Are Yield-Bearing Stablecoins Halal? sUSDe, USDY and the Interest Trap

A dollar token that pays you 5% while sitting in your wallet sounds like the friendliest product in crypto. No price chart to watch, no leverage, no impermanent loss. Just a stable balance that ticks up. That framing is exactly why yield-bearing stablecoins deserve a slower look from anyone screening for Shariah compliance, because the two biggest categories on the market generate that tick-up in completely different ways, and only one of them is genuinely up for debate.

The two names most people run into are sUSDe from Ethena and USDY from Ondo Finance. They look similar in a portfolio tracker. Under the hood they have almost nothing in common.

How sUSDe Actually Produces Yield

Ethena issues USDe, a synthetic dollar whose peg rests on a delta-neutral basis trade rather than on a bank account full of dollars.

Here is the shape of it. Ethena takes in collateral (liquid staked ETH such as stETH, spot BTC, and a working balance of USDT and USDC), then opens an offsetting short position of roughly equal notional in perpetual futures on centralized venues. If ETH drops 20%, the spot leg loses and the short leg gains. Net dollar exposure stays near zero, which is what keeps USDe near a dollar without a fiat reserve behind it.

USDe itself pays nothing. You have to stake it into sUSDe, an ERC-4626 vault token, to receive the protocol's earnings. Those earnings come from three streams:

• Perpetual funding payments. Perps have no expiry, so exchanges use a funding rate every eight hours to drag the perp price toward spot. In a bullish market the perp trades above spot and longs pay shorts. Ethena's book sits permanently on the short side, so it collects that flow. This is the headline engine, and it is why sUSDe printed double-digit APYs during hot markets and single digits during flat ones.
• Staking rewards on the stETH and similar collateral.
• Whatever the USDT and USDC portion of reserves earns, which is ultimately short-term Treasury and money-market income sitting inside Tether's and Circle's reserve books.

USDe supply crossed the $11 billion mark in late 2025, which made it one of the largest dollar tokens in existence, then contracted hard during the 2026 deleveraging when looping trades on lending markets unwound. Size is not a compliance argument, but it tells you how many Muslim investors are likely holding this without having read the mechanism.

How USDY Actually Produces Yield

Ondo's USDY is far simpler and, for screening purposes, far more decisive.

Each USDY is a senior unsecured claim on a portfolio held by Ondo USDY LLC, a bankruptcy-remote Delaware entity. The portfolio is short-duration US Treasury bills plus demand deposits at US insured banks. Treasuries are custodied through a regulated broker-dealer, the bank deposits provide fast redemption liquidity, and the token accrues value daily so the redemption price climbs above $1.00 over time. The stated yield is the weighted-average return of that portfolio minus a management fee in the neighborhood of 25 basis points.

USDY has grown into the billion-dollar range, and it sits inside a tokenized-Treasury sector that reached roughly $16 billion by spring 2026 alongside BlackRock's BUIDL, Franklin Templeton's BENJI, Circle's USYC and Ondo's own OUSG. It is the fastest-growing corner of tokenized real-world assets.

Read that description again and notice what USDY is. It is a wrapper. The economic substance is: you lend money to the US Treasury and to commercial banks, and they pay you a predetermined rate for the use of that money over time.

Are Yield-Bearing Stablecoins Halal When the Yield Is T-Bill Interest?

For USDY the answer is no, and the verdict rests on settled doctrine rather than on reasoned inference. Riba al-nasiah, the increase stipulated on a loan for the passage of time, is the exact thing prohibited in Quran 2:275 through 2:279, where the permissibility of trade is contrasted with the prohibition of riba and the lender is told he may take back only his principal. A Treasury bill is a loan to a sovereign with a fixed return determined at purchase. Every major standard-setter treats conventional bonds and T-bills as the paradigm case of prohibited interest rather than a borderline instrument. AAOIFI's screening framework caps interest-bearing securities and interest income precisely because of this, which is where the familiar 30% and 5% thresholds come from in equity screening. Those thresholds exist to tolerate unavoidable trace exposure in an operating business. They were never meant to bless an instrument whose entire return stream is the interest itself.

Tokenizing the claim changes the settlement rails and nothing about the contract. A blockchain wrapper around a T-bill portfolio is still a T-bill portfolio. Daily rebasing instead of a coupon payment is a distribution mechanic, not a change in the underlying nature of the return.

The same reasoning applies to OUSG, BUIDL, BENJI, USYC and every other tokenized money-market or Treasury product, regardless of how prestigious the asset manager on the fact sheet happens to be. This is also why a genuine Shariah-compliant alternative in this space has to be built differently, on tokenized sukuk or commodity murabaha or gold, where the return traces to rent, trade profit or asset ownership. Projects working on tokenized sukuk rails exist, but they are a different product category, not a relabeling of the same one.

sUSDe: Genuinely Contested, So Here Is the Map

sUSDe is where honest scholars diverge, and it is worth separating what is settled from what is reasoned judgment.

The case that it might pass

Funding on a perpetual works as a periodic payment between two counterparties in a market, sized by the gap between perp price and spot. Nobody lends anybody a principal that must be returned with an increase. Someone arguing for permissibility would say the return is compensation for taking the short side of a position, closer to a trading profit than to riba, and that the collateral is real assets rather than debt.

The case against, which is where most screening bodies land

Three problems stack up: the instrument itself, gharar, and the mixed sources of the reserve income.

First, the instrument. Perpetual futures are cash-settled contracts with no delivery, no possession and no expiry. AAOIFI Shariah Standard No. 20 rejects conventional futures and options as they are traded on organized exchanges, on the grounds that neither counter-value is exchanged and the object of sale is not owned or possessed. Mufti Taqi Usmani has made the same objection to conventional derivatives for decades: a sale of what the seller does not own, settled in differences rather than goods, does not become valid because a clearinghouse stands in the middle. The seller of a perp on ETH is not delivering ETH to anyone, ever. That places the yield engine on contested ground before you even reach the funding rate.

