Crypto trading platform Bitstamp has recently launched an XRP lending service, offering a “permanent” 2% yield. This move comes after the platform relisted XRP for trading last month. Bitstamp already offers a 2% annual percentage yield (APY) on several other cryptocurrencies, including Bitcoin (BTC), Ethereum (ETH), USD Coin (USDC), and Tether USD (USDT).
Bitstamp has partnered with Tesseract for its lending service, which focuses on lending to reputable institutions and conducts thorough risk and credit assessments for all borrowers. Tesseract categorizes counterparties into four tiers, with Tier 1 including large top-tier market makers from traditional finance, and Tier 4 including smaller institutional borrowers.
According to Bitstamp’s June 2023 lending report, most of its lending portfolio is allocated to Tier 2 firms, which are considered large top-tier crypto-native institutions. The report states that all borrowers have been making timely repayments of both interest and principal as scheduled, indicating strong performance of the loan portfolio.
Despite the recent legal victory of Ripple over the SEC, which confirmed that XRP is not a security, the 2% yield on XRP offered by Bitstamp remains lower than the 4.4% yield on USDT and USDC. Some respondents on Bitstamp expressed disappointment with the lending rate, expecting higher returns. However, regulatory pressure has limited Bitstamp’s lending services to residents outside of the United States, United Kingdom, Canada, and Japan.
Crypto lending has gained popularity among retail crypto holders as a way to earn on their existing cryptocurrency holdings. These lending services often offer higher savings rates compared to traditional finance firms, even in low-interest rate environments. However, the risks associated with crypto lending products have been highlighted by regulators worldwide. Several major crypto lending firms and hedge funds have faced challenges and even bankruptcy due to market volatility and overwhelming withdrawal demands from customers.
While Bitstamp’s XRP lending service provides an opportunity for investors to earn a yield on their XRP holdings, it is important for users to consider the risks involved and make informed decisions. As the crypto lending market continues to evolve, regulatory scrutiny and market conditions will play a significant role in shaping the sustainability and attractiveness of such services.
Please note that the information provided is for informational purposes only and should not be considered as financial advice.