The demand for stablecoin is increasing among institutional borrowers and traders because of cheaper costs and better stability. Over time, we have seen several new stablecoins entering the market, but only a few of them have the functionalities to beat the competition. Gemini recently introduced GUSD, a new stablecoin in its Gemini’s Earn that offers 7.4% APY.
Gemini is a popular crypto exchange that lists a variety of cryptocurrencies and stablecoins. The company also offers interest-earning products called Earn that allows users to earn additional interest for holding their assets.
Gemini Earn was initially launched in February this year, and GUSD is one of the first products in the segment. This program also supports several cryptocurrencies, including Bitcoin and Ether, and allows users to earn an interest of up to 7.4%.
GUSD is a dollar-pegged stablecoin and will currently serve the users of all 50 U.S states, including New York. The product is designed to support DAI, but as it is an algo-stablecoin, it is backed by crypto assets and not fiat currencies.
GUSD Institutional Demand
Gemini mentioned that the interest rate for GUSD is at least 100 times more than the average interest rate of any bank in the U.S, which is less than 0.05%. The platform can offer such high-interest rates as institutional borrowers have a high demand for stablecoins.
“There is high demand for GUSD among institutional borrowers who use it to fund their operations and investment strategies,” said Gemini COO Noah Perlman.
“They are willing to pay competitive market rates to borrow GUSD. Our vetted institutional lending partners such as Genesis Global Capital find these borrowers and lend your funds in exchange for an interest payment.”
However, with the higher interest rate, the risk is also higher than bank deposits. For instance, all loans made through Gemini’s Earn program are unsecured, which means there is a borrower credit risk for users.
Gemini has been making waves in the industry with several new additions. Apart from GUSD, the exchange also launched recurring Buy+Earn functionality. This addition is another step to bring all traditional financial banking services to decentralized finance.