Could Tokenized Corporate Bonds Replace Zero-Yield Stablecoins?

Zhu Su’s argument is that a U.S. debt shock and higher borrowing costs could create an opening for companies to issue regulated corporate bonds directly on blockchain networks. Holders of idle USDT or USDC, he suggests, could move into dollar-denominated tokens that pay bond coupons instead of accepting little or no yield.

The idea identifies a real trend, but it makes a much larger leap—from cheaper financial plumbing to cheaper financing and from early tokenization growth to a threat to stablecoins. The available evidence supports the first step more strongly than the others.

Zhu Su’s on-chain bond thesis

The argument has four parts:

1. More borrowing could make conventional corporate finance more expensive. U.S. companies are issuing debt at a historically strong pace, with AI-related infrastructure spending a major driver.
2. Blockchain networks could reduce distribution and settlement friction. A tokenized bond could support smaller denominations, automated coupon payments and shared records for ownership and servicing.
3. Passive dollar holders could seek yield without leaving the on-chain economy. Instead of holding a non-yielding stablecoin, an investor could buy a token representing corporate credit and receive a coupon.
4. Stablecoins could become primarily transactional assets. In this scenario, USDT and USDC would remain useful for payments, redemptions, trading and collateral, but lose some appeal as long-term cash holdings.

That is a coherent market scenario. It is not yet evidence that companies can reliably borrow more cheaply on-chain or that stablecoin demand is about to collapse.

The evidence supporting the idea

Corporate borrowing demand is real

U.S. corporate bond issuance reached approximately $1.68 trillion through mid-August 2026, up nearly 27% from the same period a year earlier, according to SIFMA data cited by Reuters. Amazon, Alphabet, Meta and Oracle alone issued about $194 billion in bonds through July 7, 2026—79% more than those companies issued during all of 2025.

That surge demonstrates why issuers may be interested in new funding channels. If debt supply continues to grow, companies and investors will have incentives to test infrastructure that can lower administrative costs or broaden distribution.

But heavy issuance has two interpretations. It may indicate that conventional borrowing is becoming more expensive, or it may show that the existing U.S. credit market is still deep enough to absorb enormous deals. August investment-grade sales set a monthly record, reinforcing the second point as well.

Tokenized real-world assets have moved beyond a purely theoretical market

The on-chain real-world-asset market, excluding stablecoins, has reached roughly $30 billion or more, although trackers use different definitions and report different totals. Growth has been concentrated in yield-bearing products, particularly tokenized Treasuries and private credit.

This is meaningful evidence of demand for blockchain-based fixed-income exposure. It shows that institutions and other eligible investors will use on-chain products when the legal structure, custody arrangements and redemption process are sufficiently credible.

It does not, however, establish a broad public market for freely traded corporate bonds. A frequently cited figure of roughly $17 billion refers principally to tokenized private credit, not a single pool of liquid, retail-accessible corporate debt. Private credit is typically more bespoke and less liquid than a publicly traded bond, making it a poor proxy for frictionless access to corporate credit.

India is testing the operational case

India’s Securities and Exchange Board, working with the Reserve Bank of India, is pursuing a pilot for tokenized corporate bonds. The project is intended to examine whether shared-ledger technology can enable faster settlement, simultaneous delivery of securities and money, automated coupon payments and lower reconciliation costs.

The pilot matters because it is focused on improving existing market infrastructure rather than assuming that a blockchain automatically creates a new liquid market. It is useful official validation of tokenization’s potential operational benefits—but it remains a test, not proof of commercial scale.

Why tokenization may not make corporate borrowing cheaper

A bond token is still a security

Putting ownership or payment rights on a blockchain does not remove the legal obligations attached to a corporate bond. Issuers and intermediaries still need to address securities-law requirements, investor eligibility, transfer controls, identity and anti-money-laundering checks, custody, disclosures and market infrastructure.

Those requirements may limit the pool of buyers and the ability to trade a token freely. Smart contracts can automate some servicing functions, but they do not replace underwriting, credit analysis, legal documentation or investor protection.

Lower settlement costs are only one part of the coupon

A company’s all-in borrowing cost reflects far more than settlement and recordkeeping. It also includes credit risk, duration, liquidity, distribution, underwriting, compliance and the return investors demand for taking those risks.

Tokenization could reduce some back-office and distribution expenses. It cannot guarantee a lower coupon unless those savings outweigh the costs of building the product and the liquidity premium investors may demand for a smaller or less-established market.

Yield is compensation for risk, not a free upgrade

USDT and USDC are designed to maintain a dollar value and are commonly used for payments, trading and collateral. A corporate bond token has a different risk profile: its market price can change with interest rates, maturity, credit spreads and the issuer’s financial condition.

A holder who moves from a stablecoin into a corporate bond is not simply exchanging zero yield for free yield. The holder is exchanging cash-like utility for an investment with duration, credit and liquidity risk.

Tax treatment adds another constraint. Coupon income remains subject to applicable tax rules, and sales may create capital gains or losses. Token transfers and decentralized-finance activity can also complicate tax-lot records and reporting. Tokenization is therefore not, by itself, a tax shortcut.

What this could mean for USDT and USDC issuers

The pressure on stablecoin issuers would be most significant if yield-bearing tokens became easy to purchase, redeem and use as collateral. Users might keep less idle capital in payment stablecoins when comparable on-chain products offer income.

That could affect the economics of stablecoin issuance. USDT and USDC reserves are primarily invested in safe dollar assets such as U.S. Treasury securities and short-term government repos, while the token holders generally do not receive the reserve income directly.

The likely response would not necessarily be to abandon stablecoins. Issuers could instead position them as the money layer for a broader on-chain financial system by supporting:

• payments and cross-border transfers;
• trading and margin collateral;
• settlement between tokenized funds, bonds and other assets; and
• distribution or integration for regulated yield-bearing products.

That points to coexistence rather than replacement. Stablecoins offer liquidity and dollar portability. Tokenized funds and bonds offer investment exposure and yield. The two products can be used together in the same transaction rather than competing for exactly the same job.

How much weight should Zhu Su’s history carry?

Zhu Su’s background is relevant to how confidently his forecast should be presented. He co-founded Three Arrows Capital, whose 2022 collapse became associated with extreme leverage and major creditor losses, and later founded OPNX.

That history does not disprove the underlying tokenization thesis. It does mean readers should separate the claim from the claimant: the strongest evidence comes from issuance data, live tokenized-asset markets and regulated pilots—not from Zhu’s conviction alone.

Bottom line

Tokenized fixed income is likely to expand where it improves settlement, servicing and distribution within a regulated structure. The 2026 bond market and India’s pilot show why financial institutions are testing the model.

The stronger claim—that a U.S. debt crisis will soon push mainstream companies to issue cheaper bonds on-chain and cause investors to abandon USDT and USDC at scale—remains unproven. Tokenization can improve the rails. It does not eliminate credit risk, create liquidity overnight or turn a yield-bearing corporate bond into a cash equivalent.