After Compound Finance, Now Coinbase is Offering Users 4% APY on USDC
“A phenomenal offering from Coinbase,” congratulated Robert Leshner, co-founder of Compound Labs, who pointed out how, unlike Compound Treasury, retail-focused Coinbase Lend is offering 3.92% APR on crypto while taking on the risk.
After Compound, now cryptocurrency exchange Coinbase has announced that it will allow users to earn 4% APY on USDC.
USDC is a popular stablecoin minted by Circle with a market cap of over $25 billion that runs on Ethereum, Solana, Algorand, and Stellar, and is expected to expand to other blockchains including Avalanche, Celo, Flow, Hedera, Kava, Nervos, Polkadot, Stacks, Tezos, and Tron as well.
This 4% Annual Percentage Yield (APY) is as of June 29, 2021, which the exchange notes “may change at any time before you start lending.”
Still, the rate is more than 50x the national average of a traditional savings account. The national average for a traditional savings account hovers around 0.07%, with high-yield savings accounts still falling well short of even 1%.
Pre-enrolling for the service is now open for eligible customers in the US, but with Coinbase not being a bank, the loaned crypto is not protected by FDIC or SIPC insurance. But it does offer a principal guarantee for the USDC in your Coinbase account.
On To The Next Billion Retail Users
This latest move from the largest cryptocurrency exchange in the US came just a day after the decentralized finance (DeFi) protocol Compound, which is also backed by the exchange, targeted institutional investors by announcing a 4% fixed interest rate on US dollars. Robert Leshner, co-founder of Compound Labs said,
“Excited to see big names like Coinbase enter the dollar yield space so soon after we announced Compound Treasury yesterday.”
He then explained that while Compound Treasury is entirely dollar-denominated, Coinbase Lend is for earning yield on a crypto, USDC.
When it comes to yield, Compound Treasury has one source, the Compound protocol itself, while in the case of Coinbase Lend, it is not disclosed, just that they are ‘verified borrowers' and by guaranteeing the principal, the exchange takes on this risk. Leshner further noted that Coinbase’s 4% APY is different from Comound’s 4% APR and is actually 3.92% APR.
While Coinbase Lend appeared to be focused on retail, Leshner said, Compound Treasury is focused on business customers and direct relationships. Leshner said,
“This is a phenomenal offering from Coinbase, and a huge point of validation for the entire industry. Wishing them great success, and the onboarding of the next billion retail users to the space.”
Interestingly, Compound Finance started the DeFi summer last year after introducing yield farming, and it just might start round 2 after introducing fixed interest rates for institutional investors.