Originally launched as an attractive alternative to traditional fiat business accounts for Internet-based ventures, the latest features for the Circle Business Account appear to take aim at a different kind of competitor: the decentralized finance (DeFi) ecosystem.
Circle, the Goldman Sachs-backed payments company and issuer of the USDC stablecoin, announced their Circle Business Account service on March 10, 2020. The accounts featured a suite of services designed to help businesses leverage USDC, including APIs that could connect to traditional payment rails, accept dollar-denominated payments as USDC, a USDC wallet service, and access multiple e-commerce marketplaces.
However, given the yields stablecoins such as USDC can generate in DeFi protocols, account holders would have been incentivized to move their stablecoin funds elsewhere. According to DeFirate, lending protocols such as Aave and Fulcrum currently yield 3.4% and 11.6% on USDC, respectively.
But on Nov. 5, 2020, Circle announced new high-yield accounts that may encourage account holders to keep their funds parked in CeFi. In a Tweet on Thursday, Circle announced a waitlist for new interest-bearing business accounts. According to their website, terms and rates will range between the open-term 8.5% APY accounts, to the 12-month 10.75% APY accounts.
Additionally, the yields will be accrued daily and paid weekly, as opposed to on a monthly or even yearly basis often seen in traditional business accounts. This will bring the accounts closer in line with many DeFi lending protocols, which offer interest in real-time. The end result is a product that appears to combine the attractive yields and delivery of DeFi interest with the brand-based guarantees of centralized finance.
Circle’s offering is just the latest in a wider CeFi-meets-DeFi trend. In August, OKEx and Bitrue announced lending platforms which would blend DeFi and CeFi features.
Raoul Milhado, CEO of Elitium, said that CeFi adopting DeFi features (and vice-versa) would ultimately be a boon for the end user:
“Centralized and decentralized apps can be combined to create new types of economies and to encourage more people to use DeFi […] By combining DeFi and CeFi, we can make the transition from a centralized world to a decentralized world more smoothly and, ultimately, win the age-old battle between DeFi and CeFi.”