By Jacob Wolinsky. Originally published at ValueWalk.
Cryptocurrency savings accounts provide an alternative way to earn money on your savings. The primary benefit of a crypto savings account versus a traditional savings account in fiat currency with a financial institution is the much higher interest rates. However, with the possibility of greater rewards comes greater risk.
There is much to consider before you sign up for a crypto-based savings account. The higher interest payments are certainly a draw, but you must decide whether that reward is worth the risks associated with crypto investments.
Here’s how crypto savings accounts work. Crypto investors deposit their initial investment, and they earn compound interest on their crypto deposits. Investors receive regular payouts, often weekly or monthly, and can make withdrawals anytime.
Here’s everything you need to know about crypto savings accounts and some of the best options on the market.
13 of the Best Crypto Interest Accounts
There are many crypto savings accounts available, so it can seem overwhelming when it comes to selecting one for your own personal use. Many of these crypto-based savings accounts have fantastic yields, so it isn’t just about choosing the one with the highest interest rate. It’s important to consider security measures, ease of use, and other factors before you deposit money into any of them.
Here are some of the best crypto savings accounts to consider.
1. BlockFi
BlockFi acts as a crypto bank, offering crypto interest accounts, a bitcoin rewards card, digital currency trading, and loans. As of the time of this writing, a BlockFi Interest Account enables you to receive interest payments with annual percentage yields (APYs) of up to 9.5%. BlockFi Interest Accounts boast no hidden fees or minimum balances.
BlockFi is U.S.-based and regulated, making it one of the few retail-focused platforms domiciled in the U.S. that earn interest. The company is institutionally backed and doesn’t have a utility token. It also boasts some of the biggest backers, including Valar Ventures, Winklevoss Capital, Bain Capital Ventures, Tiger Global, SGP Susquehanna Government Products, Morgan Creek Capital Management, and DST Global.
Unlike many other savings accounts that allow you to earn interest on your crypto, BlockFi has never held an initial coin offering and doesn’t require tokens to maintain a certain interest rate. When a customer sends their virtual currency to BlockFi, they’re sending it to one of the company’s regulated custodians, like Gemini. BlockFi then loans it out to one of its vetted institutional counterparties, which use it to execute trading strategies and hedge their positions.
BlockFi also offers multiple layers of security, including two-factor authentication.
2. Outlet Finance
Outlet Finance touts itself as allowing customers to earn 50 times more interest than traditional savings accounts. As of the time of this writing, the company pays a 9% interest rate. Outlet Finance promises to connect you to its network of overcollateralized lending partners and match you with the highest yield, enabling you to earn interest on your crypto.
The company is federally regulated, which means digital assets are moved through money transmitters and fully regulated entities. Outlet doesn’t store any sensitive data and stores funds in encrypted wallets through its crypto custodian. Crypto assets are covered by third-party insurance and upheld to SOC 2 Type II security standards. Interest is paid monthly.
3. Gemini
Gemini makes trading cryptocurrency easy, but it also offers crypto-based savings accounts with an APY of up to 8.05% as of the time of this writing. The company touts its interest rate as more than 100 times the average national interest rate, enabling crypto investors to earn more money on their crypto holdings..
To make an initial deposit into a Gemini crypto saving account, investors simply open an account with the company, purchase any amount of crypto currency, and then opt into Gemini Earn to start investing and earning interest. There are no minimum deposits or transfer or withdrawal fees.
4. CoinLoan
Like most other savings accounts on this list, CoinLoan pays different interest rates depending on which cryptocurrency is deposited. For example, bitcoin and several other digital currencies pay an APY of 7.2% as of the time of this writing, but many other cryptocurrencies pay an APY of 12.3%. Interest is earned daily, and it’s paid in the cryptocurrency that was deposited originally. CoinLoan offers an easy-to-use platform that includes a mobile app..
5. Linus
Linus touts its crypto savings account as offering 64 times the amount of interest earned on a normal savings account. As of the time of this writing, the company is placing potential customers on a waitlist, so you might not be able to open a crypto savings account with it immediately. Unfortunately, the interest rates offered by Linus as of the time of this writing are lower than with other crypto-based savings accounts, with APYs ranging up to 4.5%.
6. Hodlnaut
Hodlnaut offers APYs of up to 12.73% on its crypto savings accounts as of the time of this writing. While many of the crypto savings accounts on this list support a wide variety of digital assets, Hodlnaut only supports Bitcoin, Ethereum, Tether, Dai, USD Coin and Wrapped Bitcoin.
