Yield-Bearing Stablecoins Will Underpin New Financial Architecture: Coinshift CEO

The lines between stablecoins, lending and banking are blurring, leading to the emergence of new financial primitives, according to Tarun Gupta, CEO of payments and accounting solution Coinshift.

In a video interview with Decrypt, Gupta elaborated on his thesis, explaining that this emerging financial architecture would be underpinned by yield-bearing stablecoins like Coinshift’s own csUSDL.

“For the past six or seven years, stablecoins have solved one simple use case, which is money,” Gupta explained. “Today, you can basically make the movement of money faster, cheaper and better with stablecoins. However, they’re not solving any kind of yield use case or lending use case.”

Stablecoins’ “architecture of promises”

Yield-bearing stablecoins, which enable holders to receive passive income while maintaining the stability of fiat-pegged tokens, build on the “architecture of promises” underpinning verifiable on-chain assets, Gupta said.

“How I see this is, you need a trust layer, and then you need a transparent layer on top,” he said. “Once you combine these two layers with the power of smart contracts and blockchain, you end up having a lot of convergence between banking, lending and yield mechanisms.”

Based on that thesis, Coinshift launched csUSDL. “Can you combine a USDC-like stablecoin from the real world, which is Paxos’ USDL, and then use it to lend on a platform like Aave?” Gupta said. Coinshift’s csUSDL leverages “permissionless market creation system” Morpho Protocol, which enables the creation of verifiable markets, alongside the provably collateralized USDL.

The end user, he explained, is “trusting this entire promise of, once you hold csUSDL, you will get one USDL against that, and you don’t need to trust Coinshift for that,” he said. Instead, users place their trust in a protocol, a smart contract layer and ultimately the provably verifiable blockchain. “This financial architecture is way better than what we have in TradFi,” Gupta said. “Once we have this architecture, the thesis is that every other instrument will move on-chain,” he explained, bringing trillions of dollars in value with it.

Regulatory clarity

For that to happen, as well as the technology being in place, regulations have to catch up. Crypto-friendly jurisdictions like that of Abu Dhabi are “setting examples for other governments on how you can innovate with new technology,” Gupta said. In the U.S. the proposed GENIUS Act is putting the nation on “the right path,” he added, with institutions able to “use a specific stablecoin issuer because it’s regulated and supervised.”

The proposed legislation “brings lots of clarity,” while its rules on reserve management “ensures more trust” to end users like institutions, he said, adding that he is “100% confident” that institutions and neobanks will adopt stablecoins.

As a result, there’s now “no reason to use the old banking infrastructure to move money,” he said, adding that other fintechs like payroll providers will also migrate to stablecoins. In the future, he explained, “all fintechs will actually outcompete banks with stablecoins like USDC.”

SHIFT work

In the increasingly crowded stablecoin field, Gupta said, those with “the largest liquidity, deep integrations, and distribution” are poised to win.

For its part, Coinshift is focusing on two key areas. First, the launch of its SHIFT reward and governance token, which has two purposes: to reward the TVL of Coinshift’s cs-focused assets, and to regulate its ecosystem.

Second, the company aims to grow csUSDL adoption by playing on its yield-bearing proposition. In the short term, that means driving the stablecoin’s market cap to $100 million through “majorly large institutions,” Gupta said. “If you’re already holding USDC, you should think about holding csUSDL, because the risk is on the lowest side, and the secondary liquidity is also very high,” he explained.

As well as increasing secondary liquidity “so that people always stay in csUSDL,” the next stage of Coinshift’s plan is to fully integrate csUSDL into its platform, “to offer it to all our clients, especially b2b organizations,” Gupta said. In addition, Coinshift plans to work with DeFi protocols to “have it as collateral or become a reserve for other stablecoins.”

Already csUSDL has “15-plus DeFi integrations on day one,” Gupta said, explaining that, “At the end of the day, we’re building this underlying blueprint for making these yield-bearing instruments more liquid in DeFi, and it should be deeply integrated.”