Tempo Earn – A New Wave in Fintech Industry
The world of financial technology (fintech) has accelerated its pace with Tempo launching Tempo Earn on August 12. An innovative product, Tempo Earn, allows fintech companies to reward their users with interest on idle stablecoin balances. Moreover, fintechs stand to gain a share from the return too. The first deployment was done on the payroll platform Deel.
GENIUS Act and Its Implication on Tempo Earn
According to GENIUS Act’s Section 4(a)(11), any authorized payment stablecoin issuer cannot pay its holders any form of interest or yield. So how does Tempo Earn manage to give rewards to users? The answer lies in how it sources the yield. Tempo Earn uses tokenized money market funds, onchain lending, and institutional credit to generate the return yields. The platform chooses the assets and decides the split of rewards between the platform and their customers. The announcement emphasizes that the interest is never paid by the issuer but rather through a lending protocol.
The Role of Deel
The notable participation of Deel in this endeavor is evident. Deel created the reference implementation in June when it launched DLUSD using a comprehensive stack from Stripe: Bridge provides token issuance through Open Issuance, embedded wallets are supplied by Privy, and Tempo handles settling. The rewards are generated by Morpho vaults deployed on Tempo.
The Interest Rate Challenge
In June, Deel’s help center (updated last on June 2) informed the users about the promotional target rate. The target rate at the time of launching was up to 4% Annual Percentage Yield (APY), but the rate is variable, not guaranteed, and can change according to the market conditions. However, neither Deel nor Tempo has mentioned the contributors that fund the rate or the shareholders’ share. Deel bears the transaction and network fees, the study by Tempo revealed that this cost equals $0.001 for every stablecoin transfer.
Global Reach and Financial Inclusion
Millions of contractors around the world face the problem of losing value on their earnings as soon as they secure them, said Thierry Edde, Deel’s head of crypto. The infrastructure provided by Tempo in partnership with Deel will be a game-changer for these contractors. With Tempo, Deel introduces a dollar-backed balance within the platform making the rewards accrue automatically and further providing a card to spend anywhere. This card has been put forward for release in the third quarter.
Partnerships and Future Possibilities
Tempo, in collaboration with Deel, aims to benefit the wide user-base of Deel, which processes payroll for more than 40,000 businesses across 150-plus countries. A recent release by Stripe shows the worker count stands at 1.5 million. However, the wallet is unavailable in the US, UK, EU, and Australia as of now.
Questions arise on the applicability of the interest prohibition and the definition of a permitted payment stablecoin. These issues are yet to be addressed by Congress, thereby leaving some ambiguity around how this can affect Tempo Earn.
Despite the legislative hurdles, Tempo and Bridge both consider Bridge as DLUSD’s issuer. While Deel’s help center attributes DLUSD’s status as not a cryptocurrency, but a ‘digital dollar voucher.’
The Grab of Crypto Market
The potent crypto market pool on Tempo is petite. According to DefiLlama, the stablecoin supply on the chain amounts to around $29.9 million, having surged by 23.5% over the previous week, and the total value locked to $14.4 million. Morpho Blue leads the lending market on Tempo with about $6.9 million in deposits.
Tempo came live on the mainnet on March 18 and launched the privacy feature ‘Zones’ that conceals Earn balances and payout history from other participants on the network. Its validator set includes prominent players like Stripe, Visa, Zodia Custody, and MoneyGram. On August 3, Tempo revealed its plan to back BRSRV, the GENIUS-compliant money market fund announced by BlackRock on the same day. BRSRV is also one of the asset types that Earn offers platforms.
Tempo’s disruptive product promises an exciting fintech future with a greater intersection with the crypto world. It is opening up new opportunities and enabling better savings solutions for fintech users worldwide. The industry keenly watches Tempo’s growth and its impact on crypto fintech integration.