The company makes weekly payouts to your wallet and has no lock-in periods or minimum deposits and allows customers to deposit or withdraw anytime. The company also allows investors to swap their tokens on the platform so that they can rebalance their crypto holdings without leaving the Hodlnaut platform.
7. Coinbase
Coinbase announced in June 2021 that it would launch a crypto-based savings account that allowed investors to earn interest on their USD Coin holdings. However, it announced in September that it decided not to launch the savings account. As a result, Coinbase is not joining the other crypto banks yet and is retaining its status as a cryptocurrency exchange with several other features, but not a crypto-based savings account.
8. Celsius Network
Celsius Network advertises APYs of up to 17% with weekly payments for its crypto savings accounts. The company also allows investors to earn up to 25% more in rewards when they choose to earn in its own CEL token. Celsius Network emphasizes stablecoins but also supports numerous cryptocurrencies.
9. Nexo
Nexo is a digital wallet that also offers cryptocurrency savings accounts that make payments based on interest rates. The company supports bitcoin and more than 20 additional cryptocurrencies. Nexo advertises APYs of up to 20%, paid out daily. Many investors may find it helpful that Nexo combines a digital wallet with a crypto-based savings account for ease of use. The company also offers $375 million insurance on custodial assets.
10. Crypto.com
Crypto.com touts itself as the world’s fastest growing crypto app. The company supports more than 40 cryptocurrencies for its savings accounts. Crypto.com advertisers interest rates of up to 14.5% and up to 14% p.a. for stablecoins. Investors’ crypto keys are encrypted locally on their device with Secure Enclave and protected by biometric and two-factor authentication. Crypto.com is a digital currency brokerage that acts as a custodian, storing your cryptocurrencies. The company’s DeFi Wallet is non-custodial, which means investors have total control of their private crypto keys.
11. YouHodler
YouHodler offers APRs of up to 12% plus compounding interest on its crypto savings account. Investors can earn interest in Bitcoin, Pax Gold and all major stablecoins. Interest payments are deposited into the investor’s wallet weekly. YouHodler also allows you to exchange cryptocurrencies.
12. Voyager
All crypto banks change their interest rates at various times, but Voyager changes its interest rates every month. The company offers competitive rates on some tokens, like USD Coin and bitcoin, but the rates on many less common altcoins are low as of the time of this writing, at around 2% to 3%. Voyager requires a minimum balance before the account can start earning interest, with the minimum balance varying by cryptocurrency.
13. Ledn
Ledn’s crypto savings accounts support only Bitcoin and USD Coin and pays an annual rate of up to 9.5% on USD Coin and 6.25% in bitcoin monthly. The company works with Genesis, the largest and most-established lender in the digital asset space, as the primary borrower for its crypto-based savings accounts to produce money supply.
The company doesn’t require any minimum balance for its crypto interest accounts and has no lock-up period. It makes payments on a monthly basis. Ledn charges a 10 USDC withdrawal fee on every interest account.
Crypto Savings Accounts Vs. Regular Savings Accounts
There are some key differences between crypto-based savings accounts and regular savings accounts with a traditional bank. Perhaps the biggest differences is the plethora of risks you take on with crypto savings accounts that don’t exist with standard savings accounts. These two types of interest accounts do not have the same risk profiles, so it’s important to understand that.
FDIC Insurance
The most important difference between these two types of interest accounts is the fact that assets held by traditional banks are covered by federal insurance through the Federal Deposit Insurance Corporation.
Being covered by FDIC insurance means the federal government is guaranteeing your deposit. FDIC insurance allows consumers to place their money in the bank without worrying that they will lose it. It protects customers in case the bank fails, and it covers each customer up to $250,000 per ownership category.
Many companies that offer crypto-based savings accounts do not offer any insurance and those that do offer a different kind of insurance than what the federal government offers to customers of standard banks. Generally, insurance offered on crypto savings accounts protects against situations like cybertheft, but it does not protect against the failure of the company offering the account or against any failures relating to the lending activities it does to support the interest it pays out..
Withdrawal Restrictions
Some crypto savings accounts may have withdrawal limits. On the other hand, standard savings accounts don’t limit how much you can take out at a time, but there was a federal regulation limiting the number of withdrawals to six in a month. However, that regulation was lifted in 2020 amid the pandemic.
Compound Interest
Most standard savings accounts pay compound, rather than simple interest. This means that with the typical bank, interest is paid on the total balance each month, including the interest that was paid last month. However, most crypto savings accounts pay only simple interest, which means it is paid only on the original balance. There are some crypto interest accounts that pay compound interest though, so you’ll have to read the fine print.
Yields
It’s important to understand the difference between yields and interest rates. The interest rate is the percentage paid on a deposit, while the investment yield is the amount of earnings from the deposit over a set period.
