Cryptocurrency exchange Crypto.com drastically reduced the rewards it offers on its Visa cards, and also cut incentives for staking its native token, Cronos (CRO).
In a blog post on Sunday, the exchange effectively removed spending rewards for some of its lower-tier cards, and also more than halved rewards for staking in CRO. Crypto.com cited a need for sustainability behind the move, calling it a “difficult decision.”
In response, CRO plummeted as much as 20%, hitting a six-month low of $0.2928. The token is among the worst performing cryptocurrencies in the past 24 hours.
Crypto.com’s move was widely lambasted on social media, with users stating there were few incentives to spend using the exchange’s cards, or even stake CRO. Users also speculated over shifting to other crypto cards operators such as Binance or Coinbase.
Crypto.com on a rate-cutting spree
Effective from June 1, Crypto.com’s Midnight Blue card tier will no longer offer any rewards to customers. Other tiers such as Ruby Steel, Icy White and Obsidian now offer significantly reduced rewards.
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The exchange also introduced a cap on spending rewards, with the highest amount of possible rewards being locked at $50 per month.
But this is not the exchange’s first cut to interest rates or incentives this year. In March, the firm cut interest rates on token deposits twice, and without warning, citing a need for sustainability.
Users had compared the offered returns to those seen in a conventional savings account, which essentially nullifies any incentive to deposit tokens into the platform.
Still Crypto.com appears to be growing steadily as a platform. The exchange has over 10 million users globally, and recently became the official sponsor for the FIFA World Cup.
Lending rates on a downtrend
But Crypto.com’s move highlights a broader issue in crypto lending- due to high inflation, weak market performance and rising U.S. interest rates, offering high returns/rewards is becoming increasingly unsustainable.
An increase in crypto adoption results in more account holders, making big payouts unfeasible.
This issue is commonly observed in major DeFi lending platforms, which have had to drastically lower their interest rates due to growing deposits and user counts.
The trend could eventually see crypto lending rates fall in line with conventional banks, as adoption rates increase.
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