- Coinbase's "high yield" accounts are not FDIC-insured but the company says it guarantees them
- The 4% yield is much higher than regular bank accounts but below other crypto competitors like BlockFi
Coinbase announced on Tuesday that retail investors can sign up to receive a 4% return onsavings—the latest example of a crypto company offering rates that far outstrip the conventional banking industry's "high yield" savings accounts, which currently offer a pittance of around 0.5%.
According to the company,customers can now pre-enroll for the offering, which entails purchasing the USD Coin (USDC)—a blockchain-based equivalent of the dollar, which is backed 1-to-1 by a reserve of actual dollars.
Even though the product is essentially the same as an ordinary high-yield online savings account, Coinbase avoids the term for legal reasons. Specifically, the Coinbase USDC accounts are not back-stopped by the FDIC, a federal agency that guarantees the savings that people put in banks.
Coinbase, however, promises "peace of mind" all the same in the form of a guarantee from the company that USDC savings are secure, adding that the account offers "higher interest without higher risk." The upshot is that consumers can conclude their savings will be safe—to the degree they believe Coinbase is solvent and properly managed.
In offering the crypto equivalent of a high-interest account, Coinbase is competing with the likes of BlockFi, Celsius Network and Eco—all of which have jumped into consumer lending, one of the hottest fields in the crypto industry right now. In the case of BlockFi, the company is currently offering 8.6% returns on USDC and other stablecoins including those issued by Gemini and Paxos.
Meanwhile, NerdWallet has published a list of the top eight "high yield" savings in the conventional banking world. At the top are Citi and Goldman Sachs' Marcus brand, both of which are paying 0.5%, while others on the list include startups PurePoint and Varo, which are paying 0.4% and 0.2% respectively.
Due to regulatory restrictions, Coinbase's 4% offering will not be available for now in New York or Hawaii.