Circle creates protocol to unite centralised finance, CeFi, with decentralised finance, DeFi
High income and frequent interest payments on Circle business accounts can be designed to compete with DeFi protocols
Originally launched as an attractive alternative to traditional trust accounts for Internet-based ventures, the latest features of the Commercial Circle Account seem to target a different type of competitor: the decentralised finance ecosystem (DeFi).
Circle, the payment company supported by Goldman Sachs and issuer of USDC stablecoin, announced its Circle Business Account service on March 10, 2020.
The accounts featured a range of services to help companies leverage the USDC, including APIs that connect to the traditional payment system, accepting dollar payments with the USDC.
However, given the stable currencies of currencies such as USDC can generate in DeFi protocols, account holders were encouraged to move their funds from stable currencies elsewhere. According to DeFirate, lending protocols like Aave and Fulcrum currently yield 3.4% and 11.6% in USDC, respectively.
But on 5 November 2020, a Circle announced new high-yield accounts that may encourage account holders to keep their funds stationed at CeFi.
In a Thursday tweet, a Circle announced a waiting list for new interest-bearing trading accounts. According to its website, terms and rates vary between 8.5% open term APY accounts and 10.75% 12 month APY accounts.
In addition, others must accumulate daily and pay weekly, as opposed to a monthly or even annual basis often observed in traditional trading accounts.
This will bring the accounts closer to many DeFi loan protocols, that are interest in real time. The end result is a product that seems to combine attractive allocation and Bitcoin Trader interest delivery based on centralized finance brands.
Circle’s offer is only the latest in a broader trend of CeFi-encontra-DeFi. In August, OKEx and Bitrue announced lending platforms that would combine DeFi and CeFi resources.
In a recent opinion piece published in the Cointelégrafo , Raoul Milhado, CEO of Elitium, said that the adoption of CeFi DeFi resources (and vice versa) would ultimately be a blessing to the end user:
„Centralized and decentralized applications can be combined to create new kinds of economies and encourage more people to use DeFi […] By combining DeFi and CeFi, we can transition from a centralized to a decentralized world more smoothly and ultimately win an age-old battle between DeFi and CeFi. „