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Digital currency exchange Coinbase (NASDAQ: COIN) is expanding its Coinbase Rewards platform, which allows users to collect interest on digital currency deposits, to include the DAI stablecoin.

“Today, we’re introducing Dai Rewards, with 2% APY* for customers in the US, UK, Netherlands, Spain, France, and Australia,” said Coinbase in their official announcement. “With yields on savings accounts and government bonds at record lows, earning rewards on stablecoins like Dai and USDC stands out as an alternative way to passively generate income using crypto held on Coinbase.”

Coinbase’s announcement comes just one day after the digital currency investing platform Abra launched Abra Interest Accounts, a feature on Abra that allows users to earn up to 9% interest on their BTC, ETH, USDT, USDC, PAX, and TUSD deposits.

Abra lets its users trade Bitcoin SV, and although Coinbase does not have BSV trading support yet, it does allow it’s users to collect the BSV that they received when BCH forked off of the original Bitcoin.

Competing with banks?

The offerings from both Coinbase and Abra give banks a run for their money. Banks offer their customers interest on fiat deposits since they use customer deposits to make loans to other customers; and now, digital currency platforms are beginning to compete with banks in that regard.

A majority of the interest-bearing features on digital currency platforms are for stablecoins backed by the U.S. dollar and offer a higher interest rate than banks that is delivered on a more frequent basis. For instance, Coinbase’s interest payment on DAI deposits will be distributed within five business days after the initial DAI deposit, and then will be distributed every day after that. Compared to banks, which typically distribute interest payments once a year or monthly if you are lucky. It’s also safe to assume that digital currency platforms are also using their customers’ deposits to make loans just like banks do.

Off-loading to DeFi

The primary reason that companies like Abra and Coinbase are offering their users interest on stablecoin deposits is because they are off-loading customer’s digital currency into DeFi platforms. The most popular DeFi platforms allow individuals to lend and borrow digital currency, and they give lenders interest on their deposits in amounts that are significantly higher than what Abra and Coinbase are offering.

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