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Coinbase Announces A 4.5% Yield for Its USDC Holders

One of the leading digital currency exchanges in the world, Coinbase, has announced that customers that own the U.S. Dollar coin (USDC) will now earn a 4.5% interest on their holdings. According to the blogpost published on the Coinbase website, users can only get this annual percentage yield when they lend their USDC holdings. The USDC is tied to the dollar as a measure to prevent volatility.

Based on returns, Coinbase’s offer is better than that of American banks, which would be the exchange’s primary objective. They would want to provide a higher return than the normal American savings accounts to increase their customer base.

Coinbase’s USDC Offer

Coinbase explained that there is no contribution from the securities investors protection corporation or the federal deposit insurance (FDIC) in its USDC offer. The features of this offer are entirely different from the usual savings accounts or any other type of savings that banks offer.

Coinbase further said that the customers’ assets would determine whether the interest rates are “good or bad.” The returns from most U.S. savings account are usually less than one percent. In contrast, crypto exchanges give their customers at least 8% interest when they loan stablecoins (the digital asset pegged to the dollar).

High Interests Usually Attract High Risks 

Often, high interests are associated with higher risk levels. Hence, Coinbase has also stated that customers should bear in mind that there is a varying level of risk related to this offer even though the interest rates are pretty enticing. 

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Another risk concerns that USDC holders need to keep in mind is that their asset credit risk may be more exposed when they discover that their USDC is loaned to a third party. Hence, they lose all their asset. Between October 2018 and June 2020 (a total of nine months), Coinbase’s return on the dollar-pegged stablecoin was 1.30%. 

However, Coinbase made a downward review of the returns to about 0.16% before making this new 4.5% announcement. This new yield announcement would equal approximately 2,500% in profits. As of this writing, USDC’s market cap stands at $26 billion, making it rank eighth amongst all digital currencies. Conversely, USDT (Tether) is still the leading stablecoin, and its market cap stands at $62.8 billion.

Coinbase’s Future Plans

Coinbase intends to launch more customer-centric products to enhance its global presence. A mid-term plan is to establish a crypto app store. The firm also revealed that most of the apps in the app store would be from third parties.

In a recent article, Brian Armstrong, Coinbase’s CEO, revealed that he is convinced that the crypto space will continue to experience more significant financial and economic activities because the crypto market has not even started maturing yet.

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Armstrong further said dApps’ financial transactions alone are worth more than $11 billion. He further revealed that the popular exchange would keep increasing its digital assets portfolio and seek to invest in new projects, especially those whose primary focus is speed.


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Shelly Melancon (Switzerland)

Shelly is a cryptocurrency enthusiast from Switzerland, she bought her first crypto in 2015 when it was way less popular then it is today and since 2017 she has been writing about cryptocurrency for online news portals. Shelly is the newest addition to the Tokenhell team, she writes mostly news and reviews related articles , stay tuned to her posts to stay up to date with the crypto world.

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