Key takeaways:
- Centralized crypto lending platforms like Nexo and Youhodler offer relatively higher yields and low fees but come at the cost of custody of your funds.
- Centralized exchanges like Binance offer diverse lending and yield farming options for USDT but have lower yield potential.
- DeFi lending protocols like Aave and Compound give you full control over your funds and often have no KYC requirements but may charge high fees.
As an investor, it’s hard to find generous yields from traditional banking products like savings accounts. Thankfully, the crypto industry has matured and offers low-risk investment products. Many of these products involve stablecoins, blockchain-based tokens priced to fiat currencies (usually the US dollar).
The largest stablecoin by market cap is Tether (USDT); here’s how you can make the most out of it.
USDT Lending Platforms
Centralized lending platforms are the ideal choice to generate high yields while reducing volatility risk. They operate similarly to traditional online lending services or banks. They will require you to pass through a KYC (know your customer) verification procedure before your account is approved. We selected three of the most trusted lending platforms that support USDT and provide high yields:
Nexo
Another popular crypto lending platform is Nexo, founded in 2017. If you choose NEXO token rewards, the platform’s native token, you’ll earn an even higher APY. These are some of the highest interest rates in the market today. We also like Nexo’s intuitive interface, which can make a difference for beginners.
Retail and institutional investors choose Nexo because of its compound daily payouts and flexible earnings. Deposits are backed by a combined $775 million insurance coverage through partners like BitGo, Ledger Vault, and Bakkt.
Using the NEXO token provides many advantages, including better interest rates, higher yields, lower borrowing rates, free crypto withdrawals, and other perks.
U.S. customers are no longer accepted.
Click here to see current Nexo interest rates.
Coinloan
Coinloan is a popular crypto-lending platform that was launched in 2017. The platform is based in Estonia and was founded to pioneer the concept of peer-to-peer crypto lending.
Apart from crypto lending, Coinloan also offered users the chance to buy, sell, and swap crypto assets using an in-built orderbook. The platform supported over 20 tokens, including USDT, with interest rates between 4.95% and 12%.
Unfortunately, Coinloan’s businesses were severely affected by the market crash in 2022-23. Withdrawal limits imposed by the platform attracted lawsuits in Estonian courts, resulting in a bankruptcy filing in June 2023.
The process of returning user funds is ongoing, and a trustee appointed by Estonian authorities controls it.
Youhodler
Like many other platforms, Youhodler was officially launched in 2017. The company originally had its base in Cyprus. In 2019, Youhodler opened its second base of operations in Lausanne, Switzerland.
The platform offers crypto payment solutions, a secure wallet, crypto trading solutions, and crypto-backed lending services to customers in over 100 countries.
The Youhodler Yield Account promises up to 15% APY on various cryptocurrencies and stablecoins, including USDT. As of this writing, the APY on USDT was a healthy 6%.
The platform promises weekly payouts and consistent returns. Existing customers can purchase insurance protection through a pooled program backed by Ledger.
U.S. customers are not accepted.
Click here to see the current Youhodler interest rates.
USDT Lending on Exchanges
You can also earn interest on USDT lending with centralized crypto exchanges and platforms. They usually use funds to lend to traders who engage in margin trading. As a rule, you must lock your USDT for a predetermined period.
Here are a few well-established crypto exchanges that support USDT lending:
Binance
Binance is by far the largest crypto exchange by trading volume. Since starting in 2017 as a spot exchange, it has turned into a diverse ecosystem that also offers futures and options trading, launchpad, liquidity farming, staking, and payment options, and more.
One of the main products is Binance Earn, which is a one-stop solution to earn interest, including interest on USDT. The APY on USDT flexible deposits is a generous 10.00%, though the rate drastically declines with higher deposits. Thus, if you deposit more than 2,000 USDT, you should expect an APY of only 3.00%.
Click to see current Binance interest rates.
Crypto.com
Founded in 2016, Crypto.com has become one of the biggest crypto brands thanks to multiple high-profile partnerships, especially in sports. The platform provides exchange, non-fungible token (NFT), payment, and lending services to over 50 million users worldwide. It offers insurance coverage of $150 million on all assets under a direct insurance policy partnership with Arch Underwriting. In 2021, the company partnered with Visa to settle transactions on its payment network. Users can apply for Visa cards with a wide range of exclusive benefits on the Crypto.com platform.
The Crypto Earn product supports USDT and provides APYs of up to 12%. The reward rate depends on your choice of tokens, the size of your balance, your deposit term, and your country of residence. You can pick from flexible and fixed-term deposits, but the former gives lower yields. The interest rewards are paid weekly.
Click to see current Crypto.com interest rates.
