Welcome to USD1rewards.com

What “rewards” means for USD1 stablecoins

On this site, “rewards” refers to any form of compensation, rebate, or benefit that someone might receive for holding, using, paying with, or providing liquidity with USD1 stablecoins. “USD1 stablecoins” means any digital token that is designed to be redeemable one for one for U.S. dollars, regardless of issuer. That definition is descriptive, not a brand. Rewards can be paid in USD1 stablecoins, in other digital assets, or in traditional currency via bank transfer.

Before going further, a few plain-English definitions, noted the first time they appear:

• Stablecoin (a digital token pegged to a reference asset such as the U.S. dollar).
• On-chain (activities that happen directly on a public blockchain).
• Liquidity pool (a smart contract, which is software running on a blockchain, that holds tokens so users can trade against the pool rather than against a specific counterparty).
• Smart contract (self-executing program on a blockchain).
• KYC or Know Your Customer (identity checks that regulated platforms must perform to comply with anti-money-laundering rules).
• AML or Anti-Money-Laundering (laws and controls designed to stop illicit finance).
• APR (annual percentage rate, a yearly rate that does not include compounding) and APY (annual percentage yield, which includes compounding; in plain terms, the effect of earning interest on prior interest) ^[11][12].
• Proof of reserves (attestations by an independent accountant about reserve assets backing a token).
• Depeg (when a stablecoin trades away from its intended one-to-one value).
• Rehypothecation (when a custodian or lender reuses assets posted by customers, typically to generate yield).
• Counterparty risk (the risk that an institution in the middle of a transaction cannot meet its obligations).

Rewards connected to USD1 stablecoins typically come from one of four places:

1. A payments program that offers cash back for spending.
2. A centralized platform that shares earnings it creates by lending your assets out or by investing customer balances.
3. A decentralized finance program that pays fees or incentive tokens when you supply liquidity or lend on-chain.
4. A merchant or platform-specific promotion, such as a one-time rebate for trying USD1 stablecoins checkout.

Critically, rewards are never “free money.” Someone pays for them. The funding source is the single most important thing to understand, because it shapes risk.

How rewards are funded in practice

1) Net interest on customer balances

Some centralized platforms use customer balances to earn interest, for example by placing funds in short-term government securities or bank deposits, then sharing part of that income back as a reward. In the United States, you must remember that deposit insurance protects money placed in insured bank accounts up to applicable limits, not digital tokens held at a nonbank platform. Unless specific pass-through conditions are met at an insured bank, rewards accounts that hold USD1 stablecoins at an exchange or wallet app are generally not covered by the Federal Deposit Insurance Corporation for platform failure ^[7][10].

In the European Union, there is an important difference: the Markets in Crypto-Assets Regulation (MiCA) places e-money tokens (EMTs) and asset-referenced tokens (ARTs) into specific regimes. MiCA prohibits issuers and crypto-asset service providers from granting interest on EMTs in relation to the mere holding of the token. In plain English: an issuer in the EU is not allowed to pay you interest just for holding an EMT ^[4][16]. Rewards programs in the EU therefore tend to center on fee waivers, discounts, or merchant-funded cash back rather than “interest for holding.”

2) Trading and network fees

On decentralized exchanges, liquidity providers earn a share of trading fees. If you deposit USD1 stablecoins and another token into a liquidity pool, you receive a portion of each trade’s fee. Some protocols also add incentive tokens to attract liquidity. Fee income can be consistent when a pool is actively traded, but it can be offset by “impermanent loss” (your pooled tokens end up with a different mix than you deposited because prices moved). Incentive tokens can vary in value widely and may have lockups.

3) Merchant-funded promotions

Merchants may offer cash back when you pay with USD1 stablecoins, often because settlement costs can be lower than card networks and chargeback risk is reduced. The merchant passes a slice of those savings back to the customer. Good programs are transparent about who funds the reward and when it is credited.

4) Platform-funded promos

Some platforms run limited-time campaigns to acquire users. These promos are marketing spend. When the campaign ends, the reward ends. Always distinguish between ongoing yield and a one-off promotion.

Common reward types you may encounter

Cash back on purchases

You might see “2 percent back when you pay with USD1 stablecoins.” If a payment provider settles a merchant transaction in USD1 stablecoins and pays the same day, the merchant may accept a modest cash back incentive in lieu of higher card fees. Watch for:

• Eligibility: specific merchants, categories, or minimum purchase amounts.
• Payout unit: rewards credited in USD1 stablecoins versus U.S. dollars.
• Reversals: what happens if a purchase is refunded.
• Caps: monthly limits or expiration.