Key Access
Instead of a bank account number, cryptocurrency investment is tied to public and private keys. Some crypto savings accounts may require you to give them access to your private keys, which are the keys tied to the cryptocurrency you own. The public key is used to encrypt the digital currency, while the private key is used to decrypt it. If you don’t own the private keys for your cryptocurrency, it means you don’t technically own it. Instead, it’s owned by the digital wallet or company that operates the savings account. On the other hand, the money in a standard savings account is always yours outright, which is made clear by the fact that you can withdraw as much as you want whenever you want without limits.
Crypto Savings Accounts Vs. Crypto Wallets
It’s also important to understand the differences between crypto wallets and crypto savings accounts.
Interest
The biggest difference between the two is that a crypto saving account pays interest, while a wallet does not. As the name suggests, a crypto wallet merely holds your cryptocurrency, while a savings account makes small payments based on a given interest rate.
Security
Both crypto wallets and savings accounts must have protection against hackers. In many cases, these two types of accounts share similar standards for security.
Ownership of Crypto Keys
There are two types of digital wallet. Cold storage wallets are the most secure because they store your keys offline, but if you lose the specialized hard drive they are on, you lose access to your cryptocurrency. Hot storage wallets are accessible online, and some providers might take ownership of your crypto keys. Most crypto savings account providers require you to give up ownership of your keys so that they can lend them out.
Risks Associated with the Highest APY Crypto Accounts
As with all financial products and with decentralized finance, there are some risks to crypto savings accounts. In some cases, you could even lose money. Here are the primary risks you should be concerned about.
Exchange Rate
The number one issue with anything having to do with cryptocurrencies is sudden fluctuations in the prices. Companies attract investors by offering high-interest rates on their accounts, but those high rates can’t protect you if the price of the cryptocurrency drops suddenly. The exchange rate is also an issue because you’re not dealing with just the cryptocurrency you have deposited, but also with whatever legal tender or other cryptocurrency you want to exchange it for.
Risk of Custodian Hack
Hacking has always been a concern for cryptocurrency enthusiasts, and this hasn’t changed. Crypto interest accounts involve sending your cryptocurrencies to a custodian company, which holds and lends them out, often to a primary borrower but sometimes to other borrowers as well. If the custodian is hacked, your cryptocurrency could be stolen. Some companies offer insurance for this sort of thing, but it’s important to read the fine print before you do anything. Some companies protect customers against a hack of their own servers but do not offer protection if their custodian is hacked.
Smart Contract
Customers who aren’t tech-savvy may not understand the smart contract they are interacting with for their accounts. As a result, malicious smart contract developers could exploit these customers. Thus, it’s important to only use smart contract protocols audited by the community and professional auditing firms. However, another risk is that the smart contracts themselves are hacked due to loopholes in the code.
Risk of the Stablecoins
One of the greatest attractions to stablecoins for investors is the high-interest rates account providers are offering to pay. However, there’s more than meets the eye with stablecoins. Each stablecoin is pegged to a currency like the U.S. dollar, but when you read the disclosures, many of them are backed by things other than the currency they are pegged to.
For example, Tether said it is about 50% invested in commercial paper, a type of short-term corporate debt. The Federal Reserve had to fix the commercial paper market in 2020 due to a meltdown, and if something similar happens again, Tether might have a difficult time converting its holdings to cash so that it can meet all the withdrawal requests.
Another potential problem is if the stablecoin breaks its peg, If a stablecoin can’t maintain its value relative to its peg, investors will no longer trust it, and its value will collapse.
Loan Default
Another big concern is tied to the way these accounts work. They aren’t like regular savings accounts because the reason companies can offer such high interest rates is because they are lending the cryptocurrency out. So what happens if the borrower defaults on their loan?
The risk of these loans defaulting is low because most cryptocurrency loans are overcollateralized, often with collateral amounting to 150% of the amount of the loan. However, if the markets crash suddenly, the risk of defaults rises, and they could become an issue if a company faces a rash of defaults all at once.
Lock Up
Many crypto interest accounts have lock-up periods or extra fees for withdrawals or excessive withdrawals. In general, the more restrictive accounts tend to offer high interest rates, while those with fewer restrictions usually have lower rates. It’s always important to look at all the terms before committing to any account.
Pledge
It’s also important to understand that when you deposit money in a crypto interest account, you’re actually giving up control of it and pledging it as collateral. If the account provider collapses, you won’t be able to get your cryptocurrency back because you don’t technically own it anymore.
