How to Earn Interest on Your Cryptocurrency (2021 Guide)
The Good, the Bad, and the Ugly of Cryptocurrency Interest and Lending
Yes, you can earn interest on your cryptocurrency — and some say that you are missing unrealized gains if you aren’t. But, much like the cryptocurrency market itself, using a cryptocurrency lending platform to earn interest on your crypto is not for the faint of heart.
Though a potentially awesome opportunity for cryptocurrency hodlers, the emergence of cryptocurrency lending begs the following questions:
- Which cryptocurrency interest platform is the best? Reviews of BlockFi, Celsius, Nexo, Gemini Earn, and Crypto.com Earn.
- To whom do these companies lend your coins and tokens?
- How much can you make?
- Which currencies can you earn interest on?
- When can you withdraw your funds?
- How do cryptocurrency interest platforms work?
- How safe are they?
In the following article, we’ll review the above (in order) for informational purposes only. Down the rabbit hole we go.
Disclaimer: The following is not financial advice and was written for informational purposes only. The author is not a certified financial advisor.
Where to Earn Interest on Your Crypto
In principle, it’s simple. One can sign up for a cryptocurrency interest account with a number of platforms, including:
- BlockFi
- Celsius Network
- Nexo
- Gemini Earn
- Crypto.com Earn
You can either transfer existing crypto assets to these platforms or buy coins and tokens through them. We will go over individual rates, structure, and more later.
Disclaimer: The author is not affiliated with any of the companies listed in this article. If you work in DeFi/CeFi and want SEO assistance, email me.
Cryptocurrency Interest Platform Reviews
I use both BlockFi and Celsius based on the currencies I hold and my understanding of their security, solvency, and legitimacy. This is not investment advice.
BlockFi: Cryptocurrency Interest Account Review
BlockFi is considered the U.S. market leader in crypto lending. They have a number of high-profile backers and are reputed to take a conservative approach to lending.
PROS:
- Based in New York (and subject to New York financial laws)
- Backed by big-name investors, including Fidelity, Coinbase, and Gemini
- Conservative approach to lending
- A great, user-friendly interface
- 3rd party cryptocurrency storage and reserves
- Offers crypto credit card in partnership with Visa
CONS:
- Lower APYs (annual percentage yield)
- Fewer cryptocurrencies accepted for interest-earning accounts
- One free monthly withdrawal
- Monthly (rather than weekly) payments
U.S. Based and Backed by Big Investors
Primarily owned by Gemini, BlockFi follows New York State financial regulations — the strictest in the country. Many of the biggest names in venture capital and finance are involved, too, including Coinbase, Tim Ferriss, Bain Capital, and Fidelity.
By comparison, some crypto companies have financed through ICOs and utility tokens, which causes some concern about solvency.
Conservative Approach to Lending
BlockFi-issued loans are backed by up to 50% of the loan amount.
The company’s conservative approach to lending is reflected in lower cryptocurrency interest accounts APYs. Though this may turn away less risk-averse hodlers, many consider it a positive signal that BlockFi is engaging in less-risky lending.
More Than Earning Interest on Your Crypto
BlockFi also offers some neat features including a crypto rewards credit card, automatic trading, and automatically generated 1099s for U.S. investors at the end of the fiscal year.
Celsius Cryptocurrency Interest Account Review
Founded by Alex Mashinksy, known as one of the investors of Voice Over Internet Protocol (VOIP), Celsius is a U.S.-based cryptocurrency lending platform that takes security seriously.
PROS:
- High APYs for 39 coins and tokens
- Based in New Jersey
- Invests heavily in security and provides comprehensive guides on how users can keep their accounts safe
- Celsius requires an LTV (loan to value) of 50% meaning that if you get a loan for $100, you need to have $200 in collateral.
- Transparent certifications and licensing
- Celsius is launching a self-insurance plan, meaning that users will be able to insure 100% of their portfolio from hacks. Expected by Q1 2022.
CONS:
- Raised capital through an ICO (Initial Coin Offering)
- Celsius has stated that BitGo, its cold storage provider, has insurance of up to $100 million, and Fireblocks, its hot wallet storage provider, also has insurance. However, what they cover isn’t transparent.
All About Compliance
Celsius is transparent about its financial services licenses and security. Specifically, they provide licensing numbers right on the website so you can look them up.
- Celsius is licensed as a California Finance Lender (CFL) (see license).
- The platform is a registered Money Services Business with the U.S. Financial Crimes Enforcement Network (see registration).*
- Celsius is ISO 27001 compliant, which is an international standard for keeping financial and personal information safe (see certificate).
- The company holds an NMLS (National Mortgage Licensing System) license, a loan officer certification implemented following the 2008 financial crisis (see license).
*This does not confer legitimacy in the eyes of the U.S. government.
Earn High APYs on Cryptocurrency
Celsius offers a breadth of opportunity for investors looking to earn high interest on 39 coins and tokens at the time of writing. The highest APY currently goes to Synnex Corporation (SNX) at 13.99%.
