In 2025 with high interest rates you could run a totally honest stablecoin by putting the money in the bank or treasury bills or something else nearly risk free, spending a little of the yield on administration expenses and pocketing the rest. Contrast that to the zero interest rate regime a few years back when that wasn't possible.

I see that as unsustainable though because many people who might want to buy into a stablecoin with 0% yield would also be looking at the possibility of putting money in the bank or T-bills or tokenized T-bills, etc. Just as banks, in the long term, need to pay competitive interest rates to attract deposits, stablecoins would need to pay competitive yield.

You could have an honest stablecoin which pays some yield built the same way you could build a zero-yield stablecoin but it would then compete with dishonest stablecoins. Weird things like Luna-Terra or flat-out Ponzi schemes. Unregulated fractional reserve banking and other risky business. I don't know the details of how it happens but I know it ends in tears.