Coinbase will now provide a relatively high rate of interest for USDC holders. Anyone who has USDC holdings in their Coinbase crypto savings account will be able to earn 4% interest. This is quite a huge increase from the 0.15% interest that was paid back in June last year. So, the increase in the interest percentage is over 2500% which shows the potential of having a savings account in crypto instead of fiat.
How does this work?
For anyone using Coinbase and having USDC coin holdings which is a dollar-pegged stable coin, can lend them to earn interest. By doing this, Coinbase is directly targeting the users of the US banks that get a mere 0.9% annual interest on average. In order to preserve their position, Coinbase also mentioned their competition. The company said that many other companies provide higher interest rates on USDC coins, but that might be very risky.
Since these companies lend to 3rd parties that might have a poor credit history or might be fraud altogether, the investor might lose his/her holdings. So, basically, Coinbase is presenting itself as the solution to banks and other risky crypto companies.
The benefit of lending and staking
If you lend or stake through trustable exchanges, then there are huge benefits for you. Staking in the network can generate good annual returns for you on top of the already appreciating asset you have. Let’s say if you stake 1 ETH on a return of 10% annually. So at the end of the year, you still have 1 ETH that might have increased in value, but you will also have an additional income of 0.1 ETH, which you can now spend somewhere else.
Lending is also similar in terms of earning, but here it’s like loaning your crypto to others for a fixed rate of interest. This is also a good way to earn extra from your holdings but could be a little risky. This is because lending your crypto to untrusted parties could lead to the loss of the entire funds. So, I would say always choose trusted exchanges like Coinbase and Binance for these two, even though the rates might be a little less.
Will you be interested in earning 4% interest in your USDC holdings? And if yes, how much are you willing to lend? Let us know in the comments below. Also, if you found our content informative, do like and share it with your friends.