Coinbase a big competitor to US banks than Bitcoin.

By: Bharggavi Ssayee

Coinbase a big competitor to US banks than Bitcoin.

July 9, 2021 9:12 PM

When USDC Mocks Banks - The crypto world continues to innovate, offering alternatives to traditional bank offerings. Coinbase's 4% interest-bearing USDC loan offer positions itself as a strong competitor to traditional savings accounts.


USDC savings, 4 times more attractive than dollar savings

Coinbase offers a more attractive stablecoin savings plan than its traditional counterpart offered by banks in the United States. The exchange said in its June 29 statement that its users can earn a 4% annual return on their USDC loans.


Coinbase has singled out traditional finance interest rates which "have fallen steadily over the past few decades, making it difficult to earn significant passive income on your assets." Its offer is therefore much more attractive than that of dollar savings accounts which offer an annual interest rate of 1% or less. At the same time, it will be recalled that other crypto lending platforms offer an 8% return on dollar-backed stablecoin loans but do not have the strike force and the potential rate of penetration into the market of a giant. like Coinbase.


Coinbase is thus boosting the interest of its users holding USDC for its loan offer. The exchange initially offered a return of 1.25% on the USDC from October 2019 to June 2020. At the time, USDC was the 23rd cryptocurrency in terms of market capitalization, while it currently occupies the 8th. square. The exchange then (unpleasantly) surprised USDC holders by suddenly dropping loan yields to 0.15%.


High rewards without cover

Coinbase points out, however, that these loans are not covered by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation, unlike traditional savings accounts in the United States. The exchange thus reminds us of the risks associated with the fact that "your assets are loaned to unidentified third parties and subject to their credit risk, which could result in a total loss of your crypto holdings".


The news comes less than a month after Coinbase announced the listing of 9 stablecoin / fiat and stablecoin / stablecoin pairs. The exchange said then that the markets for stablecoin pairs had seen their volume increased tenfold in the past 6 months.


The development of stablecoins worries the US Federal Reserve (Fed). The institution goes so far as to view Tether's USDT as one of the "3 challenges for financial stability." A massive adoption of USDC or USDT would therefore be much more dangerous for the dollar than a Bitcoin rush. The reasoning holds up if we consider that the former are well placed to be used as means of daily payments, while the latter is a safe haven.