USDC Yield

Earning Yield on USDC: The Complete Guide to Circle Yield

Earning Yield on USDC: The Complete Guide to Circle Yield

Team Circle Team Circle February 10, 2021

Corporate treasurers and institutional investors looking to preserve capital and earn real interest on idle cash reserves can earn higher yields on USD Coin with Circle's institutional-grade, ultra short-term USDC fixed-income investing product.

This article will cover how stablecoin yield products have evolved over the last decade, how Circle Yield generates yield on USDC, and explore three USDC yield use cases. Earn Yield on USDC with Circle Yield, an ultra-short-term crypto fixed-income investment product.

The Evolution of Yield in the Crypto Markets

When cryptocurrency first emerged with the birth of Bitcoin in 2009, one of the earliest points of contention with the new “internet money” was that — unlike fiat currency — cryptocurrency does not pay interest. 

Digital currencies don’t pay interest when held in digital wallets, whereas money deposited in a bank account typically pays interest — albeit very little. 

However, as the crypto markets matured, the first interest-paying accounts emerged to allow digital asset investors to earn yield on their dormant holdings.

First Wave Crypto Yield Products

In the first wave of interest-bearing crypto accounts, a handful of service providers enabled crypto investors to deposit bitcoin in an account to earn interest.

The service provider was able to pay interest on bitcoin by taking the deposited funds and lending them to margin traders on digital asset exchanges on behalf of the account owner. 

Additionally, several exchanges started to offer their users the ability to earn interest by lending to margin traders directly on the platform. 

Second Wave Crypto Yield Products

The second wave of crypto yield products came with the entrance of institutional investors and professional traders. As the crypto markets evolved to become an established alternative asset class, more and more professional market participants entered the foray looking for leverage to take advantage of market opportunities. 

The institutional demand for borrowing crypto enabled a more sophisticated class of yield products targeted at both retail and institutional investors looking to earn interest on their long-term crypto holdings and cash reserves. 

Third Wave Crypto Yield Products

Now, we are in the third wave of crypto yield products, where you can find both decentralized lending protocols in the burgeoning DeFi market and professionally-managed, secure yield accounts in the CeFi (centralized finance) market. 

The DeFi lending market is currently worth over $12 billion, while the CeFi lending market is in the tens of billions, thanks to increasing institutional investor demand for both borrowing and earning yield on crypto assets. As a result, yield-generating accounts are typically able to pay above-average interest rates to depositors. 

 

What is USDC yield?

Through Circle Yield, an ultra short-term crypto fixed income investment vehicle,  qualified businesses will* be able to deposit USDC for durations ranging from 30 days to 12 months and earn superior yields on fixed-term deposits, paid in USDC.

 

With the introduction of short-term yield accounts, Circle empowers businesses and financial institutions to leverage the power of digital dollar stablecoins and a growing crypto lending market to earn above-average yields. 

Through a partnership with leading institutional crypto lender Genesis Capital, Circle Yield can generate competitive stablecoin yields on fixed-term deposits, allowing qualified businesses to earn interest on idle cash and working capital.

With our Circle Yield, an internet business can earn yield on working capital held in digital dollars for every day it isn’t put to use. Additionally, we want to give financial institutions who are bold enough to venture into the world of crypto assets the ability to generate higher yields for holding digital dollars than they currently could when holding ‘physical’ US dollars.

— Jeremy Allaire, Circle CEO

 

Circle Yield will provide access to these crypto lending markets while remaining user-friendly to businesses and institutions around the world*. 

How can Circle Yield generate superior APYs on USDC?

Circle Yield helps businesses generate stablecoin yields on ultra short-term USDC fixed-income deposits through Circle’s partnership with Genesis Global Trading who lends the deposited USDC to institutional USDC borrowers, and pays USDC lenders a percentage of the interest generated from the borrower's debt payments.

Because there are myriad opportunities to generate crypto trading revenues, market participants including crypto investment funds, hedge funds, proprietary trading houses, and institutional investors are willing to pay high borrowing rates.

Crypto lenders can, therefore, pay depositors much higher yields than traditional fixed-income financial products like CDs and money market accounts.

If you are placing US dollars into a retail money market account, you will earn around 0.50% APY. In the institutional money markets, the rates are even lower due to today’s historically low interest rate environment in most major economies. 

As a result, businesses and institutions are looking for new ways to earn yield to meet their liquidity management needs. The crypto market offers this opportunity.

