How Stablecoin Lending Works
Learn how investors can earn passive income by depositing their idle crypto assets into an interest-bearing or savings account.
Crypto lending sites are blockchain-based platforms that offer borrowing and lending services. Typically, interested parties can get instant crypto loans on these platforms. However, potential borrowers must provide some crypto collateral to secure their loans.
Many crypto lending platforms also offer investment opportunities besides providing access to loans. The options are usually available as interest-bearing or savings accounts.
With these services, investors can turn their idle crypto assets into passive income by putting them in a savings account or one that pays interest. Most of the time, money put into an interest or savings account is used to pay for crypto loans that come with interest payments.
Several crypto lending platforms include stablecoin lending options in their investment portfolios. Aside from lending stablecoins, these platforms also let investors put stablecoins into their investment programs to earn interest.
This article will discuss how stablecoin lending works. Also, we'll talk about how investors can put their stablecoins on a crypto lending platform to get better interest rates. We will also highlight common risks associated with stablecoin lending.
In the last part of this article, we will talk about the crypto lending platforms that offer the best stablecoin loans and investment services.
What is Stablecoin Lending
In addition to stablecoin loans, many crypto loan companies also give their customers the chance to lend stablecoin. With this option, investors can put their stablecoins into interest-bearing or savings accounts to earn interest.
Due to the high demand for stablecoins in the crypto markets, users can now earn high-interest rates for lending these crypto assets to a loan or investment platform in this space. But it's important to remember that the interest rates for lending stablecoins vary from platform to platform.
How Does Stablecoin Lending Work?
Stablecoin lending functions just like crypto lending does. Usually, investors sign up with a crypto lending platform that offers an interest-bearing account or savings account.
Next, they complete the registration process outlined by the crypto lending platform. As part of the registration process, investors in a centralized loan company must prove who they are. However, this process does not apply to decentralized finance lending protocols.
Most of the time, identity checks on these platforms go smoothly, and investors should be able to finish them in less than a day. After registering, investors can log in to their interest or savings accounts on the crypto lending platform they chose.
Investors must first put their stablecoins into the crypto wallet that their preferred lending platform gave them before they can move their idle assets into the account that pays interest. After this process, they can head to the interest account section of their preferred lender and deposit their stablecoins.
As an example, suppose you want to deposit your stablecoins into the CoinLoan interest account; in that case, you must follow these steps:
Signup and register on the CoinLoan platform
Next, complete all of the verification processes for new users. This includes providing user data and identity documentation.
After completing the verification process, new users can deposit their crypto assets into their CoinLoan wallets.
Next, head to the CoinLoan Interest Account section on the website.
Scroll to the stablecoin section, select your desired stablecoin, and deposit assets from your CoinLoan wallet into the Interest Account.
Investors should carefully examine the interest rates attached to stablecoin lending on a variety of lending companies before settling on a crypto loan company. This consideration is necessary because interest rates vary from platform to platform.
Before choosing your favorite stablecoin lending platform, you should also think about things like security, customer service, lock-up periods, and withdrawal limits.
Common Risks Associated With Stablecoin Lending
In general, people who want to invest may be worried about lending their stablecoins to an investment platform. In this section, we look at two common risks associated with stablecoin lending.
The lock-up period that comes with lending stablecoins to an investment platform could be a big problem for investors who want to do so. Some crypto platforms have long lock-up periods for their interest accounts, which means that investor assets can be locked up for a long time.
To avoid this problem, people who want to invest must choose platforms that give their interest or savings accounts a reasonable and flexible lock-up period.
Security is another major source of concern for potential investors in this space. Usually, crypto lending platforms will place your deposited stablecoins into hot wallets.
Most hot wallets are always connected to the internet, which makes them easy to steal from or hack. As a result, investors must consider the security features of their preferred lending platforms.
Select a lending platform that provides a cold wallet for storing your stablecoins. Also, consider choosing a platform that offers insurance on all crypto deposits made into its wallets.
How To Earn Interest On Stablecoins
There are two prominent ways to earn interest on stablecoins. The most common way to earn interest is to deposit these assets into an interest-bearing or savings account. There are several crypto lending or investment platforms that provide this type of account.
Investors can also stake stablecoins on a crypto exchange or investment platform to make passive income. This investment option is also available on many crypto lending platforms.
Crypto Lending Platforms With The Best Stablecoin Portfolios
There are several excellent stablecoin lenders currently operating in the crypto markets. In this section, you'll learn about the five crypto lending platforms with the best stablecoin portfolios.
Nexo is a leading crypto loan company. Like many other crypto loan companies, Nexo offers stablecoin loans and investment opportunities to its users. Additionally, investors can deposit their stablecoins to earn interest.
Currently, investors can earn up to 12% APY on stablecoins via the Nexo savings account. All cryptocurrency deposits made on the Nexo platform are insured and kept safe by wallet custodians like Ledger Vault, Bakkt, BitGo, and others that have been audited.
CoinLoan is another lending platform that offers stablecoin loans to potential borrowers. Currently, investors can obtain crypto loans using six stablecoins. They include digital assets like USDT, TUSD, DAI, Paxos Standard, BUSD, and USDC.
With the Interest Account, investors can do more with their stablecoin deposits than just lend them out. All investors can earn up to 10.3% APY on all stablecoins in the CoinLoan interest account.
The YouHodler platform also allows its users to obtain stablecoin loans. There are also opportunities to generate income via the YouHodler savings account. Currently, you can deposit and earn interest using any of these stablecoins USDT, USDC, DAI, BUSD, TUSD, USDP, and HUSD.
Depending on which digital asset you choose, the interest rate on stablecoins in your YouHodler savings account will be different. However, investors can earn up to 8.33% APY on the USDT token.
Stablecoins have become a vital part of the crypto markets. These digital assets have been adopted as a currency for issuing crypto loans. These assets have also been added to the investment portfolios of most lending platforms in this space.
If you want to get paid back for lending your stablecoins, you can do so on any of the investment platforms we've talked about in this article. They all offer excellent interest rates for your passive income needs.