Compound Labs, the team behind the eponymous lending project, has launched its subsidiary Compound Treasury. It provides neobanks and other financial institutions access to the DeFi ecosystem DeFi.
We’re proud to announce Compound Treasury, designed for businesses and financial institutions to access the benefits of the Compound protocol.
The idea is simple: a fixed 4% APR on US dollars, with daily liquidity and none of the complexity of crypto.https://t.co/l8ih8IzrHh
— Compound Labs (@compoundfinance) June 28, 2021
Compound Treasury, with the help of Fireblocks and Circle, allows clients to convert US dollars into the stablecoin USD Coin (USDC). The tokens are used in the Compound protocol at a guaranteed 4% interest rate. This is significantly higher than what institutions can earn on traditional bank savings accounts (0.55%-0.7% annually).
“This is the path to our company’s sustainability. If the interest rates in Compound over time bring more than 4%, the business will make money. It is also an opportunity to offer a new financial product awaited by fintech companies,” said Compound founder Robert Leshner in an interview with CoinDesk.
According to the press release, clients of the new structure will gain access to relatively high Compound market rates, avoiding the protocol’s complexities such as private-key management and converting crypto to fiat.
As of writing, the yield on USDC deposits in Compound stands at 1.67%. However all protocol users still earn governance tokens COMP, whose rising value could enable Compound Treasury to offer clients higher yields.
Over the last 24 hours, the price of COMP rose by nearly 14%, according to CoinGecko. At the time of writing, the token was trading at around $318.
Leshner stressed that Compound Treasury will offer clients services tied exclusively to stablecoins. The decision is motivated by the risk inherent in operations with volatile cryptocurrencies.
An account in Compound Treasury will operate like a normal savings. Users will be able to deposit and withdraw funds at any time.
According to Leshner, his company initially planned to create a DeFi protocol, and then on its basis build a profitable business. Compound Treasury embodies that idea.
“This is what Compound Labs offers — dollar access to the protocol. I think this business could be shockingly big and profitable,” he added.
Senior Messari analyst Mira Kristanto also noted that Compound’s yields vastly exceed the equivalent of deposits in traditional banks, so the project could be successful.
And cause it’s not happening fast enough, DeFi is coming for Wall Street — with a 4% yield on US$ vs <1% yields sitting at the bank.https://t.co/UPxe42dZB4
— Mira Christanto (@asiahodl) June 29, 2021
“When Wall Street offers DeFi yields to clients, people will finally wake up,” she said.
According to Patrick Hoisser, head of trading at Crypto Broker AG, when this happens, ‘the yield difference will be different from what it is now.’ He did not specify in which direction the metric would change.