Crypto trading platform Bitstamp has introduced an XRP lending service offering a “permanent” 2% yield, shortly after relisting the asset for trading last month.

This puts XRP on an already sizable list of coins viable for 2% APY on Bitstamp, including Bitcoin (BTC), Ethereum (ETH), USD Coin (USDC), and Tether USD (USDT).

Permanent Yield On XRP?

As explained by Bitstamp in a blog post on Thursday, the company partners with Tesseract for its lending service, which “only lends to reputable institutions and undertakes rigorous risk and credit assessments for all borrowers.”

Tesseract breaks down counterparties into four tiers, with Tier 1 including “large top-tier market makers from traditional finance,” and Tier 4 including “smaller institutional borrowers.”

Per Bitstamp’s June 2023 lending report, most of its lending portfolio is deployed to Tier 2 firms – regarded as “large top-tier crypto-native
market makers.”

“The loan portfolio is demonstrating strong performance, with all borrowers making timely repayments of both interest and principal as scheduled,” wrote Bitstamp in the report.

At the time, XRP was the lowest-yielding asset available at 1.5% APY. Since then, Ripple has secured a legal victory over the SEC in assuring that XRP is not a security, causing demand for the asset to soar. Still, the new new 2% yield remains well below its USDT and USDC yield rate of 4.4%.

Respondents to Bitstamp on X were quick to point this out, finding the firm’s lending rate to be quite underwhelming. “Not going to lie, I was expecting a little bit more,” said software developer Flare Community.

The big announcement is “let us rehypothecate your XRP”?

Not to mention, even those willing to do so wouldn’t even beat inflation?

😂😂😂😂😂

— XRPGoat (@XrpGoat) August 3, 2023

The Risks of Lending

Crypto lending spiked in popularity in 2021 as a way for retail crypto holders to earn on their existing cryptocurrency, much like fiat currency in a traditional bank account. Such services tend to offer much higher savings rates than traditional finance firms, even in low-interest rate environments.

However, multiple major crypto lending firms have gone bankrupt since last June as crypto market prices cratered, and lenders struggled to deal with overwhelming withdrawal demand from customers. These included Celsius, Voyager, BlockFi, and Genesis, alongside hedge funds like Three Arrows Capital and Alameda Research.

Regulators across the world have repeatedly warned of the risks associated with crypto lending products, arguing that their yields are unsustainable. Due to regulatory pressure, lending on Bitstamp is unavailable to residents in the United States, United Kingdom, Canada, and Japan.