What to Look for in a Cryptocurrency Savings Account
You should keep several things in mind when considering opening a crypto interest account. Some of these things are more obvious, like making sure the account provider supports the cryptocurrency you want to deposit, while others are less obvious, like reviewing the loan-to-value rate.
Coins Support
The first thing you should check before opening an account is which cryptocurrencies the company supports. If you already own cryptocurrency or you have one in mind that you want to transact in, you should ensure that you find an account provider that supports it.
Purchase Availability of Various Crypto Assets
If you don’t already own cryptocurrency that you want to put in a savings account, you should look for a provider that offers accounts that have access to the cryptocurrency market. This means you will be able to buy cryptocurrency via the platform you have your savings account through, which will streamline the entire process for you. However, if you already own cryptocurrency, you might not need an account with access to the markets.
Key Access and Ownership in the Crypto World
You should find out if the companies you are considering use key ownership swapping, and if they do, you should ask each one how the process works. Different companies might have different processes for this. In any case, it’s important to understand that you are giving up ownership of your crypto keys because the company you have the account through is lending out the cryptocurrency.
Loan-to-Value Rates
The standard among companies that provide crypto loans is a loan-to-value ratio of 50%, which means that borrowers must deposit twice as much cryptocurrency as what the value of the loan is. This ensures that there is plenty of cushion in case prices drop suddenly. If the loan-to-value rate is lower than 50%, you should probably look elsewhere.
Compound Interest
Most crypto savings accounts pay simple interest, but some do pay compounded instead. You’ll make more money if the company is compounding your interest than you will if they only pay simple interest, so read carefully to see how they measure the interest they will pay you.
Platform Security
Since providers of crypto savings accounts do not have FDIC insurance, it’s even more important for their platforms to be secure. Thus, when looking for a provider, you should carefully review their security measures.
The best providers offer cold storage for your cryptocurrency, which means that it isn’t stored or accessible online. Cold storage will keep your cryptocurrency safely away from hackers. It’s also important to look for two-factor authentication so that you will always know if something changes with your account.
You should also look for a company with insurance to protect against cybertheft, but read the fine print to see what is covered.
FAQs
Will You Make Money With A Crypto Savings Account?
Many cryptocurrency enthusiasts have been able to make quite a bit of money with an account, especially when depositing their funds into a high-yield account. However, it’s important to realize that you will receive the money in cryptocurrency, which means you usually will have to convert it to fiat money before you will be able to spend it.
As a result, you may find it beneficial to hold your cryptocurrency in USD Coin because it is pegged to the U.S. dollar, making conversion simple and making it easy to see how much money you are making. However, demand can fluctuate wildly, including with USD Coin, which means you might not be able to get your money back out at any moment.
Some account providers, like Linus and Outlook Finance, do allow customers to fund their wallet with U.S. dollars and even get their interest in dollars. However, it’s important to realize that all crypto accounts come with the same risks. In fact, the risks of any financial account are enhanced when you are dealing with cryptocurrencies.
In short, you might be able to make quite a bit of money with a cryptocurrency savings account, but there is always a chance of losing money.
Should You “Save” Money In Crypto Savings Accounts?
There is no clear answer on whether you should use such accounts to save money. Some people may find that they work for them, but they might not be beneficial for everyone. Cryptocurrency enthusiasts who plan to hold on to their tokens for an extended period might find such accounts to be useful because they might be less worried about volatility.
However, those who are new to cryptocurrency might want to investigate these accounts and think carefully about the decision. You should never invest money you can’t afford to lose, and you probably should use these accounts for short-term savings. For example, you might not want to use a crypto account for your emergency fund because it might not be easily accessible.
Which Crypto Has The Highest APY?
The answer to this question depends on which savings account provider you are looking at. In general though, bitcoin tends to have a lower APY than other cryptocurrencies, while many stablecoins have higher APYs.
Which Banks Allow You To Buy Crypto?
U.S. banks that accept cryptocurrency include Goldman Sachs, USAA, Ally Bank, Simple Banks, and Chime Bank.
Can I buy Bitcoin with cash?
To buy bitcoin with cash, you will need a bitcoin ATM or kiosk. For example, Coinstar Kiosks allow you to buy bitcoin with cash. Services like CoinATMradar will help you find a bitcoin ATM in your area. You can also use a peer-to-peer exchange like Bisq, HodlHold, Wall of Coins or LocalCoinSwap.
Final Thoughts
Crypto savings accounts aren’t for everyone, but enthusiasts may be able to make quite a bit of money if they buy and hold (or HODL) their cryptocurrency. It’s always important to look into account providers before handing over information and make sure that their platforms are secure. You should also take time to understand their rules so that you can maximize the amount of money you earn.
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