Key takeaways:
- The Lend programme was basically shut down by US officials early this year.
- In the Compound Finance process, holdings are deposited.
Decentralized finance, or DeFi, is a set of programs that manage transactions without the use of centralized intermediaries. Many observers consider DeFi to be a very unpredictable and risky industry. While some apps promise large returns, investors can expect to lose money.
Coinbase Global Inc. has launched its first yield product, which allows customers outside of the United States to receive interest on their stablecoin holdings via a third-party decentralized financial platform.
Coinbase’s intentions to launch another interest-generating product called Lend were effectively crushed by US regulators earlier this year. Customers in over 70 countries will be able to access the “attractive yields” of decentralized finance by depositing their Dai, a stablecoin designed to be pegged to the US dollar, into Compound Finance, a DeFi protocol, according to a business blog post published on Thursday. In October, the program’s yearly percentage yield fluctuated between 2.83 percent and 5.39 percent.
The product is not the same as Lend, which was canceled before it could launch. Customers would have had to lend their cryptocurrency holdings to Coinbase with Lend, whereas they will lend to Compound Finance, one of the most popular DeFi apps, with the new product. The SEC threatened to sue Coinbase in September if the exchange offered Lend, which would have allowed users to earn a 4% return.
“We still don’t have clarification on why our product wasn’t allowed to advance,” Coinbase Chief Financial Officer Alesia Haas said in a congressional hearing on Wednesday.
While Coinbase is a controlled exchange, Chief Executive Officer Brian Armstrong champions a long-term goal of connecting its users to the emerging realm of decentralized finance apps. Coinbase claims to offer simplicity of usage and to cover transaction charges known as gas fees that consumers could face if they tried to use Compound on their own.
Coinbase stated that a wider range of assets and DeFi protocols would be included in the future. At this time, there are no costs charged to users for using the software.
