With banks offering low savings account interest rates that hardly beats inflation, it’s time to think out of the box when growing your money. The answer? Earning interest on stablecoins.
Do you have a bank savings account? If the answer is yes, then one important factor you would consider when signing up are savings account interest rates.
The basic savings account interest rates can be pretty measly. That’s why popular savings accounts like DBS Multiplier account, UOB One account, and CIMB FastSaver account offer a higher bonus interest rate when you complete tasks such as crediting your salary and spending on their credit cards. Here’s a quick recap of the interest rates from each bank:
|Savings Account||Potential Interest Rate||Requirements|
|UOB One Account||Up to 3% per annum||
|DBS Multiplier Account||Up to 3.5% per annum||
|CIMB FastSaver Account||Up to 3.2% per annum||
Sadly, these rates are barely beating inflation or even falling behind. According to the Monetary Authority of Singapore, core inflation rates hit 2.2% in February and overall inflation came in at 4.3%. This basically means your money will be worth lesser in value if you rely on savings account interest rates to grow your assets. Seems like a lot of work for interest rates that can’t grow your money if you ask me.
What if we can grow our savings at a higher rate than what banks are offering now? Nope it’s not another new bank account, but rather we can tap into cryptocurrencies to grow our assets at higher interest rates while beating inflation at the same time. Seems incredulous? The idea is not as far-fetched as it seems.
Hold up, isn’t crypto volatile and unstable?
Yes, and no. We often associate cryptocurrencies with volatile assets that often see large dips or rise in their prices regularly, but what we are discussing here are another class of cryptocurrency called stablecoins.
What are stablecoins and how do they work? As the name states, they are meant to be a stable alternative to their volatile cousins. Stablecoins are tokens minted on the blockchain, and each token issued is pegged 1:1 to the US dollar.
How is this stability achieved? It is mainly done so by backing each token with an equal amount of fiat currency. So if 1 billion USD stablecoin tokens are issued, the central issuer must hold 1 Billion worth of USD dollars as fiat collateral for the tokens. That way, users can trade the tokens to cash and back without any fear that their token will drop in value.
Some popular stablecoins on the market are USD Coin (USDC), Tether (USDT), and TerraUSD (UST) which all hold a value of $1 USD. Some cryptocurrency exchanges also offer their own stablecoins such as Binance (BUSD) and Gemini (GUSD). Fun fact – Singapore also has its own stablecoin called XSGD which is issued by payment institution StraitsX.
How do these platforms earn their money?
Platforms that let users earn interest on their stablecoins utilise the same method that banks use. They lend the digital assets to individuals, corporations or institutions that utilises it depending on their business functions, and the borrowers return the assets with interest. The platform then gives a portion of the interest to you as an incentive for holding the assets with them.
Sounds great, but how do I get started?
You can start by earning interest on them in cryptocurrency exchanges. Several exchanges not only facilitate trading, but they also allow you to deposit your assets and earn interest on them. Interest rates vary from token to token, but stablecoins generally see a higher earn rate amongst exchanges.
Another option to tap on are interest-earning platforms that on lending assets to generate interest rate returns. Let’s look at some of them below.
||Deposit your tokens into Gemini Earn|
|Crypto.com||Between 3% - 6.5% per annum on stablecoins||
||Deposit your tokens into Coinhako Earn|
|Nexo||Between 8% - 12% per annum on stablecoins||
This US-based cryptocurrency exchange allows you to earn interest on your stablecoins with Gemini Earn. Their programme allows you to earn the following rates on these stablecoins:
- GUSD – 7.15% interest
- DAI – 5.31% interest
- USDC – 6.36% interest
In addition to a decent yield that beats savings account interest rates, Gemini is also known for their stringent security measures and third-party borrowers are vetted thoroughly with periodic audits.
Along with daily compounding interest and a quick turnaround when withdrawing funds from the programme, this exchange is a preferred choice for many when earning interest on stablecoins.
This popular cryptocurrency exchange allows you to earn an interest of 1.5% – 8% on your stablecoins with its Crypto Earn programme. To reach the higher interest rates, users can combine several different actions to gain a higher interest rate.
