(Bloomberg) — Coinbase Global Inc. launched its first yield product that allows users outside the U.S. to earn interest from their holdings in a stablecoin through a third-party decentralized finance platform.
Earlier this year, regulators in the U.S. effectively killed Coinbase’s plans to debut another interest-generating product called Lend. In a company blog on Thursday, Coinbase said the new offering will let customers in over 70 countries to access the “attractive yields” of decentralized finance by depositing their Dai, a stablecoin designed to be pegged to the U.S. dollar, into Compound Finance, a DeFi protocol. The annual percentage yield for the program fluctuated between 2.83% and 5.39% in October.
The product differs from Lend, which was canceled before launch. Lend would have required customers to lend their cryptocurrency holdings to Coinbase, whereas with the new product, they will lend to Compound Finance, one of the most popular DeFi apps. In September, the SEC threatened to sue Coinbase if the exchange offered Lend, which would have let users earn a 4% return. Coinbase Chief Financial Officer Alesia Haas said in a congressional testimony Wednesday that “we still do not have clarity on why our product wasn’t allowed to proceed.”
Coinbase Drops Crypto Lending Program Plans After SEC Balks (2)
While Coinbase is a centralized exchange, it has a long-term ambition to bridge its users with the growing world of decentralized finance applications, a philosophy championed by Chief Executive Officer Brian Armstrong. Coinbase says it provides ease of use and covers the transaction costs known as gas fees that users might have incurred by accessing Compound independently. It charges no fees from users for the product at this time.
DeFi, or decentralized finance, is a collection of apps where software manages transactions without use of centralized intermediaries. DeFi is seen by many analysts as a highly volatile and risky sector. While these apps offer high yields, investors need to be prepared to lose their funds.
(Adds information on fees.)
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