Earn-style accounts at centralized platforms

Some platforms pool customer tokens, invest or lend them, and share a portion of the earnings. Key questions:

• Is the program offered by a licensed entity in your country and under which regime?
• Are the assets segregated and bankruptcy-remote?
• Can the platform or its partners rehypothecate your assets?
• Are there lockups, withdrawal gates, or notice periods during stress?

The FDIC has warned consumers that deposit insurance does not protect funds at nonbank crypto platforms. If a platform fails, customers may need to file claims in bankruptcy court and might recover only a portion of assets, if any ^[7][19]. In New York, the Department of Financial Services has issued guidance for U.S. dollar-backed stablecoins covering redeemability, reserves, and attestations; programs supervised under that regime have clearer baseline requirements for issuers but do not transform a nonbank rewards account into an insured deposit ^[1][5].

On-chain lending and liquidity

In decentralized lending, supplying USD1 stablecoins to a protocol earns interest from borrowers. In liquidity pools, you earn trading fees and sometimes incentive tokens. Look for:

• Whether the protocol has been audited and whether audits are public.
• Governance and upgrade controls for the smart contracts.
• Oracle design (how price data enters the system).
• The risk of stablecoin depeg, which can create losses even in a “stable” pool.

Fee waivers and discounts

Some programs waive network fees or provide discounts on transfers or conversions if you hold a certain balance of USD1 stablecoins or use USD1 stablecoins for settlement. These are not yield; they reduce costs.

Account-level interest (jurisdiction dependent)

Outside of the EU EMT context, some jurisdictions allow interest-like features if the provider is licensed appropriately and meets disclosure rules. In the United Kingdom, for example, all marketing of cryptoassets to retail consumers must comply with the financial promotions regime and its “fair, clear, and not misleading” standard, with specific requirements for risk warnings and client categorization ^[8][14]. That does not bless any particular yield; it sets the rules of the road for how the offer is communicated.

Risk map: what can go wrong

1) Counterparty and insolvency risk
If a centralized provider uses your USD1 stablecoins to earn yield and fails, you are an unsecured creditor unless there is a specific, legally enforceable segregation regime. Deposit insurance protects deposits at insured banks, not tokens at nonbank platforms ^[7][10]. Past crypto bankruptcies show that recoveries can be partial and slow ^[19].

2) Smart contract risk
Bugs, malicious governance changes, or oracle failures can drain pools or misprice collateral. Public audits help but do not guarantee safety.

3) Depeg risk
A pegged token can trade away from one dollar during stress. If a pool contains USD1 stablecoins plus another asset and the stablecoin depegs, liquidity providers can be left with a less valuable mix.

4) Liquidity mismatch
Programs that promise fast withdrawals but invest in assets that settle slowly can face runs. Notice periods and gates are warning signs of hidden maturity transformation.

5) Legal and regulatory risk
Rules differ by country and are evolving. In the EU, EMT issuers and crypto-asset service providers face specific obligations under MiCA, including reserve, governance, and disclosure rules, and a prohibition on paying interest for the mere holding of EMTs ^[4][16]. Globally, the Financial Stability Board has issued recommendations for regulating stablecoin arrangements, encouraging consistent oversight and cross-border cooperation ^[3][9][13].

6) Fraud and scam risk
“Too-good-to-be-true” yields are a hallmark of scams. Chainalysis reports show persistent illicit activity in crypto, with evolving scam tactics, including “pig-butchering” romance schemes and fake investment platforms ^[20][21][22]. Always verify the legal entity, licenses, and custody model.

Choosing a platform or program: a due diligence checklist

Use the following questions to assess any rewards program tied to USD1 stablecoins. The point is not to eliminate all risk, but to understand what you are taking.

A. Governance and licensing

• Which legal entity operates the program? Where is it incorporated, and who supervises it?
• Does it hold the relevant license in your jurisdiction (for example, a crypto-asset service provider authorization in the EU under MiCA, an electronic money license if applicable, a money transmission license in certain U.S. states, or other local permissions)?
• If the program targets UK consumers, does the firm comply with the crypto financial promotions regime and risk warnings ^[8]?

B. Reserve transparency and redemption

• If the program involves an issuer of USD1 stablecoins, is there public, independent monthly attestation of reserves and clear same-day or next-business-day redemption terms? The NYDFS framework highlights redeemability, reserve quality, and independent attestations for dollar-backed tokens issued under its supervision ^[1].
• Are redemption fees or conditions clearly disclosed?

C. Asset segregation and bankruptcy treatment

• Are customer assets held in segregated accounts? Is there a trust or custodial structure that is legally bankruptcy-remote for customers?
• Is there any rehypothecation? If yes, what are the limits?

