Coinbase debuts new yield strategy for USD Coin (USDC)

Sun 04 Jul 2021 ▪ 14h00 ▪ 3 min read — by Luc Jose Adjinacou

Coinbase has released a blog post announcing it is rolling out a crypto savings account allowing users to earn 4% interest on USDC deposits, a product similar to a fiat savings account. The exchange will launch the product in the near future.

4% annual percentage yield

The new offer announced by Coinbase is surely a delight to its customers. Of the few details the exchange has unveiled, it is known that users will get to benefit from an annual return of 4% if they decide to deposit their USDC holdings to the service.

It seems that this product is not aimed at individuals directly. Although the exchange has not confirmed anything, the product is said to be aimed at banks. In any case, whether for banks or individuals, Coinbase points out that this offer is more advantageous than opening a traditional savings account in the United States.

The announcement, however, does mention that USDC savings are not protected by the Federal Deposit Insurance Corporation (FDIC) or the Securities Investor Protection Corporation (SIPC). In addition, Coinbase’s offer doesn’t allow creating a crypto interest account that offers “attractive rates on assets”.

In the United States, the majority of savings accounts allow clients to enjoy returns of less than 1% on US dollar deposits. Conversely, cryptocurrency platforms offer interest rates of around 8%. With that said, “they can present varying levels of risk,” Coinbase points out. “You may find 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”.

USD Coin, the 8th biggest cryptocurrency

Between October 2019 and June 2020, Coinbase offered its customers returns of up to 1.25% on their USDC holdings. Much to everyone’s surprise, the exchange has since changed its policy, with rewards for customers using stablecoins dropping to just 0.15%. This is why the news about the 4% APY might just be enough to convince more customers to use Coinbase services.

Speaking of USDC, at the time of writing, it is the 8th biggest cryptocurrency in the world. Its market capitalization exceeds $25 billion (~£18.07 billion). However, it is still far away from Tether (USDT), which ranks as the 3rd largest cryptocurrency. With a market capitalization of $62.5 billion (~£45.19 billion), it is up there with the most popular coins on the market.

Coinbase launches an attractive product aimed to entice its many customers around the world. The exchange revealed a new product for USD Coin users to enjoy an annual percentage yield of 4%. The offer is tempting and there is little doubt it will go unnoticed.

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Luc Jose Adjinacou avatar
Luc Jose Adjinacou

Loin d’avoir refroidi mes ardeurs, un investissement infructueux en 2017 sur une cryptomonnaie n’a fait qu’accroitre mon enthousiasme. Je me suis dès lors résolu à étudier et comprendre la blockchain et ses nombreux usages et à relayer avec ma plume de l’information relative à cet écosystème.


The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.

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