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Since the DeFi gold rush began early last year, the case for the cryptocurrency industry disrupting traditional finance has only gotten stronger. Many are now turning to crypto for its high returns. However, the attractiveness of high returns has been threatened by the extreme volatility of cryptocurrencies.
Enter stablecoins. Stablecoins are cryptocurrencies that are pegged to real-world assets such as the US dollar (USD). Stablecoins (in theory at least) are therefore less volatile.
With stablecoins gaining popularity, crypto savings accounts that feature stablecoins have also gained traction. These types of "savings accounts" or "interest-bearing accounts" are relatively new, but the return rates are highly attractive and far exceeds the top yields offered by traditional FDIC-insured banks.
The best cryptocurrency interest accounts in the world pay anywhere from 10x to 64x more APY than traditional interest-bearing accounts.
Interested to find out where you can get the best interest rates on your stablecoins and other cryptocurrencies? This article will look at the top crypto-based savings accounts and their advertised yields.
What Are Stablecoins?
Stablecoins are digital tokens that are linked to a real-world asset such as the USD, EUR or gold. As the name implies, this peg allows the price of stablecoins to be stabilized. Because such coins are backed by an external asset, there also presents less risk.
For example, the USDC, a popular stablecoin by Coinbase, does not fluctuate much at all. The value of a USDC is always equal to 1 USD, held in accounts with US regulated financial institutions.
Stablecoins therefore are collateralized coins that provide security in an otherwise volatile market. Earning interest on a stablecoin is more appealing than earning interest on a traditional digital currency in many ways. Unlike Bitcoin, Ethereum, Ripple, and other cryptocurrencies, you do not have to worry about a stablecoin's value dropping.
Are Stablecoins Safe?
Interest-bearing cryptocurrency accounts are not necessarily high-risk, but they are also not risk-free – making them suitable for an investor with moderate risk tolerance.
While these platforms have extensive security protocols and have yet to be hacked, they should be regarded as an investment rather than a savings account. Cryptocurrency accounts are not covered by FDIC (Federal Deposit Insurance Corporation) insurance, which covers the vast majority of bank accounts in the United States up to $250,000. FDIC insurance does not cover digital assets like Bitcoin, Ethereum and fiat-pegged stablecoins.
Some interest-bearing cryptocurrency platforms such as BlockFi, are protected by private insurance. BlockFi uses cryptocurrency exchange Gemini as its custodial service and is therefore covered by Gemini's private insurance. Celsius, another popular cryptocurrency exchange, has insurance through its custodial BitGo, and the platform is further working to integrate private insurance.
Where Can You Get The Best Interest
In the list below, we look at the best cryptocurrency interest accounts and determine those that could offer an investor the best APY for their digital assets.
Note: All percentages stated are accurate at the time of writing.
Crypto.com offers one of the highest interest rates of any cryptocurrency interest account, with a 12% annual percentage yield on stablecoins. However, you will have to buy and stake (lock-up) 25,000 CRO (approximately $2,000) to gain access to the highest tier.
If you wanted to go "all in" on the Crypto.com ecosystem, you could probably get some of the best rates in the market, but doing so is a little more complicated than its rivals.
Although not available in the US, YouHodler is an attractive option to many investors because of the ability to not only trade cryptocurrencies that are earning interest in their interest accounts, they can also use their assets as collateral for crypto-backed loans, through the company’s Multi HODL service.
YouHodler rates start at 2.5% to 8% for crypto and 12.7% for stablecoins. Interest is compounded on a daily basis and paid out once a week. YouHodler has flat rates, which means there are no tiers for earning more.
Nexo's high yield interest accounts pay out up to 12% APY on 17 different cryptocurrencies on a daily basis.
The best rates are reserved for members of Nexo's loyalty program, which is based on their native coin, the NEXO token. Cryptocurrencies like Bitcoin, Ethereum and Ripple have exchange rates ranging from 4% to 8%. Stablecoins such as USDT, USDC, and DAI, as well as cash deposits in USD, GBP, and EUR, earn between 10% to 12% in interest.
Maximize Your Profit
Earning interest on your crypto assets can be a great source of passive income. Interest rates are much higher than those offered by traditional savings accounts, resulting in significantly higher returns for investors.
However, there are certain risks to be aware of such as exchanges being hacked, so it's not completely safe. If you can tolerate the risks, stablecoins like USDC, USDT and BUSD are a great option to start earning interest on your crypto assets.
You would want to study each company and crypto bank carefully with regards to their terms and conditions, interest rates, minimum deposits, types of cryptocurrencies needed and lock-up periods as they vary widely from account to account.
It goes without saying: do not put all your emergency funds in them.
This content is for informational purposes only and is not investment advice. You should consult a qualified licensed advisor before engaging in any transaction.