Earning on Stablecoins: How Up to 10% APY Works and What the Risks Are
Stablecoin yield comes from lending, and the headline rate is a ceiling. The five risks that decide whether the return is worth it, with a real depeg case.
How does earning up to 10% APY on stablecoins work, and what are the risks?
Yield comes from interest paid by borrowers on a lending protocol, so the rate floats with borrowing demand rather than sitting where a marketing page puts it. Five distinct risks sit underneath that return. The risk table below covers each one, with a real depeg case.
Key Takeaways
- Stablecoin yield is paid by borrowers on a lending protocol, which is why the rate moves continuously with demand rather than staying fixed.
- USDC supplied to Aave V3 on Ethereum earns a 3.28% supply APY as of writing, well below the ceilings advertised across the sector (DefiLlama, aEthUSDC Aave V3 Pool Data).
- Depeg risk is real rather than theoretical. USDC fell to $0.87 in March 2023 after Circle confirmed $3.3 billion of reserves, roughly 8% of the total, were stuck at the failed Silicon Valley Bank (Chainalysis, Crypto Market Reaction to Silicon Valley Bank and USDC Depeg, 2023).
- No deposit guarantee covers stablecoin balances. The €100,000 EU scheme applies to bank deposits (European Banking Authority, Deposit Guarantee Schemes Data).
- On Brighty, stablecoin balances in Earning Vaults are quoted at up to 10% APY with no locked funds (Brighty, Homepage, 2026), generated through Aave-powered vaults (Brighty, Best Crypto Wallet Apps 2026).
- Converting euros into a stablecoin and back costs two conversions, at 0.4% to 0.6% each on Brighty, which consumes several months of yield at current base rates (Brighty, Fees and Limits, 2026).
In This Article
- Where does stablecoin yield actually come from?
- What does “up to 10% APY” mean in practice?
- What are the five risks of earning on stablecoins?
- What happened when USDC lost its peg?
- How should you size a stablecoin position?
- How Brighty handles stablecoin earning
- FAQ
Where does stablecoin yield actually come from?
Yield comes from interest that borrowers pay into a lending pool. Depositors supply a stablecoin, borrowers take over-collateralised loans against it, and the interest flows back to depositors after the protocol keeps a share.
That origin explains the single most important behaviour of the rate. Yield tracks borrowing demand, so it rises when many people want to borrow and falls when they do not. Nothing about the advertised rate at the moment of deposit guarantees what arrives three months later.
It also explains why the return is not free money. Someone is paying that interest, and the protocol sits between lender and borrower managing collateral and liquidations. The yield is compensation for the risks in that arrangement rather than a bonus for holding a token.
What does “up to 10% APY” mean in practice?
It describes a ceiling reached under favourable conditions. The rate credited on any given day is usually well below it, and the gap is visible in public data at any moment.
USDC supplied to Aave V3 on Ethereum currently earns a 3.28% supply APY (DefiLlama, aEthUSDC Pool Data). A platform routing deposits to that pool cannot pay 10% from lending yield alone while the base rate sits there. Ceilings get reached through unusually high borrowing demand, through a platform subsidising the rate from its own margin during a promotion, or through a boosted tier for higher-priced plans.
The practical response is straightforward. Treat the headline as a maximum, find the live protocol rate before depositing, and build expectations around the current number. On €5,000, the difference between 3.28% and 10% is roughly €164 versus €500 over a year, which is a large enough gap to change whether the position makes sense at all.
What are the five risks of earning on stablecoins?
Five distinct risks sit underneath any stablecoin yield product. They differ in kind rather than in size, and naming them precisely matters more than ranking them.
| Risk | What could happen | How likely | What reduces it |
|---|---|---|---|
| Depeg | The stablecoin trades below its target, cutting principal | Has occurred. USDC fell to $0.87 in March 2023 | Choosing issuers with transparent reserve reporting |
| Smart contract | A protocol exploit drains deposited funds | Uncommon on audited protocols, never zero | Sticking to established, heavily audited protocols |
| Rate | The rate falls far below the advertised ceiling | Near certain at some point, since rates float | Treating the headline as a maximum, checking live rates |
| Platform | A custodial provider fails or freezes the account | Varies by provider | Reading custody disclosures, sizing the position |
| Tax and reporting | Yield creates reportable income or gains | Applies in most jurisdictions | Exporting transaction history, confirming local rules |
Two of these get discussed constantly and three get ignored. Depeg and smart contract risk dominate the conversation, while rate risk is the one almost everyone actually experiences. A deposit made at an advertised ceiling that spends most of its life earning a third of that has not lost principal, but any plan built on the headline number no longer holds.