D. Risk management and disclosures

• Is there a clear explanation of how rewards are generated? If compounding is advertised, is the difference between APR and APY explained in plain language and with examples ^[11][12]?
• For EU programs offering EMTs, are you being offered “interest” simply for holding? If so, that would conflict with MiCA Article 50’s prohibition ^[16]. Be wary of euphemisms that are functionally equivalent to interest.

E. Technology safeguards

• For on-chain programs, review audits, bug bounty programs, admin key controls, and oracle design.
• For centralized platforms, check security certifications, incident history, withdrawal track record, and transparency reports.

F. Compliance posture

• Does the provider screen for sanctions compliance and follow global AML guidance (including FATF’s expectations and, for U.S.-facing services, OFAC guidelines for the virtual currency sector) ^[12][10]?

Account security essentials

Rewards are meaningless if an attacker drains your wallet. At a minimum:

• Enable multi-factor authentication (MFA) on every account that touches USD1 stablecoins. App-based or hardware security keys are preferable to SMS ^{[15][17][24][25]}.
• Use strong, unique passwords and a reputable password manager. NIST’s guidelines explain authenticator assurance levels and best practices for authentication ^[24].
• Beware social engineering. Scammers often impersonate support agents or romantic interests, then push you to “try a high-yield platform” and send USD1 stablecoins to a new address. Pressure and secrecy are red flags ^[20].
• Bookmark official sites and never use links from unsolicited messages to access financial accounts.

Tax and reporting basics

In many countries, rewards received in crypto are taxable income when you have control over the funds. In the United States, the Internal Revenue Service has clarified that staking rewards are gross income when received, measured at fair market value at that time. While staking is not the same as every reward type, the principle that digital asset rewards can be taxable income generally applies; always consult a qualified tax adviser for your situation ^[6][2][7].

• If you receive cash back credited in USD1 stablecoins, record the amount and the date received so you can determine tax treatment later.
• If your platform provides annual statements, compare them with your own records.
• Keep records of redemptions, transfers, and conversions (for example, selling USD1 stablecoins for U.S. dollars), because those can trigger reporting obligations even if there is little or no gain.

Global rules snapshot: United States, European Union, United Kingdom, Singapore, Hong Kong

United States
There is no single federal statute that exclusively governs stablecoins, but multiple regulators touch the space. The FDIC reminds consumers that deposit insurance applies to deposits at insured banks, not to digital asset products at nonbank firms ^[7][10]. OFAC expects crypto businesses to implement sanctions screening and internal controls tailored to virtual currency use cases ^[10]. The Internal Revenue Service treats income from digital assets as taxable in many circumstances, and maintains an updated “Digital assets” resource for filers ^[6].

At the state level, the New York Department of Financial Services has issued guidance for U.S. dollar-backed stablecoins that it supervises, defining expectations on redeemability, reserves, and independent attestations. If a rewards program involves an issuer supervised by NYDFS, review that issuer’s disclosures and attestation reports to understand how reserves are managed and how redemption works ^[1][5].

European Union (MiCA)
From mid-2024, MiCA rules for ARTs and EMTs have applied in the EU, and additional rules for other crypto-assets and crypto-asset service providers took effect in late 2024. MiCA imposes reserve, governance, disclosure, and redemption obligations, and prohibits interest payments to EMT holders for the mere holding of the token. It also mandates that service providers meet stringent promotion and conduct standards and that issuers publish detailed white papers. Supervisory technical standards and guidance continue to roll out through the European Banking Authority and European Securities and Markets Authority ^{[4][6][17][23][26]}. The BIS and the Financial Stability Board have stressed that consistent, cross-border oversight is essential, especially for arrangements that could become global in scale ^[3][9][13].

United Kingdom
All firms marketing cryptoassets to UK consumers must comply with the financial promotions regime. Among other things, it requires clear risk warnings, bans misleading incentives, and restricts direct offer promotions unless a firm is authorized or an authorized firm approves the content. If a program advertises returns on USD1 stablecoins to UK retail audiences, those communications must meet the regime’s standards ^[8][14][31].

Singapore
The Monetary Authority of Singapore has finalized a regulatory framework for single-currency stablecoins pegged to the Singapore dollar or G10 currencies. It focuses on high reserve quality, disclosure, and redemption within short timeframes. Any rewards program offered in Singapore must operate within that framework and other applicable requirements of the Payment Services Act ^[18][28][30].

Hong Kong
In 2025, Hong Kong passed legislation establishing a licensing regime for fiat-referenced stablecoin issuers, with detailed AML and prudential expectations and implementation via guidelines from the Hong Kong Monetary Authority. If a program markets to Hong Kong users, check whether the operator is licensed or within a transitional window, and what the redemption and reserve rules are under the new ordinance ^{[32][33][27][29]}.

