Coinbase has announced it will stop paying rewards on USDC ($1.00) deposits to customers who don’t pay for a subscription plan.

Coinbase currently offers between 2% and 3.5% annually in so-called rewards to eligible customers who hold USDC, the dollar-pegged stablecoin, on the exchange.

In emails sent to customers on Thursday and seen by DL News, the exchange said that after December 15, only Coinbase One customers will earn the 3.5% rate, while non-paying customers will forgo rewards.

Coinbase’s USDC rewards programme is funded by the exchange and designed to incentivise customers to hold USDC on Coinbase.

The programme is similar to those offered by other exchanges, trading platforms, and neobanks, in which customers’ idle cash deposits are automatically invested in low-risk financial products such as short-term government bonds and money market funds.

Circle, the issuer behind USDC, holds US government bonds that back its stablecoin.

Coinbase says on its website that it does not use or lend customers’ USDC without their instruction.

A Coinbase spokesperson told DL News that the firm regularly assesses the USDC rewards rate and always aims to offer its best rates at any given time.

Falling rates

It’s not clear what motivated the change.

Last November, Coinbase ended its rewards programme entirely for customers in EU countries due to new requirements introduced by the bloc’s Markets in Crypto-Assets Regulation.

As recently as September, Coinbase reopened the rewards programme to new regions, with CEO Brian Armstrong promoting a 4.1% reward rate for non-paying Canadian customers.

Although Coinbase says its USDC rewards are not generated directly from investing customer deposits, falling interest rates may still affect them.

On Wednesday, the US Federal Reserve cut the federal funds rate by 0.25%. It’s the third reduction of the year, and brings the federal funds target range down to 3.50-3.75%

As interest rates fell over the past year, Coinbase also lowered its USDC rewards across multiple regions.

The exchange cut UK customer rewards by 0.25% twice before today in January and October, while US customer rewards fell to 4% in October before today’s reduction to 3.5%.

Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.