BlockFi was recently hit with a $100 million penalty by the SEC over their lending products in the US. Following BlockFi, another major crypto-lender, Nexo discontinued its high yield product for US clients. Amidst all the regulatory actions, cryptocurrency trading and payments firm BCB Group launched their dual fiat and crypto yield product Monday in the European Union. According to a press release, its new product, BCB Yields, offers users various options to earn a return on their balance using the BCB Securities Fund. BCB Group claims this to be the first product in the crypto market to provide such investment options on a range of cryptos. When denominated in Euros, the annual percentage rate sums up 2%.
Due to excessive inflation, the interest provided by traditional financial institutions has fallen near or even below zero. This depreciation in interest rate has created a great void in the market for high-yield financial products. As an alternative to traditional banking, DeFi and CeFi platforms are trying to lure investors with a higher yield. With BCB Group's new product, users will get market risk-neutral returns produced by arbitrage strategies, just like sophisticated traders. These strategies are already well established in traditional finance but not yet widely understood or applied to the crypto market.
BCB Group says that their new product is the only risk-neutral investment tackling inflation in most currencies. Clients can choose to invest in either fiat or crypto over periods of 30,60, or 90 days, accompanied by corresponding notes that resemble bonds. The 2% interest can jump to even 8% when denominated in the US dollar. There are multiple strategies for USD, EUR, GBP, CHF and cryptocurrencies. This is just the first step of the firm that will be followed by a broader range of yield options leveraging decentralized finance protocols and products. For those stuck in the negative interest rate area, investing in crypto derivative products can be a great solution.
Before investing in crypto lending platforms or applying for crypto-backed loans, doing due diligence always pays off in the long run. While there are some safe crypto lending platforms like BlockFi and CoinLoan, there are also some fraudulent platforms like Cred where you risk losing your assets. It is always recommended that you go through the platform reviews and comparisons before deciding.