Business use cases for offering rewards

Merchants, marketplaces, and fintechs use USD1 stablecoins rewards to influence behavior. Three common patterns:

1) Accept USD1 stablecoins and offer cash back
A merchant that pays high card fees might prefer settlement in USD1 stablecoins, then share a portion of those savings with the customer as cash back. Design tips:

• Keep it simple: one headline rate with a clear monthly cap.
• Make settlement and refund rules explicit.
• Provide an easy-to-read receipt showing the reward credit.

2) Treasury incentives for on-chain settlement
Platforms that pay suppliers or creators can offer a small rebate for choosing USD1 stablecoins payouts. This can reduce payout friction across borders. Ensure that contractual terms clarify who bears any conversion costs when a recipient later sells USD1 stablecoins for local currency.

3) Loyalty tiers
Some businesses create tiers based on USD1 stablecoins usage: for example, higher withdrawal limits, faster support, or fee discounts. Avoid promising yield where regulations prohibit it. In the EU EMT context, base benefits on usage or service levels, not on the duration of holding the token to stay clear of MiCA’s interest prohibition ^[16].

Short FAQ

Is there such a thing as “risk-free” rewards?
No. Rewards depend on funding sources that carry risks: counterparty, market, liquidity, technology, or legal. The best programs explain those sources clearly.

Are rewards guaranteed to continue?
No. Payment-funded cash back is constrained by merchant economics. On-chain rewards depend on trading volumes or borrowing demand. Centralized programs can change rates or pause withdrawals during stress.

Can a program in the EU pay interest on EMTs?
No. MiCA Article 50 prohibits issuers and crypto-asset service providers from granting interest in relation to the holding of EMTs ^[16].

Do deposit insurance rules protect my rewards account?
Not if the account is a nonbank crypto platform product. FDIC insurance protects deposits at insured banks up to legal limits, not tokens held at a nonbank. Marketing that implies otherwise is misleading ^[7][10].

How do APR and APY apply to crypto rewards?
APR is a simple annual rate with no compounding. APY includes compounding and will be higher than APR if interest is reinvested. If a program quotes APY, ask how often rewards compound and whether reinvestment is automatic ^[11][12].

What compliance signals should I look for?
Clear disclosures, audited financial statements where relevant, sanctions and AML controls aligned with FATF and OFAC guidance, and licensing appropriate to the jurisdiction are good signs ^[12][10].

