Crypto lending is a fast-growing corner of the crypto world, and DeFi efforts around crypto lending have been picking up steam, as we periodically cover in our Friday DeFi watch series. We had recently covered some interesting developments in this space around tokenizing interest here. It is also worth revisiting an earlier piece on crypto lending rates, which are highly volatile, compared to their traditional finance peers.
Crypto exchange behemoth Binance today announced its foray into the fast-growing crypto lending business. Binance users can earn interest on their cryptocurrency deposits with BNB, ETC and USDT being the first ones to go live on the platform. Binance is clearly expanding the suite of its product offerings with the launch of margin trading followed by the lending business. This new initiative could be used to channel more liquidity into the borrowing business in which Binance lends funds for users to trade on margin. While the interest rate differential for ETC and USDT seems reasonable at 0.3% and 0.0375%, the figure for BNB stands astronomically high at 94.5% due to the significantly high borrowing rate of 0.3% daily interest rate (109.5% annualized).
Combined with its recent foray into stablecoins through a stablecoin platform that could potentially permit any corporation or entity (or even any Govt) to launch its own stablecoin, as well as its recent DEX efforts, Binance truly is reaping the virtuous cycle benefits of being an end-to-end behemoth in the heart of the crypto scene in Asia, where it is also relatively unfettered by regulations, unlike some of its counterparts in the US such as Coinbase or Circle. It remains to be seen how ‘traditional’ DeFi giants such as Compound and DAI react to Binance’s entry into this fast-growing market. We are in the very early stages of DeFi, and some incredibly compelling, hitherto unimaginable use-cases should soon emerge in this space. Keep watching closely.
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