USDT DeFi Lending
If you want full control over your funds and not share your personal information with anyone, you might opt for Decentralized Finance (DeFi) lending protocols. DeFi is one of the most important trends within the crypto industry, as it enables users to access financial services run by algorithms and powered by blockchain rather than being managed by centralized entities.
Pros and Cons of Lending on Exchanges
Aave
Aave is the second-largest DeFi protocol, with a total value locked (TVL) figure of more than $10.4 billion. Stablecoins play a leading role on Aave, accounting for around 25% of all deposited assets – approximately $120 million out of a total market of $486 million.
The interest rate for contributing with USDT liquidity is well over 1%. Although this is far less than the interest rates, there are no lockup periods and minimum balances. (You usually pay transaction fees to move money in and out.)
Click to see current Aave interest rates.
Compound Finance
Aave’s direct competitor is Compound, which has a TVL of $2.36 billion as of this writing. The lending protocol triggered the DeFi craze in the summer of 2020 when it launched its governance token.
Compound V2 offers an excellent APY of 3.72% on lending USDT. Around $183.6 million worth of USDT has been locked on the platform by lenders, with a utilization of 79% as of writing.
Click to see current Compound interest rates.
What is USDT?
USDT is a stablecoin cryptocurrency issued by Tether Limited, a company launched in 2014. USDT has its price pegged to the US dollar based on a 1:1 ratio. It is hosted on the Ethereum blockchain as an ERC-20 token.
Tether claims that US dollars, cash equivalents, other short-term deposits, and commercial paper reserves fully back USDT. MHA Cayman released the latest attestation report, confirming that USDT tokens are fully backed.
When writing, USDT’s market cap exceeds $108 billion, among the top three largest cryptocurrencies after Bitcoin and Ethereum. The stablecoin has played a key role in the crypto industry, bridging the gap between blockchain and traditional finance.
What is USDT Used For?
Stablecoins like USDT were developed because traditional tokens like bitcoin and Ether were too unstable to be useful in a wide range of scenarios that require low volatility.
For Stable Transactions
Everyday transactions, remittances, and other payments require a relatively stable currency. The extreme volatility of cryptocurrencies makes them less suitable for such transactions. Since it is designed to maintain a stable value pegged to the US Dollar, USDT is an excellent alternative for transactions that require low volatility.
As a Bridge Between Fiat and Crypto
Buying cryptocurrencies with US dollars and other fiat currencies is not easy. Many decentralized exchanges do not support credit cards or other traditional payment methods. USDT is helpful as a bridge in such situations – you can easily buy USDT using fiat currencies and then use the stablecoin across various exchanges.
As a Temporary Store of Value
Price fluctuations during periods of high market volatility can severely impact the valuation of your crypto holdings. In some situations, the sensible option could be to convert your volatile tokens into USDT until market conditions improve. Although USDT is not as stable as fiat currencies, it is significantly better than other cryptocurrencies.
For Margin Trading in Cryptocurrencies
To margin trade between various cryptocurrencies, you need a stable and highly liquid token that can be immediately deployed and seamlessly traded across different exchanges. USDT ticks all the boxes and is widely used by crypto margin traders to amplify their positions.
As Part of Trading Pairs
Traders often want to minimize the risk of volatility. While trading directly between two cryptos is convenient, it usually comes with high levels of volatility. USDT provides an alternative option – use trading pairs that involve USDT as the base currency. Many exchanges offer trading pairs that include USDT as one of the cryptos.
For Cross Border Remittances
Cross-border transactions through traditional banking networks often come with steep transaction fees. They are also not viable in certain parts of the world due to the lack of adequate banking infrastructure. USDT allows users to transfer funds worldwide at a significantly lower cost, even in areas where traditional banking services are unavailable.
Why are USDT Yields so High?
According to the FDIC, the yield provided by traditional savings accounts was around 0.46% (non-rate cap adjusted) in 2024. So, why are USDT rates higher? This is a good question, considering that USDT has its price pegged to the US dollar, reducing the volatility risk to almost zero.
Nexo, and others offer better rates thanks to a business model in which users lend cryptocurrency to borrowers willing to pay higher rates. The latter are ready to use their crypto as collateral, which isn’t possible with traditional banks. Thus, the growing demand for loans against crypto collateral is driving the interest rates.
USDT Staking vs. Lending
Staking and lending are two ways for investors to profit from their crypto holdings without selling them. Traditional savings accounts cannot generate significant yield in today's low-interest-rate environment. Thankfully, investors can use stablecoins like USDT for staking and lending instead.
The main difference between staking and lending is that the former requires users to lease their USDT to a blockchain or crypto platform in exchange for rewards, while USDT lending requires them to rent the funds to borrowers to earn interest.
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