Sources

1. New York State Department of Financial Services, “Guidance on the Issuance of U.S. Dollar-Backed Stablecoins” (June 8, 2022). https://www.dfs.ny.gov/industry_guidance/industry_letters/il20220608_issuance_stablecoins ^[1]
2. Internal Revenue Service, Revenue Ruling 2023-14 (staking rewards income). PDF. https://www.irs.gov/pub/irs-drop/rr-23-14.pdf ^[2]
3. Financial Stability Board, “High-level recommendations for the regulation, supervision and oversight of global stablecoin arrangements” (July 17, 2023). https://www.fsb.org/2023/07/high-level-recommendations-for-the-regulation-supervision-and-oversight-of-global-stablecoin-arrangements-final-report/ ^[3]
4. European Banking Authority, “Asset-referenced and e-money tokens (MiCA)” and related RTS. https://www.eba.europa.eu/regulation-and-policy/asset-referenced-and-e-money-tokens-mica ^[4]
5. NYDFS, “General Framework for Greenlisted Coins” noting applicability of stablecoin guidance (Sept. 18, 2023). https://www.dfs.ny.gov/industry_guidance/industry_letters/il20230918_gen_framework_greenlisted_coins ^[5]
6. IRS, “Digital assets” landing page (updated 2025). https://www.irs.gov/filing/digital-assets ^[6]
7. FDIC, “What the Public Needs to Know About FDIC Deposit Insurance and Crypto Companies” (July 28, 2022). https://www.fdic.gov/news/fact-sheets/crypto-fact-sheet-7-28-22.html ^[7]
8. UK Financial Conduct Authority, Policy Statement PS23/6, “Financial promotion rules for cryptoassets” (June 2, 2023). PDF. https://www.fca.org.uk/publication/policy/ps23-6.pdf ^[8]
9. FSB, PDF of high-level recommendations (July 17, 2023). https://www.fsb.org/uploads/P170723-3.pdf ^[9]
10. U.S. Treasury OFAC, “Sanctions Compliance Guidance for the Virtual Currency Industry” (Oct. 2021). PDF. https://ofac.treasury.gov/media/913571/download?inline= ^[10]
11. Consumer Financial Protection Bureau, “What is the difference between a loan interest rate and the APR?” (Jan. 30, 2024). https://www.consumerfinance.gov/ask-cfpb/what-is-the-difference-between-a-loan-interest-rate-and-the-apr-en-733/ ^[11]
12. U.S. SEC Investor.gov, “What is compound interest?” and calculator resources. https://www.investor.gov/additional-resources/information/youth/teachers-classroom-resources/what-compound-interest ^[12]
13. BIS Financial Stability Institute summary on global stablecoin recommendations (Feb. 29, 2024). https://www.bis.org/fsi/fsisummaries//global_stablecoins.htm ^[13]
14. FCA, “Cryptoasset firms marketing to UK consumers” (last updated Nov. 15, 2023). https://www.fca.org.uk/firms/cryptoassets/marketing-uk-consumers ^[14]
15. CISA, “Turn On MFA” resource hub. https://www.cisa.gov/secure-our-world/turn-mfa ^[15]
16. BaFin (Germany), summary of MiCA Article 50 interest prohibition for EMTs. https://www.bafin.de/webcode?id=19627440 ^[16]
17. ESMA, “Markets in Crypto-Assets Regulation (MiCA)” overview and technical standards process. https://www.esma.europa.eu/esmas-activities/digital-finance-and-innovation/markets-crypto-assets-regulation-mica ^[17]
18. Monetary Authority of Singapore, “MAS Finalises Stablecoin Regulatory Framework” (Aug. 15, 2023). https://www.mas.gov.sg/news/media-releases/2023/mas-finalises-stablecoin-regulatory-framework ^[18]
19. Investopedia, “What Happens When A Crypto Exchange Goes Bankrupt?” backgrounder on consumer risk. https://www.investopedia.com/crypto-bankruptcy-affecting-investors-6274367 ^[19]
20. Reuters, “Crypto scams likely set new record in 2024 helped by AI, Chainalysis says” (Feb. 14, 2025). https://www.reuters.com/technology/crypto-scams-likely-set-new-record-2024-helped-by-ai-chainalysis-says-2025-02-14/ ^[20]
21. Financial Times coverage of 2025 Chainalysis insights on cryptocrime. https://www.ft.com/content/f40b7ac7-bb50-4712-aa7f-5219c2b18789 ^[21]
22. Chainalysis, 2024 Crypto Crime Report overview. https://www.chainalysis.com/blog/2024-crypto-crime-report-introduction/ ^[22]
23. EUR-Lex, summary of Regulation (EU) 2023/1114 (MiCA). https://eur-lex.europa.eu/EN/legal-content/summary/european-crypto-assets-regulation-mica.html ^[23]
24. NIST, Special Publication 800-63B: Digital Identity Guidelines — Authentication and Lifecycle Management. https://nvlpubs.nist.gov/nistpubs/specialpublications/nist.sp.800-63b.pdf ^[24]
25. CISA, “Implementing Phishing-Resistant MFA” fact sheet. PDF. https://www.cisa.gov/sites/default/files/publications/fact-sheet-implementing-phishing-resistant-mfa-508c.pdf ^[25]
26. ESMA Final Report on certain MiCA technical standards (July 2024). PDF. https://www.esma.europa.eu/sites/default/files/2024-07/ESMA75-453128700-1229_Final_Report_MiCA_CP2.pdf ^[26]
27. Reuters, “Hong Kong passes stablecoin bill, one step closer to issuance” (May 21, 2025). https://www.reuters.com/world/asia-pacific/hong-kong-passes-stablecoin-bill-one-step-closer-issuance-2025-05-21/ ^[27]
28. MAS News hub index for Crypto Tokens and Payments. https://www.mas.gov.sg/news?focus_areas=Anti-Money+Laundering&focus_areas=Crypto+Tokens&sectors=Payments ^[28]
29. HKMA press release, “Implementation of regulatory regime for stablecoin issuers” (July 29, 2025). https://www.hkma.gov.hk/eng/news-and-media/press-releases/2025/07/20250729-4/ ^[29]
30. MSI Global Alliance summary, “Singapore finalises its new regulatory framework for stablecoin” (June 3, 2024). https://www.msiglobal.org/resource/singapore-finalises-its-new-regulatory-framework-for-stablecoin.html ^[30]
31. Hogan Lovells client note, “FCA finalises guidance for cryptoasset financial promotions” (Nov. 6, 2023). https://www.hoganlovells.com/en/publications/uk-cryptoassets-fca-finalises-guidance-for-cryptoasset-financial-promotions ^[31]