Competition for DeFi – Circle introduces business accounts with high interest income9. November 2020
The “centralized financial services” are now increasingly competing with the decentralized financial services.
The Circle Business Account, the business account of the crypto payment service provider Circle, which was originally intended to offer Internet companies an alternative to bank accounts with traditional, centralized financial institutions, is now also becoming a competitor for decentralized financial services (DeFi).
Circle, which is supported by Goldman Sachs and even publishes the Stablecoin USDC had the Circle business account on March 10, 2020 introduced
The corresponding business accounts offer companies a number of possibilities to use the USDC as uncomplicated as possible as a means of payment and transaction. For example, you can connect the stablecoin to traditional payment systems via an API, receive payments in US dollars as USDC or use this to pay at various online retailers.
The crux so far, however, was that crypto assets in the form of stablecoins such as the USDC could be better invested in DeFi projects, as higher interest income beckoned here. According to data from DeFi information portal DeFirate, projects such as Aave and Fulcrum currently offer 3.4% and 11.6% interest on the USDC, respectively.
Circle has now countered this by introducing new business accounts with particularly high interest rates on November 5th
This is intended to ensure that corporate customers prefer to park their crypto funds with Circle, and thus in the system of „centralized financial services“ (CeFi). As stated on the company’s website, the corresponding interest rates are between 8.5% and 10.75% per year. However, interested customers must first register on a waiting list.
The interest income is skimmed off daily and paid out weekly, which is a clear advantage over traditional business accounts, which often only pay out monthly or even annually. Accordingly, Circle is more oriented towards DeFi projects that offer interest income in real time. The end result is a financial product that combines the rapid availability and attractive interest rates of decentralized financial services with the security of centralized financial services.
The new offer from Circle is the next crossover between “CeFi” and “DeFi”. In August, the OKEx crypto exchange already entered into a partnership with Bitrue in order to create similar synergies.
Raoul Milhado, CEO of Elitium, recently in a commentary for Cointelegraph written , competition between DeFi and CEFI that ultimately for consumers is beneficial:
“Centralized and decentralized apps can be combined to create new financial products and get more people excited about DeFi […]. By combining DeFi and CeFi, we can simplify the transition from a centralized to a decentralized financial system. „