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Binance launches cryptocurrency lending, but it’s pretty strange

Posted: 27 August 2019 2:04 pm
News

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It's a modest lending scheme to start with, but there's always room to grow.

Binance has announced the launch of Binance Lend, which lets Binance users earn interest on digital assets or borrow cryptocurrency.

"Binance Lending is simple and intuitive to use. Users can subscribe to any lending product and earn interest, it's as easy as that," said CZ, the Binance CEO. "The interest rate for each product is guaranteed, so your crypto balance will always grow, regardless of how the market moves."

It's another entrant in a burgeoning field of cryptocurrency lending products, which collectively make up a cornerstone of the decentralised finance or "DeFi" movement.

But this particular product is weird in more ways than one.

Curious and curiouser

The biggest eyebrow-raiser is, as CZ said, the "guaranteed" interest rates and the promise that "your crypto balance will always grow, regardless of how the market moves".

This is a major red flag for cryptocurrency scams and Ponzi schemes because conventional wisdom and educational literature alike will always strongly emphasise that there's no such thing as a guaranteed investment.

And yet, here we are.

The rates are pretty good too, compared to banks, with Binance Coin holdings earning up to 15% interest annually. Tether and Ethereum Classic holdings pick up only 10% and 7% though. Those are the only three cryptocurrencies on offer, which is the second strange part.

BNB and USDT make sense, but ETC feels a bit random.

The reason Binance can get away with this "guaranteed returns" scheme is probably the strict caps on the amount loaned and the set 14-day maturity period, which present some tight guardrails for the amount at stake.

There are individual caps on how much each person can "invest" at once as well as total caps on the total amount that can be invested.

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Even if everything goes horribly wrong and Binance can't turn a single cent from lending funds, each 14-day payout is easy enough to swallow, collectively amounting to the following at today's prices:

  • 1,150.68 BNB (about US$28,750)
  • 38,356.1 USDT (about US$38,356.1)
  • 53.7 ETC (about US$382.80)

It's a modest scheme for a segment that regularly boasts of issuing billions in cryptocurrency loans. But it's still a little baby project, and the thing about little babies is that they tend to grow – probably at a rate roughly similar to 15% per year.

Disclosure: The author holds BNB and BTC at the time of writing and plans to try to get into this thing after launch – "guaranteed interest" red flags be darned. This is not financial advice or anything, but you should totally avoid Binance lending for reasons entirely related to its status as an unregulated financial product and not at all related to the author's desire to more easily get one of those limited spaces.



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Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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