Platform risk deserves particular attention for anyone using a custodial app rather than depositing directly. No deposit guarantee scheme covers a stablecoin balance, since that framework applies to bank deposits (European Banking Authority). Provider disclosures on how customer assets are held replace the statutory protection that does not exist here.
What happened when USDC lost its peg?
The clearest illustration of depeg risk happened in March 2023. Circle confirmed that $3.3 billion of the reserves backing USDC, roughly 8% of the total, remained stuck at Silicon Valley Bank after regulators shut the bank down (Chainalysis, 2023).
The market reacted within hours. USDC fell to $0.87 by the early morning of 11 March, recovered partially, and stayed below its $1 target across the weekend (Chainalysis, 2023). Anyone who needed to exit during that window took a real loss on what was supposed to be a stable asset, and positions across the wider market were liquidated as a result.
Two lessons carry forward. A stablecoin’s peg depends on the reserves behind it and on the traditional banking system holding those reserves, which is the link most people forget when treating a stablecoin as equivalent to cash. And the risk materialised over a weekend, when redemption channels were slowest, which is when a depeg is hardest to escape.
The peg did recover, and USDC has operated normally since. The episode is useful precisely because it shows the risk is survivable rather than catastrophic, provided the position was sized to withstand it.
How should you size a stablecoin position?
Sizing follows from the risks rather than from the rate. Money that must be intact on a specific date belongs somewhere with deposit protection, and a yield-bearing stablecoin position is not that place.
Three questions settle most cases. How long can the money stay untouched, since two conversions at 0.4% to 0.6% consume several months of yield at current base rates (Brighty, Fees and Limits, 2026)? What would a temporary 10% drop in value mean, using the March 2023 episode as the reference rather than a hypothetical? And would a total loss of the position change anything important?
The break-even arithmetic is worth running before depositing. At a 3.3% rate, roughly two months of yield covers a single 0.5% conversion, so a round trip into and out of a stablecoin needs about four months just to reach neutral. Positions held for weeks rarely justify the round trip, whatever the advertised rate suggests.
A reasonable default for most people: keep a working balance in the currency you actually spend, and treat a yield position as something separate with a horizon measured in months.
How Brighty handles stablecoin earning
Brighty offers Earning Vaults for stablecoin balances, generating yield through Aave (Brighty, Best Crypto Wallet Apps 2026). Published yield is quoted at up to 10% APY with no locked funds and free deposits and withdrawals (Brighty, Homepage, 2026).
Applying the framing above, that 10% figure is a ceiling and the rate earned tracks conditions in the underlying protocol. The live number is the one to check before depositing.
The absence of a lock-up matters more than it sounds in a variable-rate environment. It means the decision to exit can be made when the rate stops justifying the position, rather than on a schedule set by the product. Fixed-term products elsewhere trade that flexibility for a higher quoted rate.
Two costs shape the real return for a European user. Moving euros into a stablecoin and back means two conversions at 0.4% to 0.6% each by plan tier, above free monthly allowances of €0 on One, €2,000 on Plus and €5,000 on Pro (Brighty, Fees and Limits, 2026). And the balance is held custodially, so the platform risk in the table above applies alongside the protocol risk.
FAQ
Is stablecoin yield safer than a savings account?
No. EU bank deposits carry a €100,000 guarantee per depositor per bank (European Banking Authority), while a stablecoin position carries depeg and protocol risk with no equivalent statutory cover, plus platform risk on a custodial app. The higher rate is compensation for that difference.
Can a stablecoin actually lose its peg?
Yes. USDC traded as low as $0.87 in March 2023 after $3.3 billion of its reserves were stuck at a failed bank (Chainalysis, 2023). The peg recovered, but anyone forced to exit during the episode realised a loss.
Why is my actual rate so much lower than advertised?
Because advertised rates are ceilings drawn from peak conditions while the credited rate tracks live borrowing demand. Checking the protocol’s current supply APY before depositing gives a realistic expectation.
How much would €5,000 earn?
At the current 3.28% Aave rate, roughly €164 over a year (DefiLlama). At a 10% ceiling the same balance would earn €500, which shows how much the choice of figure changes the picture.
Do I pay tax on stablecoin yield?
Generally yes, treated as income or capital gains depending on the jurisdiction. The obligation exists whether or not the platform reports it, so exporting a transaction history at year end is worth the effort.
Is there a minimum sensible holding period?
Around four months at current base rates, since two conversions at roughly 0.5% each need that long to break even before any yield accrues. Shorter horizons rarely justify the round trip.
Download Brighty to hold stablecoins in an Earning Vault with no locked funds, and check the live rate before committing anything.