DeFi Protocol Compound Finance Targets Institutions with Fixed Interest Rate on USD
DeFi project Compound Finance is now all set to attract institutional investors to the growing decentralized finance sector.
Coinbase backed decentralized lending protocol announced the launch of Compound Treasury that is designed for businesses and financial institutions to access the benefits of the Compound protocol.
This institutional-focused product offers a fixed 4% APR on US dollars, with daily liquidity but with none of the complexity of crypto.
“Our vision is that Compound Treasury becomes the bridge for non-crypto financial institutions to deliver the core benefits of DeFi to the next billion users.”
It is currently available to customers in California.
Compound is working with Circle and Fireblocks to enable Neobanks, fintech startups, and other large holders of US dollars to access the interest rates available in the USDC market of the Compound protocol.
“Growth in USDC and institutional DeFi continues to compound….excited to work with Compound,” commented Jeremy Allaire, Co-founder & CEO of Circle, the company behind the USDC stablecoin.
While accessing higher rates than in the traditional markets, institutions won’t have to deal with private key management, crypto-to-fiat conversion, and interest rate volatility.
To access this product, institutions simply have to wire USD to the Compound Treasury Account and start earning a “guaranteed” 4% per year interest rate, with no minimum or maximum amount or time limit.
As for where this 4% fixed interest rate comes from, Robert Leshner, founder of Compound Labs, said, “Rates are at a “generational low,” and still come pretty close to 4.00%. Historical market data over the past cycle puts them quite a bit higher. If rates are lower, think of the difference as a marketing expense.”
This marketing expense comes from Compound Labs, which is operating Compound Treasury as a stand-alone business, he added. Furthermore, this subsidy won't be coming from the COMP tokens Compound Labs was allocated at genesis but from the “sweet venture capital money that everyone in DeFi loves to hate,” quipped Leshner.
According to the official announcement, Compound Treasury has already begun onboarding customers and is planning to expand access to it “significantly over the coming months.”