USDT & USDC Earn Up To 30% Interest On Compound, Are Big Players Involved?

ShapeShift CEO and Founder Eric Voorhees recently raised concerns about the decentralized finance (DeFi) arena by pointing out the extraordinary returns being generated by stablecoins such as Tether (USDT) and (USDC) on platforms like Compound. This statement comes amid the latest update on SEC and ShapeShift fiasco that witnessed the latter paying a fine.

ShapeShift CEO Highlights Exorbitant USDT & USDC Returns On Compound

The ShapeShift CEO highlighted that stablecoins like USDT and USDC have attracted about 20% to 30% returns from collateral loans on Compound. In a tweet, Voorhees remarked, “Trustworthy stablecoins (USDT, USDC, etc) across defi are earning 20-30% right now on trustworthy platforms (Compound, etc), where they’re being lent out with overcollateralized loans.”

While these returns may appear lucrative on the surface, Voorhees expressed surprise at the unprecedented rates and raised questions about the underlying dynamics driving them. Moreover, he speculated the possibility of large financial players having a role in USDT and USDC interest surge as they might have converted bank fiat to stablecoins. He pondered, “How can rates get this high without enticing large financial players to convert bank fiat into stables and earn that yield?”

Furthermore, he labeled the initiative as “one of the best risk-adjusted trades in the world right now.” However, he highlighted that his speculations might be wrong as he might be missing out on something. Hence, he asked the crypto community, “Am I missing something?”

In response to these queries, a user shared his observation regarding the unsustainable nature of the current rates due to a “stables squeeze.” He attribute the cause to farmers/leverage traders as Binance’s farming pools have recently spurred attention. Voorhees acknowledged the validity of their observation and stated, “This is probably the right answer I’m just surprised by the degree.”

Also Read: Conflux Network Announces First Hong Kong Dollar-Backed Stablecoin

ShapeShift & SEC Settlement

The ShapeShift crypto exchange reached a settlement with the U.S. Securities and Exchange Commission (SEC) on March 5, in response to allegations of operating as an unregistered dealer. During the period from 2017 to 2019, ShapeShift allegedly offered securities without registering with the commission.

To resolve the SEC’s claims, ShapeShift agreed to a cease-and-desist order and a $275,000 fine. The agreement marked a significant development, causing ShapeShift’s token FOX to plummet by over 9% to $0.078.

Earlier, in January 2021, ShapeShift announced plans to overhaul its business model, discontinuing direct crypto asset exchanges through its website and ceasing to act as the counterparty to customer transactions. By July of the same year, ShapeShift began winding down its corporate structure.

ShapeShift defended its decision by underscoring its dedication to immutable, non-custodial decentralized finance, a principle it has championed since its inception. Ultimately, the exchange distributed more than 60% of its 1 billion FOX tokens to over one million clients.

Also Read: Senator Cynthia Lummis Drafts Key Bill for Stablecoin Regulation