Cryptocurrency exchange Coinbase wants to foster USDC adoption by letting you earn rewards when you keep USDC on your Coinbase account. Essentially, if you’re a U.S. customer, your Coinbase account has become an uninsured savings account with a 1.25% APY rewards rate.
If you’re not familiar with USDC, it’s a stablecoin backed by CENTRE, a consortium of companies working in the cryptocurrency space. 1 USDC is worth exactly 1 USD, and CENTRE members save USD in regular bank accounts whenever they issue USDC tokens. CENTRE members currently hold over $1 billion in reserve bank accounts as they have issued over 1 billion USDC.
In addition to price stability, stablecoins work just like any other ERC-20 tokens. You can hold them in a cryptocurrency wallet, you can send and receive them, you can exchange them.
When you want to buy some bitcoins on Coinbase, users usually transfer some money to their accounts and then convert USD into BTC. And yet, transferring money to a Coinbase account can take days, which means you could miss out on some big price changes.
Conversely, if you’re selling some bitcoins on Coinbase, chances are you exchanged those BTC into USD and then transferred your USD balance to your bank account. If you want to buy some bitcoins again in the future, you’ll have to go through the same lengthy process.
Coinbase’s pitch is simple: Whenever you’re converting your crypto assets and you end up with USD, just leave them on the platform as USDC.
You don’t have to do anything to accept USDC rewards as eligible Coinbase users will automatically start earning rewards starting now. If you currently hold USDC, you’ll notice that you have some “rewards pending”.
Coinbase calculates rewards in real time, which means that you’ll earn rewards even if you hold a large sum of USDC for a few hours and then transfer everything. But your Coinbase account is credited with rewards only once a month.
For now, the APY rewards rate is 1.25%, but Coinbase can change that rate in the future. It’s also worth noting that your Coinbase wallet is not insured by the Federal Deposit Insurance Corporation (FDIC) or the Securities Investor Protection Corporation (SIPC).
Don’t put all your savings on Coinbase, as you could lose everything in case you get phished. Coinbase won’t be responsible.
So who’s eligible exactly? For now, the feature is limited to U.S. customers who don’t live in Hawaii or the State of New York. You have to verify your account (level 2) and you have to hold at least 1 USDC.
If you earn over $600 in USDC rewards in a single year, Coinbase will send you a 1099-MISC form so that you can report your earnings with the IRS.