Coinbase, a major crypto exchange, has announced that users can earn 4% interest on USD Coin via a product the firm compared to an alternative to a fiat savings account. In a June 29 blog post, the company said that its users could earn a 4% annual percentage yield (APY) by lending out their holdings for the USD Coin (USDC).
The crypto exchange appeared to be targeting different banks with the offering, alleging that it has a better return than the normal savings account in the whole of the United States. These announced yields represent the exchange increased interest for USDC holders by over 2,500% since it was lowered considerably in June 2021.
Nevertheless, Coinbase mentioned that the loaned USDC is not protected by the Federal Deposit Insurance Corporation (FDIC) or the Securities Investor Protection Corporation (SIPC) like the normal savings accounts in the United States. Furthermore, the exchange is not offering a cryptocurrency interest account that offers attractive rates on the clients’ and users’ assets.
Even though a majority of the savings accounts active in the United States offer returns of less than 1% on the dollar, most of the other crypto platforms offer an interest rate of about 8% for lending US dollar-pegged stablecoins. Coinbase stated:
“While the high-interest rates are appealing, they can present varying levels of risk. You may find that your assets are loaned to unidentified third parties and subject to their credit risk, which could result in a total loss of your crypto holdings.”
The crypto exchange originally offered around 1.25% yields on USDC from October 2019 to June 2021, when it abruptly announced rewards for the users holding the stablecoin would plunge it to 0.15%. the 4% yields represent Coinbase possibly increasing interest for USDC holders by over 2,500%.
At the time of writing, USDC is the 8th biggest crypto, with a market cap of over $25 billion. Tether (USDT) is still the most popular stablecoin active on the crypto market, coming 3rd with a market cap of $62.5 billion.
