Gemini adds GUSD to its Earn product, offering 7.4% interest on the stablecoin

Crypto exchange Gemini has added the GUSD stablecoin to its interest-earning product called Earn, offering a flat 7.4% annual percentage yield or APY.

The development means Gemini users in all 50 U.S. states, including New York, can deposit GUSD to their Earn accounts and earn interest.

Gemini Earn was initially launched in February of this year. The program supports various cryptocurrencies, including bitcoin, ether, and DeFi tokens, allowing users to earn interest up to 7.4%.

GUSD is the first dollar-pegged stablecoin to be added to Earn. The product already supports DAI, but it is an algorithmic stablecoin, meaning it is not backed by fiat currency but by crypto assets.

Institutional demand 

Gemini said the 7.4% APY on GUSD is more than 100 times the national average interest rate on savings accounts in the U.S., which is currently less than 0.05% APY.

Gemini and other crypto lenders, such as BlockFi, are able to offer high interest rates on crypto and stablecoins because there is strong demand by institutional borrowers.

"There is high demand for GUSD among institutional borrowers who use it to fund their operations and investment strategies," Gemini COO Noah Perlman told The Block. "They are willing to pay competitive market rates to borrow GUSD. Our vetted institutional lending partners such as Genesis Global Capital find these borrowers and lend your funds in exchange for an interest payment."

While crypto lending offers higher yields than bank deposits, it comes with a higher level of risk. Loans made through Gemini's Earn program, for instance, are unsecured. That means users are exposed to borrower credit risk.

In other news, Gemini has also launched the recurring Buy+Earn functionality. It allows users to automatically purchase a set amount of GUSD or any other crypto available on Gemini on a regular basis and have it immediately transferred into Earn.

Gemini Earn is currently available in the U.S. and Singapore, while GUSD into Earn is only supported in the U.S. Perlman said Gemini is "actively exploring" the possibility of expanding access to Earn in other international jurisdictions.