Coinbase will pay users 4% interest on USDC holdings

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Major cryptocurrency exchange Coinbase has announced that users will be able to earn a 4% interest rate on USD Coin per product of the company compared to an alternative to a savings account.

In a Tuesday blog post, Coinbase said its users could earn a 4% annual percentage return, or APY, by lending their holdings for the U.S. dollar-linked stablecoin USD Coin (USDC). The crypto exchange seemed to target banks with the offer, claiming it has a better yield than a typical savings account in the United States.

However, Coinbase said the USDC loan is not protected by the Federal Deposit Insurance Corporation or the Securities Investment Protection Corporation – unlike typical savings accounts in the United States – nor does the exchange offer a crypto interest account that provides “attractive rates on customers’ assets . ”While most savings accounts in the United States give a return of less than 1% on the dollar, many other crypto platforms give an interest rate of about 8% to lend U.S. dollar stable currencies.

“While high interest rates are attractive, they can present varying levels of risk,” Coinbase claimed. “You may find that your assets are lent to unidentified third parties and subject to their credit risk, which could result in a total loss of your crypto assets.”

The exchange originally offered 1.25% returns on USDC from October 2019 until June 2020, when it unexpectedly announced compensations for users owning the stability would fall to 0.15%. The 4% yields represent Coinbase possibly a growing interest rate for USDC holders over 2,500%.

Related: The high-yield USDC trading accounts target DeFi

At the time of publication, USDC was the 8th largest cryptocurrency, with a market capitalization of more than $ 25 billion. Tether (USDT) remains the most popular stablecoin on the crypto market, coming in 3rd with $ 62.5 billion.