- MGX, a state-owned investment fund from the United Arab Emirates, invested $2 billion in Binance through the World Liberty Financial stablecoin called USD1.
- Binance Chain began distributing USD1 and offered incentives that pushed annual percentage returns (APR) up to 99% as of July 15.
- Crypto yield farmers used a process called ‘looping’ on Euler Finance to earn the high APR by leveraging USD1 against Tether (USDT).
- The high returns are possible because incentives from Binance and other protocols are subsidizing the APR, and these rates may not last.
- Users taking advantage of these yields face increased risks from price swings, use of leverage, and exposure to third-party protocol and management structures.
In March, the state-backed Emirati investment company MGX placed $2 billion into Binance using Donald Trump’s World Liberty Financial stablecoin, known as USD1. Following this investment, Binance Chain started distributing the USD1 token and introduced major incentives to increase its use on decentralized finance (DeFi) platforms.
As of July 15, some users on Euler Finance reported earning up to 99% annual percentage return (APR) on USD1 when pairing it with Tether (USDT), another leading stablecoin. This opportunity became available after Binance Chain and partners began subsidizing USD1 deposits with generous rewards.
According to data shown at 3:20 UTC on July 15, yield farmers reached this high APR by “looping”—a process where borrowers use loaned funds as new collateral to borrow and earn more, thus increasing their potential returns. As stated in the report, “Crypto yield farmers were quick to find ways to cash in on the sudden partnership, and have already unearthed an incredible and possibly irresponsible annual percentage return (APR) available to early users of the stablecoin.”
Although this 99% rate is much higher than traditional finance offerings such as savings accounts (currently around 4%) or the long-term S&P 500 average (about 10%), these returns are artificially boosted by incentives from Binance and may not last. The article notes, “Of course, the APR is currently subsidized by Binance and other protocol incentives, so it’s not guaranteed nor even likely to remain this elevated.”
The process of looping amplifies both gains and risks. Users increase leverage by repeatedly borrowing and lending with the same principal, but they become more vulnerable to sudden price changes. A market drop could trigger liquidations, causing users to lose their positions. In addition to market volatility, those participating are exposed to multiple third-party risks—such as flaws in smart contracts or problems with companies like Euler Finance, Tether, World Liberty Financial, and Binance entities.
The report also points out that USD1 is debuting on DeFi platforms with high returns but no excess reserves—adding another layer of financial uncertainty for participants.
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