Interpreting "RWA's First Stock" Figure Issuance of YLDS: How Do Yield-Bearning Tokens Break Through Compliance?

Original Author: Zhang Qianwen

Introduction

On October 14, 2025, Figure Technology Solutions (Nasdaq: FIGR) announced that its registered interest-bearing security token, YLDS, under Figure Certificate Company (FCC), was originally deployed on the Sui public chain. This marks YLDS’s first move out of its original chain (Provenance) onto another mainstream Layer-1 public chain, achieving an important breakthrough in “cross-chain compliance.”

Against the backdrop of tightening regulation in the US crypto market and frequent “troubles” with yield products, Figure chose an almost opposite approach: proactively acknowledging the security attributes and implementing compliant frameworks for yield distribution. This not only makes YLDS one of the first assets on a compliant yield-bearing chain registered with the SEC but also provides a replicable legal compliance model for compliant yield in the Web3 world.

Deconstructing YLDS: From USD deposits to on-chain yield—full process

YLDS is essentially a blockchain-based yield security token, with its core mechanism being the digital mapping of real-world fixed-income assets (such as short-term notes or government bonds) and issuing them as compliant securities on the public chain.

Its operation process is as follows:

• Subscription: Investors subscribe to YLDS with USD, funds are transferred into an independent escrow account
• Asset Investment: The escrow invests in underlying assets that generate stable returns
• On-chain Issuance: Figure mints corresponding YLDS tokens on the Sui public chain, serving as beneficiaries’ proof of interest in the asset pool
• Return Distribution: After the underlying assets accrue interest, Figure distributes the interest proportionally to investors
• Principal Redemption: Upon maturity or under specific conditions, investors can redeem their principal

This model creates a closed loop of “USD deposit—asset investment—on-chain proof—return distribution—principal redemption,” balancing traditional financial compliance with on-chain transparency and verifiability, building a “RWA on-chain + securities law compliance” dual-layer yield vehicle.

Legal Attributes: Stable face value YLDS ≠ Stablecoin

Although YLDS appears similar to a “yield-bearing stablecoin” in user experience, their legal attributes and regulatory logic are fundamentally different:

While global regulations on stablecoins are still evolving, positioning stablecoins as “payment and store of value tools,” regulated within payment systems (not capital markets), and prohibiting “interest or yield payments to holders,” is a consensus and trend across major jurisdictions. In contrast, YLDS is based on traditional securities registration and disclosure, leveraging public chains to enable 24/7 transferability and programmable yield distribution. Legally, YLDS is an investment product, with its yield structure and legal relationships being entirely different from stablecoins:

Therefore, stable face value YLDS ≠ Stablecoin. Although both have similar nominal values anchored at “$1,” stablecoins focus on maintaining short-term purchasing power and payment stability (“price stability”), while YLDS aims to provide “yield stability” supported by real assets and long-term risk controllability. This represents a new compliance paradigm: achieving stable returns under securities law rather than pursuing price stability under payment law.

Compliance logic of YLDS yield mechanism

In the context of US crypto market regulation, yield-bearing crypto products have always been high-risk enforcement areas. The SEC has taken enforcement actions against products like BlockFi, Celsius, and Gemini Earn, mainly citing unregistered securities issuance. According to US securities law and payment regulation logic: if a token pays yield or interest to holders, it is easily regarded as an investment contract; stablecoins and payment tokens with yields may lose their “payment tool” status and fall under securities regulation.

In this environment, Figure’s approach is to “acknowledge the security attributes → avoid investment contract risks → fall into debt securities → register for compliant issuance,” to build a regulated yield security structure without abandoning on-chain innovation.

1. Starting point: Proactively acknowledging security attributes

Unlike other passive Web3 yield products that face regulation, Figure’s strategy is to actively recognize YLDS as a security and voluntarily incorporate it into the SEC exemption framework. This proactive recognition is a form of self-securitization: by choosing a registration path, directly integrating YLDS into the legitimate securities issuance system, and entering the regulatory framework, it resolves disputes over “whether it constitutes a security,” gaining compliance space.

2. Core mechanism: “Degrading design” from Howey to Reves

The core innovation in Figure’s legal structure is its degradation compliance strategy: that is, optimizing the structure so that YLDS’s risk profile resembles traditional bonds and aligns with the “debt instrument” characteristics under the Reves Test, rather than an equity investment contract.

In YLDS’s structure, returns are defined as debt interest, which is a debt payment under contractual obligations, not investment profit (profit), which would be investment dividends under management returns. Its yield comes from interest on real assets, not platform reinvestment returns. This design cleverly avoids the “profit expectation” and “efforts of others” elements in the Howey test, legalizing the yield mechanism.

3. Issuance path: Differentiating between registered securities and cross-border private placements

According to public information, YLDS is represented by FCC-issued Figure Certificates, which are debt-like face-amount certificates with debt attributes (interest-bearing debt securities). FCC has submitted a Form S-1 registration statement to the SEC in 2025, explicitly stating in the prospectus:

Figure Certificates are interest-bearing debt securities, issued by Figure Certificate Company, a face-amount certificate company registered under the Investment Company Act of 1940.—— [SEC Filing, Figure Certificate Company, 2025]

This arrangement means: YLDS’s rights are not issued via private placement exemption but are incorporated into the SEC’s formal regulation as registered debt securities. This not only affirms YLDS’s legal legitimacy but also provides a solid securities law foundation for subsequent on-chain deployment (such as on the Sui chain).

Furthermore, FCC indicates in SEC filings that some Figure Certificates (like Transferable Certificates) may be traded on registered alternative trading systems (ATS) in the future, enabling compliant secondary transfers among holders. This arrangement breaks the traditional “registered but non-transferable” liquidity barrier and offers an important compliance point for the lifecycle of on-chain securitized assets—from issuance, holding, yield distribution, to compliant transfer—entirely within regulatory oversight.

Of course, in actual crypto market operations, a common approach remains the combined use of Regulation D and Regulation S exemptions, allowing flexible private placements, with on-chain lockups, compliance audits, and trading platform support, to achieve a balance of “on-chain compliance + cross-border coverage.”

Figure’s compliance path can be viewed as an advanced version of this traditional dual-exemption framework: through registration or registered bond mechanisms, it enters the regulatory system with clearer boundaries. Meanwhile, the widely used Reg D + Reg S combination continues to serve as a flexible private placement route for global on-chain asset issuance.

YLDS’s approach, intersecting with mainstream structures, demonstrates the diversity and future potential of on-chain compliance: it can be “registered as legitimate” or “exempted as an alternative,” depending on the precise legal structure and issuance timing.

Conclusion: From gray-area yield to regulated yield as a model

Figure’s compliance approach is not about evading regulation but about embedded restructuring through legal design: proactively acknowledging the security attributes, transforming yield from investment profit into debt interest, and achieving a safe transition from “potentially non-compliant investment contract” to “regulated debt security” via compliant issuance.

This path shows how to balance on-chain transparency with off-chain legal compliance, how to realize yield, trust, and regulation simultaneously, providing a replicable model for crypto financial products moving from “gray-area yields” to “regulated yields,” and offering important compliance references for RWA projects.