In a higher-for-longer rate environment, the biggest winners for crypto may be the on-chain infrastructure that brings Treasury yields onto the blockchain, rather than the top-yielding assets themselves.

Tether and USDC are posting meaningful earnings from their operations and reserves: Tether reports about $1.5 billion in net operating profit with roughly 184.6 billion USDT outstanding, while USDC shows around $701 million in revenue and reserve income as its circulation tops 73.3 billion.

The tokenization of Treasuries is expanding fast, with on-chain Treasury markets swelling from about $300 million in 2023 to roughly $15 billion by August this year, signaling a shift toward yield-bearing on-chain instruments.

Stablecoins like USDT and USDC are benefiting from higher yields as their reserves move into short-term government securities and other income-generating assets, boosting net operating profits.

The crypto landscape is shifting: higher rates tend to favor yield-generating on-chain products and the economics of stablecoins, even as Bitcoin and other risk-sensitive tokens may lag in a rising-rate environment.

Investors can now access both yield and crypto exposure through on-chain products such as tokenised Treasuries and yield-backed stablecoins, reshaping traditional liquidity dynamics in the space.

While higher rates may not lift crypto asset prices across the board and could tighten financial conditions, they are not wholly negative for the sector because infrastructure and on-chain yield mechanisms can still benefit.