You are here
Teaser rates come to crypto as Binance starts lending business
BINANCE is guaranteeing returns as high as 15 per cent to customers who lend their cryptocurrencies, the latest move by the largest digital exchange to cement its dominant market position.
Going live on Aug 28, Binance Lending will let the exchange's users earn that much in annual interest for lending out their BNBs - the exchange's own coin - while earning 10 per cent for Tethers and 7 per cent for Ethereum Classics over 14 days.
A limited number of coins per user will be accepted, and a total of only 10 million Tethers, 20,000 Ethereum Classics and 200,000 BNBs will be eligible, according to Malta-based Binance's site.
"If you can trade, custody and earn passive income all in one place, it creates a better user experience," said Jeff Dorman, chief investment officer at Arca, a Los Angeles-based asset manager that invests in cryptocurrencies. "This leads to stickier customers, and more revenue for Binance."
Additional uses for BNB, such as in lending, are likely a way for Binance to try and boost the coin's price.
BNB has fallen 10 per cent in the past month.
"The greatest impact on price will probably be on BNB, rather than on Bitcoin or other coins that can't be used for loans," said Josh Gnaizda, chief executive officer of Crypto Fund Research.
Binance is joining the ranks of other Bitcoin exchanges by effectively offering interest-bearing crypto savings accounts.
Mike Novogratz-backed BlockFi, for example, offers up to 6.2 per cent in annual compound interest on Bitcoins, Ethers and Gemini Dollars.
"In terms of the yield being offered, 15 per cent is incredibly high, and is likely unsustainable as competition will always bring rates down," Mr Dorman said.
Binance, which recently launched margin trading, said the lent coins "will be used in cryptocurrency leveraged borrowing business on Binance.com", according to the terms of service.
"They need to keep growing their product offerings as their reach becomes limited by their attempts to launch compliant offerings," Mr Gnaizda said. "And more specifically, providing lending services based on BNB and Tether allows them to fund the expansion of their margin trading business."
Perhaps it will push more users toward margin trading as well, said Aaron Brown, an investor and a writer for Bloomberg Opinion.
"If you want to borrow coins from Binance, you pay rates more like 100 per cent per year, so offering to pay 10 per cent to 15 per cent on loans still leaves them with a huge spread," Mr Brown added. "They may hope people buy coins on margin to lend them." BLOOMBERG