Dive Brief:
- To mark the launch of its lending arm, global cryptocurrency exchange Binance is offering 15% annualized returns over the next 14 days to its customers who, on Wednesday, lend their holdings of the exchange's coin, BNB, according to the Binance's website.
- Binance also guarantees 10% returns over that time to users who lend Tethers, and 7% for Ethereum Classics, two other cryptocurrencies. The offer is limited to 10 million Tethers; 200,000 BNB; and 20,000 Ethereum Classics. The exchange said it will be "constantly evaluating" new coins and tokens to add based on value and demand.
- The exchange may be trying to boost the price of BNB, which has lost 10% of its value in the past month, according to Bloomberg.
Dive Insight:
The launch also illustrates the exchange's attempt to diversify its business, broaden its customer base and retain users. Binance rolled out margin trading last month and announced plans to add futures trading to its platform, but did not indicate a timeline on that.
The exchange may also hope users buy BNB on margin to lend them.
"Users can subscribe to any lending product and earn interest," Binance CEO Changpeng Zhao said. "The interest rate for each product is guaranteed, so your crypto balance will always grow, regardless of how the market moves."
But the market is precisely what will force such a high yield to be short-term, Jeff Dorman, chief investment officer at the Los Angeles-based asset management firm Arca, told Bloomberg.
"In terms of the yield being offered, 15% is incredibly high, and is likely unsustainable as competition will always bring rates down," Dorman said.
