Coinbase Cuts USDC Rewards Rates in a Blow to the Asset’s Growth Hopes 

Popular cryptocurrency exchange Coinbase is making a significant change to its rewards program for the USDC stablecoin. The San Francisco-based exchange has reduced the rewards percentage on USDC holders by 90 percent.

Coinbase Giving Up on USDC?

As Decrypt reports, Coinbase sent an Email to users earlier this week. The exchange confirmed that rewards for holding USDC in Coinbase accounts would be slashed from 1.25 percent to 0.15 percent. The reduction will bring Coinbase’s rewards percentage levels on par with those offered by several banking institutions, but also below several of its counterparts. The Email showed that the new rewards program would take effect as of today. While Coinbase didn’t give reasons for the new change, it could prove fatal for the hopes of the stablecoin and provide a means for other dollar-backed assets to take up a larger market share. 

Coinbase has been offering 1.25 annual percentage yield on USDC tokens held in its accounts since it launched the USDC rewards program in September 2019. It will be interesting to see how this new rate affects users’ desire to continue holding the asset.

While Coinbase is gutting its rewards program for its asset, the exchange appears to be expanding that of another cryptocurrency. Last week, the exchange announced that it had rolled out staking rewards on Tezos for users in the United Kingdom and three countries in the European Union. 

As the company’s announcement confirmed, users in the U.K., Spain, France, and the Netherlands will now be able to get interest on Tezos holdings on the exchange. Coinbase launched the Tezos staking rewards in the United States last year, and as the firm explained, users have earned over $2 million in rewards since then. 

Unlike the paltry returns that USDC holders will now be getting, Tezos staking rewards on Coinbase stand at an impressive 5 percent annual percentage yield. Given this, it won’t be much of a surprise to see more users switch to holding the top cryptocurrency. 

Tether Pulls Away in the stablecoin Race

USDC’s rewards reduction could also hurt the asset’s chances of dethroning Tether as the top stablecoin. As CoinMarketCap shows, USDC is the second-largest stablecoin in the industry, with a market cap of $735.2 million at press time. Tether, on the other hand, holds a market cap of $9.1 billion. 

Tether recently leapfrogged XRP to become the third-most valuable digital asset in the world, only behind Bitcoin and Ether. The asset’s rise has been attributed mainly to the constant increase in the supply of Tether. At the same time, reports show that there were some major Tether inflows to exchanges in the weeks leading to the Bitcoin halving.

The top stablecoin’s case also appears to be getting some help from another fledgling part of the crypto space – decentralized finance (DeFi). Earlier this month, leading DeFi protocol Aave reported that it had $7.2 million in USDT tokens locked, out of $60 million in total assets. Compound, one of the top DeFi platforms, also added Tether to its asset base, after a community-driven governance proposal passed last month.