Access to DeFi from Coinbase is enabled for users from Spain and other countries.
Coinbase over “collateralizes” the investment to cover potential losses on the DeFi platform.
This article contains referral links. Know more.
The exchange for bitcoin (BTC) and other cryptocurrencies, Coinbase, based in the United States and offering its services in dozens of countries, is expanding its services. It now incorporates access to decentralized finance (DeFi) through its platform.
From this December 9, the company enabled a tool that allows obtaining financial returns. It can access this service using DAI, decentralized stablecoin developed by MakerDAO.
The Coinbase initiative is carried out together with the Ethereum-based DeFi platform, Compound Finance, according to announced on the exchange’s blog. Compound specializes in loans and offers returns to those who deposit certain tokens on their smart contracts.
“Decentralized finance is becoming one of the most popular use cases for blockchains and cryptocurrencies, because it allows people to access applications without the need for a centralized middleman,” Coinbase highlights.
The company recognizes that for many people it can find it difficult to enter the world of DeFi, as well as they can also face the high fees of Ethereum. “Coinbase is making DeFi more customer friendly and accessible with just a few steps and without network fees,” they say.
It is worth clarifying that, unlike what happens when using the decentralized platform directly, whoever enters via Coinbase must provide their personal data and verify their identity through a document.
Who can access Coinbase’s DeFi returns?
Users from 70 countries are already eligible to opt for this service. According to the company’s statement, Spain is among the authorized jurisdictions. They also mention the United Kingdom and Germany.
CriptoNoticias tried to access Coinbase’s DeFi service from Argentina and Venezuela. It was found that – at least for now – users from those two countries do not have access enabled. Nor can citizens or residents of the United States use this service.
The reason that prevents US citizens from opting for the new service could be related to a threat of lawsuit made by the United States Securities and Exchange Commission (SEC) to Coinbase months ago. The reason was the launch of a loan product based on the stablecoin USD Coin (USDC), a fact reported by CriptoNoticias.
How does Coinbase’s DeFi service work?
The exchange, in its alliance with the Compound platform, requires users to have DAI in their Coinbase account to access DeFi returns.
Then, automatically, the stablecoin is sent to the Compound platform where it begins to generate interest.
With respect to the percentage of the yield, this varies according to Compound rates and it will automatically update to reflect changes in the market.
Currently, Compound handles an annual rate of 4.93%. Anyway, Coinbase clarifies that this is variable and, for example, during October, it fluctuated between 2.83% and 5.39% annually.
Coinbase cautions that while they keep the protocol under surveillance, it cannot “guarantee that there will be no potential losses.” But, in order to mitigate risks, they hold excess assets to cover missing funds, if any.
Additionally, the company guarantees that, although the stablecoins will be in Compound, users will be able to access the funds when they deem it necessary.
Coinbase also offers bitcoin loans
This is not the first investment and finance product to be offered by the Coinbase exchange. At the beginning of November, it unveiled a financial loan tool, using bitcoin as collateral, a fact that was detailed by CriptoNoticias.
In this way, they can be ordered borrowed up to 40% of the value of bitcoin in an account, or up to USD 1 million. In return, the exchange requires the return of an annual interest of 8% applied to the operation.
The line of credit is available, for now, only for the United States. Unlike traditional banking and financial institutions, Coinbase does not require a customer credit check.