Crypto.com has just announced a massive reduction of the rewards rates on Crypto Earn. The new rates are effective immediately.
For the uninitiated, Crypto Earn is a product which earns rewards on term deposits (akin to interest) in multiple digital currencies, including stablecoins pegged to fiat. It has arguably been more valuable than their prepaid card. While this change won’t affect you if you only use Crypto.com’s Visa Card, it’s worth noting as part of the bigger picture of changes to the financial landscape.
Revised Rates for Select Stablecoins
Effective immediately, Crypto Earn has slashed the earn rates on new deposits for many popular stablecoins: TGBP, TAUD, TCAD, TUSD, and USDP.
Going forward, the maximum rate on these stablecoins has been drastically reduced to 3% per annum.
That’s a huge drop from barely a few months ago, when rates were as high as 12% per annum for Royal Indigo / Jade Green members on a 3-month TCAD deposit. It follows a reduction to 8%, a rather quiet change which was overshadowed by changes to card rewards and CRO staking.
(I’ll only be focusing on the rates for 3-month deposits, the longest term and highest rates available.)
Instead of different rates for each card tier, the new rates are based on the value of your 6-month locked CRO stake, with a simplified structure. You’ll earn 2% on stablecoin deposits if your lockup value is US$400 or less (equivalent to the Ruby Steel buy-in price), or 3% if your lockup value is US$4,000 or more (equivalent to the Royal Indigo / Jade Green buy-in price).
However, Crypto Earn has complicated the interest rates by throttling rewards on larger balances:
- Tier 1: on your first US$3,000 in Crypto Earn (across all digital currencies), you’ll earn the full rate (3% for stablecoins)
- Tier 2: on your next US$27,000 in Crypto Earn, you’ll earn 0.5x the Tier 1 rate (1.5% on stablecoins)
- Tier 3: on any further assets in Crypto Earn above US$30,000, you’ll earn 0.3x the Tier 2 rates, or 0.15x the Tier 1 rate (0.45% on stablecoins)
If you ask me, these tiers based on your balance are an enormous disincentive from using Crypto Earn. When they were first introduced, the Tier 1 quota went up to US$30,000, throttled at 0.5x beyond that.
Now, however, the same rate reduction kicks in at 10% of that balance size, a dramatically lower level which anyone avidly using the platform will easily exceed. For anyone who deposits US$30,000 in stablecoin into Crypto Earn, you’d earn an effective rate of 1.65% per annum on the total balance.
Existing deposits will continue to earn at the old rates until their term ends. Also, Crypto.com Private members (Icy White / Frosted Rose Gold and Obsidian tiers) will continue to earn an extra 2% on Crypto Earn balances of any size and in any currency (except CRO), paid in CRO.
As for other cryptocurrency tokens, including bitcoin and ethereum, Crypto Earn will continue to pay the same interest rates on your staked balance. These vary by coin, with some altcoins still in the double digits.
Meanwhile, many flash-in-the-pan altcoins have been delisted from Crypto Earn for new deposits, and active flexible-term deposits will be returned to your wallet tomorrow.
Broader Economic Implications
This rapid sequence of spontaneous changes comes amidst an industry-wide crypto sell-off on the precipice of a global economic downturn.
Typically, when inflation is high, governments raise interest rates to incentivize saving over borrowing, and to shrink the money supply. However, Crypto.com is lowering their rates instead.
Remember that Crypto.com doesn’t operate like a central bank – they operate like a profit-oriented corporation, which is what they are. They have no control over the tokenomics (i.e. money supply) of any of the currencies which they support (with the exception of their own proprietary CRO). Instead, these custodial assets represent liabilities for the company, with balances and rewards that must be paid out to their customers.
On the cusp of economic uncertainty, it’s not a surprise to see companies on the defensive. Even crypto is not immune, as the industry has become so intertwined with traditional financial markets and investment practices over the course of the most recent bull run.
It’s a sobering reminder that while cryptocurrency has an exciting place in our future, it fundamentally works differently than our longstanding financial instruments and institutions – for better or for worse.
Therefore, I’m inclined to view these shockwaves as a symptom of broader-reaching market forces that go beyond crypto. I don’t see it as an indictment of blockckhain technology; rather, it’s a reality check that the financial opportunity in the space doesn’t always align with its technological fundamentals.
Will I Continue to Use Crypto.com?
I still see Crypto.com as one of the more stable, longstanding major players in a tumultuous space, with an appetite for legitimacy and mass-market adoption. While I think there’s wisdom in diversifying across several platforms, I’d say the counterparty risk of Crypto.com going under or exit scamming is low compared to its competitors.
Furthermore, TrustToken, the backer of TrueCAD (TCAD) and its constellation of sibling tokens, is one of the more reliable stablecoin issuers. As they fully collateralize their stablecoins, the asset risk of TCAD depegging from the fiat Canadian dollar is eliminated – unlike the embattled Tether token, whose algorithms have inflated its supply beyond what is sustainable, causing it to lose its peg to the US dollar from time to time.
However, with Crypto.com reducing its rewards, and traditional banking institutions raising their rates, you can actually earn a higher guaranteed rate of return with fiat, even in the most conservative investment vehicles. For example, EQ Bank is offering a savings account rate of 1.65% with flexible withdrawals, the same as the effective rate on US$30,000 in Crypto Earn on a 3-month term. They also offer 1-year GICs at 4% per annum, a savvy alternative if you don’t need immediate liquidity.
For the risks that do remain on a crypto platform and with crypto assets, however slim, it’s not worth it for what at best would be a razor-thin financial advantage.
While my use of and interest in cryptocurrency will continue, it’s from a long-term technological perspective. Now is not the time to be conflating that with a strategy for growing fiat-pegged assets – a reality which is purely dictated by the numbers.
Crypto.com has gutted the rewards paid as interest on Crypto Earn deposits. The changes are severe enough to motivate me to look for other ways to grow my assets, and to refocus on other reasons to be intrigued by cryptocurrency and blockchain technology.
The last time Crypto.com reduced their rewards, they partially backpedalled on some of the changes due to widespread community outrage. I wouldn’t expect that to happen this time, however, as these particular changes seem to be representative of systemic economic factors first and foremost.
I’m not sure if I’m more discouraged by the changes being made with no advance warning, the series of devaluations in quick succession, or the dishonest marketing of a high rate which is heavily throttled before it can be valuable. Still, I’m hopeful for the future of Crypto.com, despite these clear indications that their products will not be lucrative for me as a consumer in the impending bear market.