US-based exchange Coinbase on June 2 emailed its users that it would be decreasing the interest rate for its stablecoin USD Coin (USDC) from an annual yield of 1.25% to 0.15% - an 88% drop in return rates for holders. Saying that they periodically assess the rewards rate for USDC, the new interest rate has already come into effect at the time of publishing.
In terms of market cap, USD Coin is the second most popular stablecoin after Tether (USDT). The new interest rate removes one of the most appealing factors of stablecoins, namely that they provide holders with an unmatched interest rate for a gain in passive income.
The Circle-backed stablecoin initiative first began offering interest to US customers in October 2019, with the rewards being distributed monthly. The program was a bid to increase the attractiveness of USDC as an investment, which still trails USDT by over $8 billion.
The stablecoin niche is highly competitive with multiple well known entities that directly challenge the likes of Coinbase also offering dollar-backed stablecoin. DAI, Gemini Dollar (GUSD) and BUSD are all up and coming tokens that are attempting to bridge fiat and crypto through various investment features.
Coinbase has been experiencing a tumultuous time, as far as its trading platform goes. The exchange experienced downtime just as Bitcoin (BTC) was spiking to $10,000, angering some users, who noted that this happened during previous incidents of volatility.
