USDC - How Risky Is Coinbase's 4% Interest Rate On USD Coin?
Coinbase (NASDAQ: COIN) , America's leading cryptocurrency custodian and exchange, announced a new program that pays a 4% annual percentage yield (APY) on the stablecoin USD Coin (CRYPTO: USDC) . USDC is the world's second-largest stablecoin (behind Tether ) and is backed by real U.S. dollars held in a bank. Since it can be redeemed at any time for one U.S. dollar, its price stays stable, hence the term "stablecoin."
If one USDC is equal to one U.S. dollar, why is Coinbase offering such a generous 4% interest rate? By comparison, the typical savings account pays far less than 1% per year on U.S. dollars. Let's dive into the details of Coinbase's USDC interest rate to determine just how "risk-free" it really is.
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How Risky Is Coinbase's 4% Interest Rate On USD Coin?