Coinbase Ending USDC Rewards for Free Users, Will Only Be for Paid Members

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Crypto exchange Coinbase will stop paying USDC rewards to non-paying customers next week, confirming to Decrypt on Thursday that only Coinbase One premium subscribers will be eligible to earn 4% on their stablecoin holdings.

The exchange first made the announcement in an email sent to Coinbase customers on Thursday, saying the change will take effect on December 15. A Coinbase spokesperson confirmed that USDC rewards are now a member-exclusive benefit of Coinbase One.

“Coinbase One allows you to earn 10x the average savings rate in the U.S. with uncapped earnings and no minimum balance,” they said, noting that other benefits—like no trading fees—are also bundled in with the $4.99/month subscription fee.

Coinbase’s USDC rewards program has always had a variable rate. For example, in July, right after the GENIUS Act was signed into law, the exchange was paying up to 4.1% on USDC balances held on its platform. There’s always been an incentive for Coinbase One users, though. In the same announcement, the exchange advertised that subscribers would earn 4.5% on USDC.

When Coinbase reported its Q3 earnings in October, the company said users had $9 billion in USDC on the platform. That’s a 90% increase from the same time last year, according to its SEC filing, which the company attributed to “primarily to our USDC rewards program, combined with deeper integration of USDC across our products.”

The company also said its stablecoin revenue increased by $107.1 million in Q3, “due to higher average USDC balances held in Coinbase products, on which we earn the vast majority of the interest on the associated reserves.”

The platform has also been advertising a “System Update livestream” on December 17, but didn’t share any official details. Following leaks of apparent prediction market and tokenized stock trading integrations in November, a Coinbase rep pointed Decrypt towards a teaser for the livestream.

Stablecoin issuers like Circle mint digital tokens, USDC, in exchange for U.S. dollars. To ensure every USDC token can be redeemed for cash, Circle maintains its reserves in cash and cash-like vehicles, like short-dated U.S. Treasuries and overnight U.S. Treasury repurchase agreements. But that means the interest earned on those reserves fluctuates when the Federal Reserve adjusts its target rates.

Just yesterday, the Federal Reserve approved a third 0.25% benchmark interest rate cut for the year, dropping its target rate to a range of 3.5% to 3.75%. Investors were already worrying last month that Fed rate cuts would directly impact the interest the company earns on its $78.5 billion reserves.

As Circle prepared to make its New York Stock Exchange debut earlier this year, SEC filings revealed that the stablecoin issuer gives 50% of the interest earned on its reserves to Coinbase. Although the GENIUS Act prohibits stablecoin issuers from paying interest or yield on their tokens, it does not stop partners—in this case, Coinbase—from offering reward programs to drive adoption.

Coinbase first debuted its rewards program in October 2019, offering 1.25% on USDC that was held on the platform. At the time, USDC was still managed by Centre, the consortium co-founded by the crypto exchange and stablecoin issuer Circle. The consortium was later dissolved in 2023 as Coinbase acquired a stake in Circle.

The same month Coinbase launched USDC rewards, the Federal Open Market Committee cut rates a third and final time in 2019. The Fed ended the year by unanimously voting to lower its target interest rate to a range of 1.50% to 1.75%. But in 2020, the onset of the COVID-19 global pandemic resulted in five unscheduled emergency FOMC meetings and brought interest rates all the way down to near zero.

Circle has adjusted its reward rate over the years, but this is the first time it’s suspended the program entirely for free users.