Bitcoin and Ethereum hodlers receive annual percentage yields of 6.20% and 5.35% for up to 1 BTC and 100 ETH, respectively.
Nexo Cryptocurrency Interest Account Review
Nexo is a popular European platform for earning interest on crypto.
Though the platform offers several advantages, such as daily interest payments, different term lengths, and high APYs, the company has made several misleading claims surrounding SEC compliance and stock listings.
For these reasons, I would require significantly more transparency before using Nexo to earn interest on my cryptocurrency.
PROS:
- Daily cryptocurrency interest payments
- Over-collateralized lending, meaning that Nexo claims to have more in assets than loans offered
- Different types of accounts offered: Flex and Fixed terms
CONS:
- Misleading or false claims in whitepaper and on website
- Higher payment reserved for those who take earnings in NEXO token
- High spread on Nexo’s cryptocurrency exchange
Nexo’s Misleading Claims
The biggest question surrounding Nexo is their claim that the NEXO token is SEC-compliant.
SEC (Securities and Exchange Commission) compliance would mean that everyone who holds a NEXO token is an accredited investor, which is not true for the majority of NEXO users.
In its whitepaper, Nexo also claims that it successfully listed shares on a public stock exchange. This is true: Nexo’s parent company did IPO on the Bulgarian Stock Exchange in 2014.
“On May 7, 2014, Credissimo* successfully listed 2.5 million shares on the public markets.” — Nexo Whitepaper
This is misleading: Nexo’s parent company shares were delisted a year after its IPO.
*Nexo is owned and operated by Credissimo, a European fintech group.
Gemini Earn Cryptocurrency Interest Account Review
Gemini Earn, a type of account that exists within the Gemini Exchange ecosystem, is an easy option to earn interest on cryptocurrency without using a new platform.
PROS:
- 42 coins and tokens supported at the time of writing
- Withdraw anytime without fees or minimums
- New York-based exchange
- Gemini Earn offers cryptocurrency exchange users an easy way to earn extra income from their crypto, a feature not offered by most exchanges.
CONS:
- Low APYs (1.49% for BTC, 2.05% for ETH, and 2.77% for LTC at the time of writing).
- Collateral is not required for loans. Instead, the company conducts risk evaluations and background checks.
Gemini Earn Offers Ease of Use
If you compare Gemini Earn to Celsius or BlockFi solely as cryptocurrency interest accounts, the latter two are more compelling: They offer higher APYs and require loan collateralization, which, in my opinion, is a good thing.
However, if a crypto holder compares Gemini to Coinbase, the former offers more functionality: specifically, the ability to earn interest on your crypto without using a new platform.
Crypto.com Earn Cryptocurrency Interest Account Review
Similar to Gemini, Crypto.com is a cryptocurrency exchange that offers users the ability to earn interest on their holdings and stake the exchange’s native token.
PROS:
- High APYs for large market cap cryptos including Bitcoin (BTC) and Ethereum (ETH)
- APYs increase with the amount staked, which is uncommon.
- A large selection of coins and tokens are accepted.
- Crypto.com is, primarily, an exchange, meaning that users can easily earn interest on their holdings without transferring funds.
- Flexible, one-month, and three-month terms are available.
- Offers borrowers three different LTVs (loan to value): 25%, 33% and 50%.
CONS:
- CRO — the exchange’s native token which is essential to the platform — is extremely volatile and of uncertain value.
- UX, UI, and customer support are reportedly challenging to navigate.
- Offerings are confusing. One can lock up or stake their currency, two different processes.
- Additionally, lock-up periods and conversion rates (whether rewards are in CRO, the native token, or USD) can be confusing.
- Not available in New York.
- Based in Hong Kong.
Crypto.com Earn Is Intertwined with Its Exchange and Token
Crypto.com Earn is far from an ideal platform for anyone not already using the exchange. For starters, it is complicated and offers several different ways to earn passive income, including interest and staking the native token, CRO.
Bearing in mind that this is not investment advice, it’s important to note that the CRO token — an essential part of their cryptocurrency interest platform — is volatile and of questionable value.
For many users, the centrality of the token is reason to discount Crypto.com Earn.
How Much Can You Make in Cryptocurrency Interest?
As with traditional bank accounts, interest rates are subject to change. At the time of writing, Bitcoin (BTC) interest rates range from 4.5–6.8% APY (annual percentage yield).
For some smaller cryptos, including stablecoins and tokens, APYs can go up as far as 12.5% for under 0.1 BTC worth — though they can go higher for larger quantities depending on the platform.
Which Currencies Can You Earn Crypto Interest on?
It’s possible to earn interest on most of the top 20 cryptocurrencies on a variety of platforms. Most accept Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), and Chainlink (LINK).
Why Do Stablecoins Often Have Higher Interest Rates?
Stablecoins offer some of the highest APYs for good reason: As stablecoins (theoretically) are begged to the USD, their prices don’t move as dramatically as other cryptos.
A 10% APY on a coin that has increased 30% in price is a very different number.
Additionally, stablecoins play an important role in the crypto market: Many crypto traders will convert funds into stablecoin during bear markets, rather than incur the transaction fees that go along with converting crypto into fiat (government-backed currency).
