Interest rate, Stablecoin & new opportunities

Interest rate and sparked stablecoin business.

Interest rate, Stablecoin & new opportunities
Picture from my Medium

Stable coin could be getting a step closer to rival fiat as interest yielding stable coins and lending partnership brings great possibilities to crypto.

It all started back in 2018 when both GUSD and PAX started a 1% discount as sweetener if traders use their stablecoins in a particular way before cashing them out. This is the reason PAX and GUSD witnessed a surge in their economic activities both on OTC desks and over exchanges like Binance and Houbi where a number of traders moved millions of dollars within a single day. There was a rise in the market cap of PAX and GUSD at the cost of TUSD because the market cap of TUSD had significantly crashed.

The concept of interest in stablecoin has been making crazy buzz in the crypto space lately and TUSD along with many others are in the game now. You can now make almost 8% interest on your TUSD. TrueUSD is now partner with Cred and the TrueUSD holders are more excited about it than anyone else out there because this partnership will give them up to 8% interest via CredEarn. More specifically, the partnership of TUSD and Cred and arrival of universal euro coin will enable holders of stable coin to make money-8% interest via Creed.

“We are excited about our partnership with TrustTooken-the creator of TUSD”, Creed announced.

CredEarn was chosen because they have had great experience with stable coins, tokenized borrowing and lending, the credibility of team and what not. Moreover, Cred has been super successful with launching through Uphold and have a huge costumer base from over 127 countries.

“We want to give as mush benefits as possible to the holders of stable coins and partnering with TrustToken will enable us do that”, said Dan Schatt-cofounder and president Cred.

The partnership of TrustCoin with Cred will give huge benefits to stablecoin holders including the following:

· The partnership will provide 8% of interest to the holders of TUSD. This is the highest interest rate for TUSD in the market right now.

· There is no fee plus no requirement for min or max contribution.

· Up to $100M crypto custodian insurance policy through BitGo.

· A 1 to 1 conversion agreement to USD on TUSD stablecoin.

Interest-bearing StableCoin

The revenue model of stablecoin backed by fiat relies on the money of the platform using the coin. According to data, Tether is thought to have a whopping $1.8 billion of costumers’ deposits with its banking partner Deltec. At an interest rate of 1%, it generates $1.8 million a year in revenues.

Partnership with lenders can enable fiat-backed stablecoin issuers make additional income by giving funds in the form of loans to banks. An interest return on the loaned money could be shared with those who store their stablecoin with trusted partners.

If this stablecoin lending and storage takes off, it will no doubt start a price war and cut throat competition and this will be imperative for the competitors to increase interest rates on stablecoin like banks do. It will also It will also bring forward crypto-lending as another possibility for mainstream investors and with yet another lending based model of revenues, we should be expecting more fiat-backed stablecoin companies that make stablecoins for their countries like Switzerland and Japan etc. to make big money.

Universal Protocol Platform and TrustToken are the first companies to execute this kind of business model. Both the firms have partnered with Cred and this partnership will enable the respective stablecoins TUSD, TGBP, UPUSD and UPEUR to earn interest when transferred into and held in the CredWallet.

How does it work?

It is super simple. Let’s say you have some 50k TUSD in your wallet. First of all create an account here with CredEarn and transfer the TUSD you have into your Cred Wallet. You do not have to worry about the security because Cred is partnered with insured custody providers like Bittrex and BitGo which protects costumers’ stablecoin worth hundreds of millions.

On the start day of the program, which happens on first and fifteenth of every month, your 50k TUSD will be transferred into your Cred wallet. After three months since starting day, you will get 1000 interest payment in TUSD in your CredEarn wallet. Same happens after another three months with your base 50k TUSD being transferred into your wallet. You could also auto-renew for another three month term.

Target Costumers:

CredEarn is however not targeting Western markets but instead countries suffering with hyperinflation like Venezuela. The unbanked countries crippled with inflation are very likely to adopt this way of making good money. Venezuelans suing Cred service expect to make as much as its users do in the rest of the world.

Is there risk?

Steinrucek is marketing and communication manager with TrustToken and considered it as investment and linked it to certificate of deposit or a bank account saying however he later on said he misspoke when he compared both.

“There is no doubt risk and you are taking out risk because it is investment, but there is no doubt you will get 8% in interest. There is no scenario here where you would be sent home with 5%”.

He further added that any risk from standpoint of the consumer would be evaluating the companies participating in providing the accounts.

BitGo, Uphold, Ledger and Bittrex act as custody providers for funds been sent to CredEarn. As much as $100Million insurance on costumer assets will be provided by BitGo through its deal with Lloyd’s of London.

However this new CredEarn offering is pretty much similar to another startup called BlockFi. BlockFi is a crypto lending startup that provides an interest rate of 6.2% annually on holdings of your stablecoins. The 6.2% interest rate was later cut for institutional investors. The startup claim to have already taken in more than $35million in the deposit accounts with more than $25 million in the first two week of announcing the accounts.

Price War

Some of the leading Stablecoins are USDT with more than $4.04B market cap, USDC with 417.17M market cap, TUSD with $194.5M market cap and PAX with $182.56M market cap. The concept of return on stablecoin has pushed these companies to a price war as well as Interest War to attract more and more users.

In addition, the arrival of many new stablecoin in the market in the last couple of months has challenged the dominance of the leading coins. The competition has also given rise to dedicated tracking service.

alt coins
Zahoor Ahmad Khan
Zahoor Ahmad Khan
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Zahoor Ahmad Khan

YC Startup School, Wharton Finance, Avid Writer, Economics.

See all posts by Zahoor Ahmad Khan