Photo Credit To qwdqd Via Flickr
Binance, the largest crypto exchange in the world, recently unveiled a crypto lending platform. The platform will allow users to earn up to 15% guaranteed interest on their crypto without being exposed to any risk. However, some are skeptical about Binance’s ability to deliver on its promise. As a result, some are warning investors to be cautious about the lending program.
The Lending Program Has Been Criticized by Some
Binance recently revealed that investors would be able to use their crypto holding to get a passive income by lending their crypto for a fixed period. The post goes on to state that only three crypto coins will be accepted. BNB, the native crypto coin of the exchange, will earn people 15%. The loans mature after 14 days with interest paid out immediately. While it looks enticing, some analysts want crypto investors to be cautious.
One analyst said that promising investors a guaranteed rate never works out well. CZ, the Binance CEO told those who invest in the platform that since interest is guaranteed, investors would always see their crypto balance grow.
Binance CEO Hits Back
The Binance CEO is not taking the criticism lying down. While some have been critical of the new lending program, he explained that there was a simple explanation of how the platform works. In a tweet, the CEO said that all lending to the platform would go to the margin borrowing business of the exchange. These borrowers would pay the interest, which the exchange would give to those that lend money to it.
He explained that the platform was quite different from other schemes that guarantee a return on investments. According to the tweet, they do not need to look to other places where they can invest. It is the reason why they released their margin feature first, according to him.
The lending platform is going to launch on August 28. For those that lend Tether, they will earn a 10% interest, for those that lend Ethereum Classic coins the exchange will offer a 7% rate. BNB coins, as already mentioned above, will earn users a 15% interest. This platform will come with a cap for each user. Additionally, there is a general cap for all the coins to be listed. For Tethers, there will be 10 million, for Ethereum Classic, the cap is set at 20,000. Finally, the platform has set an upper cap of 200,000 for the BNB coins. It is likely that the initial quote will be filled quite fast once the platform goes live.
One investment expert noted that with users being able to trade, custody, and earn passively in one platform, the user experience would improve a great deal. The result is that Binance will earn the loyalty of its customers over time. It is worth noting that Binance is not the only exchange that offers such a service, BlockFi has a similar service. The exchange offers compound interest of up to 6.2% annually for ETH, BTC, and the Gemini Dollar.