The three categories that decides the earn rates are:
1. The duration that you want to lock up your tokens for
Crypto Earn allows you to deposit your tokens for a period of 1 month, 3 months, or the option to keep it flexible. The interest rates increase by 2% – 2.65% depending on the other factors below.
2. Tiered rewards based on token quota
Tier 1 rewards are capped at USD $3,000 in value regardless of stablecoins or cryptocurrencies, and can earn the full interest rates. Tier 2 rewards apply to amounts between USD $3,000 to USD $30,000 and can only earn half the interest rate stated. Tier 3 rewards apply to amounts above USD $30,000, and it earns you 30% of Tier 2 rates.
3. The amount of CRO tokens staked on the exchange
Users who stake USD $400 or less in CRO tokens receive a lower rate of 1% – 4.5% for their stablecoins for 1 month & 3 month lockups, while those who stake USD $4000 or more in CRO receive a higher rate of 2% – 6.5%.
The exchange has phased out CRO staking rewards for the credit card effective 1 June 2022.
This up-and-rising platform has been on a roll with the green light of its Major Payment Institution licence by the Monetary Authority of Singapore (MAS), and it recently launched its Coinhako Earn programme.
Despite being a relatively new programme, Coinhako has added a sizeable number of tokens to their Earn programme in a short amount of time (There are 20 tokens at the time of writing). Their programme allows you to earn the following rates on these stablecoins:
- USDC – 8.00% interest
- USDT – 8.00% interest
Their recently launched option for UST offers a rather high interest rate and demand is high as well. With a high interest rate and a fast growing earn programme, Coinhako Earn is shaping up to be another great option to beat savings account interest rates.
Interest-Earning Crypto Platforms
If earning interest on exchanges isn’t your cup of tea, you can also consider interest-earning crypto platforms as well. Such focus on lending cryptocurrencies deposited by their users to corporations or institutions and are able to offer rates that exceed savings account interest rates.
This interest-earning company established itself as one of Singapore’s trusted digital payment tokens (DPT) service platform when it received an In-Principle Approval from the MAS in March 2022.
In addition to their credibility, Hodlnaut also offers pretty attractive interest rates when it comes to stablecoins. Unfortunately the company has paused withdrawals due to market conditions, with no updates on the resumption of services.
Another popular way to earn interest on stablecoins is with Nexo. This overseas-based interest platform was one of the first few to offer crypto banking services in 2017 and features a large number of crypto tokens to earn on.
Instead of differing rates for each stablecoin, Nexo offers a fixed base rate for all of them starting from 8.00%. Their list includes:
- Pax Dollar (USDP)
- TrueUSD (TUSD)
Similar to Crypto.com, you can perform actions to increase the earn rate on your assets held. This includes increasing your membership level by keeping a portion of your portfolio in their native NEXO tokens, and choosing to earn in NEXO tokens instead of your tokens held.
Celsius is another interest-earning platform that is beginner-friendly, and it has a longer list of stablecoins than other platforms which it offers a decent interest rate on. Unfortunately due to market conditions, Celsius has currently paused withdrawals with no further updates on the resumption of services.
There’s so many choices! Are there any risk?
While stablecoins are considered less volatile than standard cryptocurrencies, they do still have some associated risk due to their nature.
Firstly, stablecoins are not recognised as legal tender in Singapore. The digital asset can be converted to Singapore or US fiat dollars when needed, but it is not recognised as money when held as a stablecoin asset.
Secondly, interest rates are determined by market forces and may be adjusted. This phenomenon isn’t limited to cryptocurrencies since banks and other financial institutions adjust their rates according to the market as well.
Lastly, always check the security and credentials of the platform. Even if we consider the platforms listed here to be trustworthy, always do your own checks as well to make sure that these platforms maintain strong security measures, are transparent about their lending, and have stringent checks to those they are lending to.
I’m good to go. What else should I do to get started?
Other than signing up with the platform of your choice, you will also need to convert your Singapore dollars to a stablecoin of your choice as well. Hop on over to our fiat on-ramp guide to get started!
Editor’s Note: This post was originally published on May 2022 and has been updated for accuracy and comprehensiveness on 10 August 2022
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