Coinbase has announced that it will allow users to earn interest on their cryptocurrency by lending it to a decentralized funding app called Compound (via Bloomberg). The software isn’t currently available to users in the US, though, after plans for a similar feature got the company into trouble with the Securities and Exchange Commission.
Coinbase says that customers in more than 70 countries will be able to lend their Dai, a stablecoin whose value is pegged to the US dollar, to borrowers from within its app. The process works using a protocol called compounding, which programmatically collects money from lenders and collects interest on that money from borrowers. Coinbase’s goal is to make the system more user-friendly – lending through Compound usually involves receiving multiple tokens when making a deposit and paying transaction fees whenever you enter or exit crypto (Coinbase says it will cover this fee for its users).
The program is similar to Coinbase Lend, which the company announced in June but canceled in September after the SEC threatened to sue the company, saying the feature would be seen as security. Lend would have allowed users to earn interest on USDC, another stablecoin, even though users were lending it directly to Coinbase for management rather than through an external protocol.
Coinbase also promised that you’ll get any money you put in your Lend back, but the company doesn’t make any such guarantees with this new program. It also warns users of the potential for losses and be sure to note that interest rates are variable — vehicle prices for DAI fluctuated between 2.83 and 5.39 percent throughout October, according to Coinbase.