How can corporations and institutions use Circle Yield to earn interest on USDC?

Circle Yield offers various use cases for banks, large commercial enterprises, crypto startups, internet businesses, FinTechs, real estate investment firms, financial institutions, and accredited businesses looking to earn high APYs on USDC

 

1. Earning Yield on Working Capital

Regardless of whether you are an internet business, a bank, a crypto startup, or a financial institution, you can convert your working capital from fiat currency into digital currency and deposit digital dollars into Circle Yield to earn above-average yields on short-term cash.  

For corporate treasurers and money managers looking for alternative short-term cash investments to low-yield money market products or corporate debt instruments, Circle Yield's institutional-grade fixed-income investment product offers a competitive option that can generate above-average yields on working capital.

 

2. Generating Above-Average Returns 

Circle Yield provides treasurers and institutional investors with a novel way to allocate capital in an asset class with a different risk profile than otherwise found in the traditional money and capital markets. 

For example, the open-term account provides market participants with the opportunity to passively deploy capital in the crypto capital markets while remaining in the US dollar. 

Circle Yield could also offer a substantially higher annualized returns than comparable products in the legacy financial markets.

 

Government Bonds

The current 10-Year US Treasury yield is at an all-time low of less than 1%, making it challenging for corporate treasurers and investors to preserve capital and earn real returns on the risk-free rate.

 

AAA US Corporate Bonds

While AAA-rated US corporate bonds have a long-term average yield of 6.68%, investment-grade corporate debt will earn you around 2.50% per annum.

Even though corporate bonds offer slightly higher returns than US Treasury bonds, the low-interest rate environment is also making life harder for investors with exposure to corporate debt. 

 

High Yield Corporate Bonds

High-yield corporate bonds have historically outperformed government bonds and high-rated corporate debt, but they come with a much higher level of risk, which is too high for most treasurers and non-specialist fixed-income investors.

 

US Stocks

US stocks, measured by the S&P 500 Index, have historically generated average annualized returns of close to 10%.

However, if you are entering the market at the end of a rally or in the middle of a correction, your returns can be substantially lower or even negative, making stocks a risky investment for conservative investors, such as corporate treasurers.  

All of these allocations are not without risk. Entering into digital currency lending markets can pose credit, market and operational risk that may result in loss of principle and should be carefully vetted before comparison risk adjusted payments.

 

New call-to-action3. Managing Assets and Liabilities

For financial institutions who are looking to balance their assets and liabilities, depositing digital dollars in Circle Yield can be an exciting new avenue to manage the interest rate gap

By converting US dollars into USDC and earning higher returns, asset and liability managers can hold more funds in cash while earning potentially higher yields than riskier asset classes. 

 

Start Earning Yield on USDC 

Sign up to join the waiting list and be notified as soon as the Circle Yield goes live*.

A Circle Account can be opened by businesses and financial institutions globally, while Circle Yield will be gradually rolled out to other countries around the world.

 

* Offering subject to business approval, geographical availability, and regulatory authorization, and there is no guarantee that the product will become available in a specific timeframe or geography. Service offered through Circle International Bermuda Limited. It is anticipated that Circle International Bermuda Limited will enter into lending arrangements with one or more institutional borrowers, including Genesis Global Capital, LLC. You should conduct your own investigations and analyses in connection with any participation in this product and the information set forth in these materials. All prospective participants in the products described herein are advised to consult with their legal, accounting and tax advisers regarding any potential participation. Additional information is available upon request. Customer-facing offering subject to regulatory requirements and business account approval. Please contact Circle to discuss eligibility.

** Rates are purely indicative and are subject to change pending availability, approval and market conditions.

*** Withdrawal requests for open and fixed term accounts could take up 72 hours in high withdrawal periods.

1
%

1 month fixed rate

Fixed short term**

Retain flexibility by allocating over a shorter duration.
Rates are purely indicative and are subject to change pending availability, approval and market conditions. 
1
%

3 months fixed rate

Fixed short term**

Retain flexibility by allocating over a shorter duration.
Rates are purely indicative and are subject to change pending availability, approval and market conditions. 
1
%

6 months fixed rate

Fixed long term**

Earn higher rates by locking in funds for longer.
Rates are purely indicative and are subject to change pending availability, approval and market conditions. 
1
%

12 months fixed rate

Fixed long term**

Earn higher rates by locking in funds for longer.
Rates are purely indicative and are subject to change pending availability, approval and market conditions. 

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