When Can You Withdraw from Your Cryptocurrency Interest Account?
Reading withdrawal policies is critical. Some platforms allow the loaner to choose how long they would like to loan their cryptocurrency for (and may offer higher APYs for longer periods of time, such as 3+ months).
At the time of writing, cryptocurrency interest account platforms offer the following withdrawal schedules:
- BlockFi: Up to 3 business days. Users get one free withdrawal per month and there is a withdrawal minimum of 0.003 BTC and 0.056 ETH.
- Celsius: Up to 2 business days. There is a minimum withdrawal amount of $1.
- Nexo: Up to 1 business day and withdrawals are free.
- Gemini Earn: Up to 5 business days and withdrawals are free.
- Crypto.com Earn: One can withdraw from a Flexi Plan at any time but cryptocurrency from a Fixed Plan cannot be withdrawn until its due date.
When Do You Receive Crypto Earnings Payments?
- BlockFi: Monthly
- Celsius: Weekly
- Nexo: Daily
- Gemini Earn: Daily
- Crypto.com Earn: Weekly
Is There a Minimum Account Balance for Cryptocurrency Interest Accounts?
- BlockFi: No minimum
- Celsius Network: No minimum
- Nexo: 0.001 BTC, 0.1 ETH, 0.01 LTC, 1 for stablecoins, and more
- Gemini Earn: No minimum
- Crypto.com Earn: Some of the highest minimums, including 0.005 BTC, 0.15 ETH, 450 XRP, 1.5 LTC, and more
How Do Cryptocurrency Interest Accounts Work?
Similar to savings accounts at traditional fiat banks, cryptocurrency interest accounts earn you interest by lending out your digital currencies.
In addition to offering interest accounts, these companies double as crypto lending platforms for individuals and institutions. For example, in addition to having an interest-generating account on BlockFi, you can also receive a crypto-backed loan.
Who Is Borrowing Your Crypto?
It largely depends on the company, though most offer a combination of loans to individuals (retail clients) and institutions (market-making firms, hedge funds, etc).
Retail Clients
Retail clients are non-business clients, meaning individuals, who get crypto-backed loans to make investments, pay off debts, or make large purchases, as they would with a traditional loan.
For retail clients, the big difference is that crypto-backed loans exist outside of the traditional financial sector’s restrictions — including who can get a loan, for what, and when.
Pay attention to how a platform issues loans. Some require collateral — locking up a percentage of the loan amount — while others do not.
Discrimination in loan issuance remains a large problem in banked countries like the United States.
Globally, billions of people remain unbanked — meaning that they do not have access to traditional financial services or stable government currencies. For them, blockchain-based finance (Defi and Cefi) may offer the life-changing ability to access loans and exchange currencies safely and digitally.
Institutional Clients
Hedge funds, marketing-making and trading firms, crypto miners, and other companies also receive loans. These companies are typically bullish on cryptocurrency but want immediate liquidity to make an investment or pay off an expense.
Market-making firms are critical to the cryptocurrency market’s health. Essentially, these companies buy crypto for one price and sell for another. Like day traders, market-making firms profit off of the spread between these two figures.
How Safe Are Cryptocurrency Lending Platforms?
Any form of cryptocurrency holding beyond a hardware wallet is inherently risky.
As cryptocurrency is not considered legal money in the eyes of the U.S. government, crypto is not insured by the FDIC (Federal Deposit Insurance Corporation) or the SPIC (Securities Investor Protection Corporation).**
Unlike securities and bank accounts (up to $250,000 per individual per bank), cryptocurrency is not insured by the government.
In other words, investing in cryptocurrency is risky by nature— and any form of crypto holding beyond cold storage increases that risk.
**Certain cryptocurrency exchanges are FDIC insured, including Coinbase, Crypto.com, Gemini, Band Binance, among others. However, FDIC insurance only covers USD, not cryptocurrency.
Potential Risk Mitigation Solutions
Higher yields often translate to higher risk.
Here are few things that your author has considered when choosing where to invest her crypto. The following is for informational purposes and is not investment advice.
- I research where a potential crypto interest account holds your money. Is it stored through a secure third-party platform or in cold storage?
- How do they issue loans and do they require collateral?
- How has the company raised money? Some are backed by reputable investors, others have funded through ICOs.
- Where are they based? Your author only earns cryptocurrency interest using U.S.-based companies.
- How transparent is a company about its processes and security? The easier the above information is to access, the more confident your author is regarding the platform’s legitimacy.
Interest: The New Frontier of Cryptocurrency
Every day, blockchain-based technology increasingly challenges the inefficiencies, inequalities, and quirks of our existing financial system.
Accounts that let investors earn interest on cryptocurrency are just the next phase of blockchain-based finance — allowing individuals faster, more global, and more equitable access to capital.
But as with all fast-evolving technology, there are significant risks that go along with earning interest on cryptocurrency. Proceed at your own risk — and remember that the above is not financial advice but was written entirely for informational purposes.
