BUIDL) and Franklin Templeton's BENJI.
- Price appreciation, where each token slowly climbs above $1 — i.e. Ondo's USDY (USDY).
Source: Ondo US Dollar Yield (USDY) Page
By mid-2026, these stablecoins yield roughly 3.5-3.6%—tracking whatever the prevailing rate for short-term US treasuries is, minus management fees, etc.
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The Exotic Edge
Step away from cash, and the designs get stranger. A growing class of stablecoins holds its peg through financial engineering rather than a vault of dollars:
- Basis-trade coins, like Ethena's USDEe (USDe), hold crypto and short an equal amount of futures, creating a "delta-neutral" position that cancels out price swings while collecting funding payments from leveraged traders. USDe carries around $4.5 billion in supply, and it is the model Synthetix is adopting for its sUSD replacement.
- Lending-backed coins, like Sky's sUSDS and Frax's sfrxUSD, mint dollars against overcollateralized crypto loans and pay holders a savings rate out of the interest borrowers owe.
- Algorithmic designs, the lineage that produced Terra, persist in smaller and more cautious forms.
Note that more exotic designs tend to deviate from their peg more often and more severely because they lack the simplest backstop a fiat-backed coin has: a reserve of cash redeemable 1:1 on demand.
Splitting the Risk
The newest idea borrows directly from Wall Street. Protocols like Royco and Strata take a yield-bearing stablecoin and slice it into tranches, a structure that mortgage bonds have used for decades.
A senior tranche takes a lower, protected yield. A junior tranche absorbs the first losses in exchange for the bulk of the yield. If the underlying strategy stumbles, junior holders are hit before senior holders feel a thing.
The model got its first real stress test in mid-2026, though on a yield token rather than a stablecoin:
On Strata, Neutrl's NUSD (NUSD) splits into a senior piece with a yield floor near 3.8% and a junior piece reaching toward 5.9%. It is a tidy way to let cautious and aggressive money share the same asset.
Source: Strata
But it is also young, thinly capitalized, and hasn’t yet been battle-tested during a real crisis.
The Graveyard
All this financial engineering has unintended consequences—it creates new ways to break.
The clearest cautionary tale is the one now ending. Synthetix’s sUSD held its dollar peg through SNX collateral until a 2025 governance change cut the required collateral ratio from 750% to 200% and removed the incentive for holders to buy the coin back when it dipped. The peg slid to $0.68, then to around $0.21, and the protocol is now winding it down near $0.25.
Source: sUSD token Page
Others failed faster. In November 2025, a fund manager's loss at Stream rippled through its xUSD into Elixir's deUSD and Stable Labs' USDX (USDX), a cascade driven by coins being lent and re-lent against one another. In June 2026, Main Street's msUSD lost its peg within a day after a reserve verifier walked away.
When Ethena's USDe briefly fell to $0.65 on one major exchange during the October 2025 crash, it held near $1 on decentralized venues like Curve, and redemptions never stopped. That was a price dislocation, rather than a failure of the delta-neutral hedge backing the coin.
As the stablecoin landscape grows more crowded and increasingly varied, being able to tell the difference between a stablecoin’s glitch and a collapse is now part of the job of holding one.
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