Leading cryptocurrency exchange Coinbase has revealed that its users will be able to earn 4% interest on USD Coin via a product the company compared to an alternate to a fiat savings account.
Within an official web blog earlier today on Tuesday, Coinbase added that its users could earn 4% annual percentage yield, or APY, by lending out their holdings for the USD pegged stablecoin USDC [USD Coin]. The cryptocurrency exchange appeared to be targeting banks with the offering, claiming it’s a far better return than a typical saving account within the U.S.
Additionally, Coinbase added that the loaned USDC isn’t secured by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation – unlike typical savings accounts within the U.S. – neither is the exchange offering a crypto interest account that gives “attractive rates on users’ assets.” While most savings accounts within the U.S. offer returns of less than 1% on the dollar, many other cryptocurrency platforms provide a rate of interest of roughly 8% for lending USD – pegged stablecoins.
“While the high-interest rates are appealing, they will present varying levels of risk,” claimed Coinbase. “You may find that your assets are loaned to unidentified third parties and subject to their credit risk, which could end in a total sum loss of your cryptocurrency holdings.”
The exchange originally offered 1.25% yields on USDC from October 2019 to June last year, when it unexpectedly announced rewards for users holding the stablecoin would drop to 0.15%. The 4% yields represent Coinbase potentially increasing interest for USDC holders by over 2,500%.
At the time of reporting, USDC is the 8th largest cryptocurrency, with a market capitalisation of over $25 Bln. Tether [USDT] remains the foremost popular stablecoin on the cryptocurrency market, coming in 3rd with a $62.5 Bln market capitalization.