Second, gharar. The size and even the sign of funding is unknown in advance and can flip negative, at which point Ethena pays instead of receives. Sustained negative funding is exactly the scenario that eats the reserve fund. A return whose magnitude and direction are both indeterminate is the textbook gharar objection, and it is stronger here than in an ordinary trading position because it is being marketed as a stable yield.

Third, mixed impurity. Part of the reserve sits in USDT and USDC, whose yield comes from Treasury and repo income, and part of the return comes from ETH staking. Staking itself has its own taxonomy: the Shariah Review Bureau and other boards generally distinguish proof-of-stake validation rewards, which several boards have accepted as compensation for a real network service, from lending-style or rehypothecated staking arrangements, which they have not. Ethena's structure blends categories rather than isolating a clean one.

Independent screening services that have looked at USDe and sUSDe have generally landed on non-compliant or grey, with the staked yield specifically flagged as problematic and the perp-backed portion flagged for gharar. That is the current weight of opinion, though nobody should present it as a settled unanimous ruling the way the T-bill question is settled. The prohibition of riba on a Treasury bill is doctrine. The classification of perpetual funding is a reasoned application of derivative and gharar principles to an instrument that did not exist when those principles were formulated, and it should be described that way. It also sits downstream of the broader crypto split, where the Shariah Board of Pakistan and scholars in the Usmani tradition have taken a restrictive line on crypto generally while Malaysia's Securities Commission Shariah Advisory Council permits trading in digital assets as recognized property. Even the permissive side of that split does not extend to conventional futures.

Where the Other Faith Frameworks Land

The frameworks we screen against do not agree here, and the differences are instructive.

Jewish halakha treats ribbis with a two-tier structure, biblical (d'oraisa) and rabbinic (d'rabbanan), and the prohibition applies between Jews. Institutions such as Bais HaVaad address commercial interest through the heter iska, which recasts a loan as a joint venture with profit-sharing. Interest paid by the US government or by a corporation is generally not the target of the prohibition in the same way, so USDY would not fail a halakhic screen the way it fails a Shariah screen. Loans between individuals structured through a token would need a heter iska.

Christian BRI screening and the USCCB Catholic guidelines both descend from moral-conduct and product-based exclusions: abortion, pornography, weapons, human dignity, environmental stewardship. Neither maintains a live prohibition on receiving interest, so a Treasury-backed token clears on its face. A Catholic investor applying the social-teaching side of USCCB might still ask questions about a leveraged synthetic dollar and the speculative apparatus behind it, but that is a prudential concern rather than an exclusion.

LDS investors do not have an interest prohibition either. The relevant text is Dallin H. Oaks' 1971 warning about speculation, written in the context of members chasing quick returns in volatile markets, along with the long-standing counsel to avoid debt. A synthetic dollar whose peg depends on a permanently rolled derivatives hedge is precisely the kind of thing that counsel would make you slow down on, even where nothing is formally prohibited.

So the split is clean: USDY is a hard fail under Shariah and a pass under the other four. sUSDe is contested under Shariah, and under the Christian, Catholic, Jewish and LDS lenses it raises prudence questions rather than doctrinal ones.

What To Do With This as a Retail Investor

• Read the yield source, not the yield number. If the disclosure says Treasury bills, money-market funds, repo or bank deposits, the return is interest and the wrapper does not change that.
• Distinguish holding from staking. Plain USDe pays nothing and sits on the peg mechanism; sUSDe is what turns on the income stream. Holding a non-yielding dollar token as settlement cash is a much narrower question than holding a yield vault.
• Watch for indirect exposure. Lending markets pay you in wrapped versions of these assets, and DeFi vaults routinely route a slice of their strategy through T-bill tokens. Your "halal LP position" can be earning Treasury interest two hops away.
• If you are already holding a T-bill token, the usual approach is to exit and purify the accrued interest portion by giving it away without expecting reward, rather than treating it as income.
• Look at the alternatives honestly. Tokenized sukuk, commodity murabaha platforms and gold-backed tokens aim at the same "stable asset that grows" slot with a different contractual basis. They generally offer lower and less predictable returns, and that is the point.

How FaithScreener Handles These

Yield-bearing dollar tokens get screened on their income source rather than their price behavior. A token whose distributed return traces to Treasury, repo or deposit interest hits a treasury_interest hard fail in our crypto screening module, which is a flat exclusion and not something a percentage threshold can rescue, because there is no operating business here for a tolerance ratio to apply to. Derivative-funded synthetics get flagged separately on the perpetual futures and gharar axes, with the contested status shown rather than hidden, so you can see that the call rests on inference rather than explicit text. If you want to see how the thresholds and hard fails are constructed across all five faith frameworks, the screening methodology lays out which rules are doctrinal exclusions and which are judgment calls applied to new instruments.

The Bottom Line

USDY and its tokenized-Treasury cousins fail a Shariah screen outright, because the return is US Treasury and bank-deposit interest with a blockchain wrapper on top, and that is the exact contract Quran 2:275-279 addresses. sUSDe lands somewhere else, contested and leaning non-compliant, failing on the perpetual futures instrument and the indeterminacy of funding rather than on riba al-nasiah directly. The thing to remember is that "stablecoin" describes the price behavior and tells you nothing about where the money comes from, and under Shariah the source is the entire question.

This is educational research rather than a religious ruling or personalized investment advice, so confirm any position with a qualified scholar or advisor before you act on it.