Compound Entered CeFi Business Model Using DeFi Protocol

  • Financial users can borrow loans by depositing USD or USDC as security. 
  • Financial institutions can earn up to four percent annual interest. 

Compound is a decentralized peer-to-peer lending protocol that recently extended its loans to users and financial institutions who deposit their assets as security.

Vice President of GM Compound Reid Cuming highlighted that recognized banks could carry off “USD or USDC” with a fixed rate starting from 6% APR.  

Authorized institutions can use ERC-20 digital assets, including ethers and bitcoin, as a security deposit to borrow loans in the form of USD at a fixed interest rate of six percent annually. Repayments are not mandatory as long as their loans remain over-collateralized.  

Compound treasury was established over a year ago with a motto to act as a bridge for non-crypto fintech institutions to deliver the core benefits of DeFi to the next billion users.   

Robert Leshner, the founder of Compound Finance, highlighted his statement: “At this time, financial companies’ clients and banks can deposit US dollars into their Compound Treasury accounts and earn up to four percent interest annually.”    


Leshner added, “Now, in addition to accepting dollars and paying institutions a yield, we’re going to allow institutions to borrow from Compound Treasury.”  

Leshner said, “A rating agency monitors compound Treasury and recently received a B-credit rating from S&P, giving it an “external source of accountability.”

Extending his statement, Leshner mentioned that “Client collateral would not be rehypothecated, ideally preventing Celsius-like incidents from reoccuring.” 

He said, “If there are more customers supplying liquidity to Compound Treasury than there are borrowers, we put the excess in the Compound Protocol.” “Then when there’s more borrower demand, then there are customers providing liquidity and earning yield, we will source liquidity from the Compound Protocol.”

Earlier in August 2022, Compound announced the launch of “Compound III,” a new “streamlined” version of its protocol. 

As per data from CoinMarketCap, While writing this article, the token of Compound (COMP) is trading at $54.43 with a market cap of $395,595,183. 

Nancy J. Allen
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