Decentralized finance (DeFi) lending protocol Spark has switched some of its Treasury reserves from U.S. Treasuries to crypto-native yield strategies, signaling a new approach to on-chain yield generation as Treasury profits continue to compress.
On Thursday, Spark announced that it had allocated $100 million of its stablecoin reserves to the Superstate Crypto Carry Fund (USCC). USCC is a regulated basis trading fund that generates yield from the price difference between the spot and futures markets of major digital assets. The fund allows DeFi protocols to derive market-neutral yields from the same derivatives markets that hedge funds have traditionally used.
USCC has approximately $528 million in assets under management and currently has a 30-day yield of 9.26%, according to Superstate’s website.
Superstate CEO Robert Leshner said the fund allows Spark to “maintain exposure to yield opportunities that are uncorrelated to the Federal Reserve’s interest rate policy.” Such diversification could be timely as Fed officials face increasing challenges balancing inflation control with economic growth.
The 10-year Treasury yield recently fell below 4%, although the Fed has struggled to anchor the long end of the yield curve, due in part to mounting U.S. fiscal pressures. Spark noted that the Fed’s rate cut cycle could put pressure on stablecoin issuers and DeFi protocols that are heavily exposed to short-term government bonds, forcing them to seek alternative, uncorrelated revenue streams.
Tether remains the largest crypto-native holder of U.S. Treasury securities, with exposure exceeding $100 billion. USDC issuer Circle ranks a distant second. The two largest stablecoin companies collectively held more than $132 billion in U.S. government debt as of September.
According to TD Economics, “Currently, this is about 2% of the size of the Treasury bill market, but this share is likely to increase further as stablecoin supply expands vigorously.”
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On-chain yield evolves beyond passive income
On-chain yield has long been considered one of the most attractive use cases for DeFi. Over time, the mechanisms for generating yield have become increasingly sophisticated, expanding from simple lending and staking to complex market-neutral and restaking strategies.
According to research from Galaxy Digital, on-chain yield is no longer just about earning interest, but about choosing strategies that balance liquidity, complexity, and risk in pursuit of higher returns.
While Spark and Superstate highlight the importance of diversifying away from U.S. Treasuries, Galaxy notes that U.S. Treasury yields still serve as the benchmark for most on-chain yield strategies, effectively setting a “risk-free floor” for stablecoin and DeFi returns.
As these yields decline, protocols are increasingly turning to crypto-native yield sources such as basis trading, validator rewards, and risk-staking mechanisms. Such strategies are still correlated with traditional interest rate policy.
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