The cryptocurrency world has seen an influx of stablecoins. While their initial purpose is to provide a stable asset value, Nexo sees merit in this concept for different reasons. The crypto-oriented loan platform will offer hefty interest rates to users storing major stablecoins on this platform.
Nexo has Unusual Plans
The purpose of a stablecoin is to create digitized versions of existing assets. In this case, they usually represent 1 US Dollar in digital form. These digital currencies can be traded freely across many exchanges supporting Bitcoin and altcoins. However, it appears they will also provide an interest-bearing alternative to traditional bank accounts.
Nexo, the loan platform focusing on cryptocurrencies, sees merit in these new assets. Holders of such coins can earn interest rates of up to 6.5%. Those rates are high, especially for currencies which do not fluctuate in value. This is a rather surprising development for a company trying to position itself in the world of cryptocurrency lending.
The company confirms they are looking for owners of the “major” stablecoins. That list includes TUSD, USDC, GUSD, PAX, and DAI. One notably absent currency is Tether’s USDT. That asset has not been able to maintain a $1 valuation for nearly two weeks now. All other stablecoins have no problems in this department, which makes them of greater interest to Nexo.
Crypto Lending Slowly Becomes Successful
Volatile currencies such as Bitcoin lend themselves perfectly to lending service providers. The fluctuating value of this asset seems to attract a lot of attention. Nexo also supports Ethereum, Binance Coin, NEXO, and XRP as collateral options. The addition of these major stablecoins brings the total to 10 different supported assets.
These new rates put an interesting spin on crypto lending as a whole. Extending such a loan carries certain risks. The recipient of a loan can back out of the deal and never refund the lender. That has been a problem for platforms such as BTCJam in the past few years. How Nexo will address such potential situations, remains to be determined.
Using a stablecoin for loans seems counterproductive. It is virtually the same as obtaining a cash loan, but in digital format. This new decision may improve the overall liquidity of all supported stablecoins accordingly. None of them comes close to rivaling Tether’s USDT in terms of supply and market cap. This high interest offered by Nexo may help change that situation over the coming months.
Why do you think Nexo is offering such high interest gains for stablecoin holders? Let us know in the comments.
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