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Fiat currencies are traditional currencies issued by central banks and backed by a government. United States Dollar, European Euro, British Pound, Japanese Yen, and Chinese Yuan are the most used and the leading currencies in the world. USD Dollar is the most dominant currency in the world. You can use USD Dollar anywhere in the world.
There are different Dollars used in the world. There is the Canadian Dollar, Australian Dollar, New Zealand Dollar, and other 17 countries besides the United States. United States Dollar is the most accepted and used currency by far.
Defi platforms offer USD saving accounts besides crypto saving accounts. You can send fiat currencies to the defi and centralized crypto platforms and earn interest by holding them in a saving account.
The Federal Reserve of the United States issued Dollars and followed an expansive fiscal policy during the pandemic. Inflation rates have new highs and prices are going up constantly in the United States. This is very new for Americans. Interest rates offered by traditional banks are not satisfying anymore in 2021.
Defi platforms offer very competitive rates for USD saving accounts with very flexible terms and conditions. There are advantages and disadvantages of Defi platforms compared to traditional banks.
There is also another way to use your fiat currencies to earn more interest. You can convert fiat funds to stable coins in a 1 to 1 ratio. Since the cryptocurrency market is fast growing, bullish market, there is a huge demand for funds to support new projects and leveraged trades. Crypto platforms offer very good rates on stable coin saving accounts. There is a huge inflow to the cryptocurrencies markets and the market cap is constantly growing.
You can use USDT, USDC, BUSD for USD. There are several other stable coins pegged to USD in a 1 on 1 ratio. Stable coins can be exchanged with other cryptocurrencies on exchange platforms. Stable coin saving accounts offer very high APR.
Traditional banks usually offer up to 1 or 2% APR in a USD saving account. Crypto companies offer up to 10 - 12% APR on stable coin saving accounts which is a great rate and protects you against inflation. Because when you receive 2% APR for your Dollars, you will not be protected against inflation. Converting your fiat Dollars to USD stable coins and using them in a saving account can help a lot.
You can open a USD savings account in a bank or in a crypto finance company. The traditional way is opening a savings account in a bank, but banks offer very low APR. Banks also require you to provide all your identity verification documents. The good thing about banks is they are regulated and all funds in saving accounts are subject to insurance. There is standard deposit insurance up to $250,000 USD for everyone in the United States, this insurance is provided by FDIC. FDIC is Federal Deposit Insurance Corporation. Defi platforms are not regulated and not protected by the governments. But there are some defi platforms offering insurance for funds on saving accounts.
The good thing about the Dollar saving account is the price stability. You always have the same amount of Dollars. Real life price or a major fiat currency doesn’t fluctuate too much. Even the biggest market cap cryptocurrencies Bitcoin and Ethereum prices are too volatile and can change intensely. The value of cryptocurrencies may fall or increase sharply.
Fiat currencies are more stable and convenient. You can always send your fiat currencies to your debit card and withdraw some cash from the nearest ATM.
But of course, low risk brings a smaller yield. Make good research before deciding how you will use your savings.
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