CoinDesk Launches CDOR Benchmark for Stablecoin Lending Rates

CoinDesk Indices and Sentora have introduced a new benchmark tied to overnight stablecoin lending rates, aiming to bridge the gap between on-chain markets and mainstream money markets. The CoinDesk Overnight Rates (CDOR) are designed to convert real-time borrowing activity into standardized rates, providing a tool for trading firms, exchanges, and protocol treasuries to hedge interest-rate exposure or fix funding costs over time.

The CDOR will initially utilize data from Aave lending pools for USDC and USDT, two of the most widely used stablecoins. These benchmarks will be calculated and published daily, based on the platform’s variable borrow rates. Stablecoins, which are digital tokens pegged to traditional currencies like the U.S. dollar, play a crucial role in the crypto economy. They are commonly used for trading, on-chain transactions, and increasingly for cross-border payments and foreign exchange.

As the adoption of stablecoins continues to grow, with more institutions and businesses getting involved, the demand for sophisticated financial tools that mirror mainstream financial markets is also increasing. Andy Baehr, the head of product and research at CoinDesk Indices, highlighted the significance of CDOR rates, stating that they provide a cornerstone element for the stablecoin rates markets. These rates use the same conventions as traditional finance benchmarks, which support the largest derivatives markets in the world.

Futures contracts that settle against overnight rates are also in development, with several firms set to act as market makers. This addition, alongside a clearer regulatory environment, is expected to exponentially increase the interaction of institutional players with decentralized finance (DeFi). Ed Hindi, chief investment officer at Tyr Capital, emphasized that CDOR rates enable the creation of a broad range of financial derivatives that are currently missing in the crypto financial ecosystem.