Both USDC and USDT offer enormous compound returns.
CEO of ShapeShift, Erik Voorhees, believes prominent financial actors’ involvement is responsible for the spike.
The cryptocurrency exchange ShapeShift previously settled with the SEC and paid $275,000 to settle charges.
Eric Voorhees, the founder and CEO of ShapeShift, recently expressed worries over the decentralized finance (DeFi) space by highlighting the exceptional gains produced by stablecoins like Tether (USDT) and USDC on Compound. This statement was made after the most recent SEC and ShapeShift scandal, in which the latter was forced to pay a fine.
CEO of ShapeShift Points Out Absurd USDT & USDC Returns on Compound
The CEO of ShapeShift emphasized that stablecoins, such as USDT and USDC, have garnered profits on collateral loans on Compound ranging from 20% to 30%. Voorhees tweeted that trustworthy stablecoins (USDT, USDC, etc.) across DeFi are currently generating returns of 20-30% on reputable platforms (Compound, etc.). This is achieved by lending out these stablecoins through overcollateralized loans.
While these returns seem profitable initially, Voorhees voiced astonishment at the historically high rates and raised concerns about the underlying dynamics. Furthermore, he conjectured that major financial institutions may have contributed to the USDT and USDC interest rate spike by converting bank money to stablecoins. “How can rates get this high without attracting big players in the financial industry to move their bank fiat into stables and earn that yield?” he wondered.
Furthermore, he referred to the project as “one of the world’s best risk-adjusted trades right now.” He did point out that he might be missing something, thus his assumptions might not be correct. So he posed the question, “Am I missing something?” to the cryptocurrency community.
One user noted that the current rates are unsustainable because of a “stables squeeze” in answer to these questions. Given the recent attention that Binance’s farming pools have received, he attributes the cause to farmers and leverage traders. “I’m surprised by the degree, but this is probably the right answer,” Voorhees said, conceding the truth of their discovery.
Shift in Form and SEC Settlement
In response to accusations that it was acting as an unregistered dealer, the ShapeShift cryptocurrency exchange and the U.S. Securities and Exchange Commission (SEC) struck a settlement on March 5. It is alleged that ShapeShift issued securities without registering with the commission between 2017 and 2019.
ShapeShift consented to a $275,000 fine and a cease-and-desist order to address the SEC’s allegations. The deal signalled a significant turning point, sending ShapeShift’s token FOX plunging more than 9% to $0.078.
Before this, in January 2021, ShapeShift declared that it would restructure its business model. This included giving up on acting as the counterparty to consumer transactions and ending direct cryptocurrency asset trades on its website. In July of the same year, ShapeShift started dismantling its organizational framework.
To justify its choice, ShapeShift emphasized its unwavering commitment to non-custodial, immutable decentralized finance—a tenet it has supported from its founding. Ultimately, the exchange gave over a million customers access to more than 60% of its 1 billion FOX tokens.
