A compliant platform stops paying USDC rewards to free users in the United States

Source: PortaldoBitcoin Original Title: Coinbase will stop paying USDC rewards to free US users Original Link: https://portaldobitcoin.uol.com.br/coinbase-vai-parar-de-pagar-recompensas-em-usdc-para-usuarios-gratuitos/ A compliant platform stops paying USDC rewards to US free users

A compliant platform will cease paying USDC rewards to non-subscribed US users. The platform confirmed that only premium subscription users will be entitled to earn 4% returns on their stablecoin balances. This measure does not apply to Brazil, where rewards remain unchanged.

The announcement was initially sent via email to US users, informing them that this change would take effect on December 15. A representative of the compliant platform confirmed that USDC rewards are now exclusive benefits for paid subscription members.

“Subscribers can earn 10 times the US average savings rate, with no upper limit and no minimum balance requirement,” the representative said, noting that other benefits (such as trading fee exemptions) are also included in the $4.99/month (approximately R$27) subscription.

How USDC Rewards Work

The USDC rewards program of the compliant platform has always used a floating rate. For example, after legislative approval in July, the platform paid up to 4.1% on USDC balances. Paid subscription users have always enjoyed additional incentives, and in the same announcement, the platform declared that subscribers would receive 4.5% USDC returns.

When the compliant platform announced its Q3 financial report in October, the company reported that users held $9 billion USDC on the platform, a 90% increase compared to the same period last year. The company attributed this growth mainly to “our USDC rewards program, combined with deep integration of USDC into our products.”

The company also stated that its stablecoin revenue increased by $107.1 million in Q3, “due to an increase in average USDC balances, with most of our earnings coming from interest on related reserves.”

The platform also plans a “system upgrade live broadcast” on December 17 but has not yet shared official details. After a leak in November about possible integration of prediction markets and tokenized stock trading, a representative of the compliant platform directed media to view the live broadcast teaser.

The Relationship Between Stablecoin Issuers and Interest Rates

Stablecoin issuers like Circle issue digital tokens such as USDC to exchange for USD. To ensure each USDC can be exchanged for cash, Circle keeps its reserves in cash and equivalent assets, such as short-term US Treasuries and repurchase agreements. However, this means that the interest earned from these reserves fluctuates with the Federal Reserve’s rate adjustments.

Just yesterday, the Federal Reserve approved its third rate cut this year by 0.25 percentage points, lowering the target rate to the 3.5%-3.75% range. Investors had already been concerned last month that Fed rate cuts would directly impact the company’s earnings from its $78.5 billion reserve.

Circle’s Partnership with the Compliant Platform

Documents submitted by Circle at the beginning of this year for its NYSE listing show that the stablecoin issuer will transfer 50% of the interest earned from its reserves to the compliant platform. Although relevant legislation prohibits stablecoin issuers from paying interest or yields on their tokens, the law does not prohibit partners (such as the compliant platform) from offering reward programs to promote adoption.

The compliant platform first launched the USDC reward program in October 2019, offering 1.25% returns on USDC held on the platform. At that time, USDC was still managed by Centre, a consortium co-founded by the exchange and stablecoin issuer Circle. The consortium was later dissolved in 2023, when the compliant platform acquired Circle’s stake.

In the same month that the compliant platform launched USDC rewards, the Federal Reserve’s Federal Open Market Committee conducted its third and final rate cut of 2019. The Fed unanimously voted to cut the benchmark rate to the 1.50%-1.75% range. However, in 2020, the beginning of the global COVID-19 pandemic led to five emergency FOMC meetings, pushing rates close to zero.

Circle adjusted its reward rates over these years, but this was the first time the program was completely suspended for free users.