Coinbase will pay users 4% interest on USDC holdings

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Coinbase, a major cryptocurrency exchange, has announced that users will be able to earn 4% interest on US dollars through the company’s product compared to a cash savings account alternative.

In a blog post on Tuesday, Coinbase He said Its users can earn 4% annual return, or APY, by lending their holdings in exchange for fixed currencies pegged to USD Coin (USDC). The cryptocurrency exchange appears to be targeting banks with the offer, claiming that it has a better return than a typical US savings account.

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However, Coinbase said that lender USDC is not protected by the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation — unlike typical savings accounts in the United States — and the exchange does not offer a crypto interest account that offers “attractive rates on client assets.” Most savings accounts in the US yield less than 1% on the dollar, Many other encryption platforms It offers an interest rate of around 8% for lending stablecoins pegged to the US dollar.

“While higher 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 complete loss of your crypto holdings.”

The exchange originally offered 1.25% Returns on USDC from October 2019 Until June 2020, when it unexpectedly announced that the rewards for users holding the stablecoin would drop to 0.15%. Returns of 4% represent the potential for Coinbase to increase interest for USDC holders by more than 2,500%.

Related: Target high yield USDC business accounts from Circle DeFi

At the time of publication, USDC is the eighth largest cryptocurrency, with a market capitalization of over $25 billion. Rope (USDTIt remains the most popular stablecoin in the cryptocurrency market, coming in at number three with a market capitalization of $62.5 billion.