Those who have U.S. dollars saved can earn interest on that cash by stashing it in a high-yield savings account or CD with a bank.
But can you do something similar with your crypto assets? Yes, depending on where you hold your cryptocurrency and which coins and tokens you own, you can earn interest on your crypto while you HODL.
Here’s an in-depth look at how crypto savings accounts work, where to find one, and if they could make sense for you.
What Is A Crypto Savings Account?
A crypto savings account is a cryptocurrency account that allows you to store currency and earn interest. This works much like a traditional bank savings or brokerage account, with a few key differences we’ll cover below.
The most important features of a cryptocurrency savings account are account security and interest payments. If you stick with a well-reputed exchange and follow online security best habits around passwords and two-factor authentication, your currency should be safe and secure from hackers and other losses.
But keep in mind that unlike traditional bank savings accounts, crypto savings accounts can't offer any federal insurance to protect your crypto assets. Even if the company advertises that it offers FDIC insurance, this would only apply to the cash in your account that hasn't been converted to crypto yet and lent out.
But if your cryptos are lost, stolen, or the crypto savings platform goes belly up, you could lose all of your initial deposit. That makes these account more risky than bank savings accounts which are insured up to $250,000 per depositor by the FDIC.
For this reason, we don't recommend that anyone move their emergency fund over to a crypto interest account. However, these accounts can be a great way to earn steady income on cryptos that you already hold and increase your investment yield.
How Crypto Savings Accounts Work
Crypto savings accounts use a combination of methods to generate interest for crypto holders. Similar to a bank, cryptocurrency can be lent for interest. But the nature of decentralized finance (DeFi) applications adds more ways to generate income from savings.
- Staking: With staking, you contribute your currency toward the blockchain network’s proof-of-stake protocol, earning you a small cut of mining earnings. Some cryptocurrency exchanges provide this service for you, though they may take a cut of your profits as a fee.
- Lending: Crypto lending works like bank lending but uses smart contracts and blockchains. Crypto lending to others with Bitcoin, Ethereum, and other currencies may earn you a high rate of return.
- Liquidity pools: Liquidity pools allow users to buy and sell cryptocurrency on decentralized exchanges. The pool is a crowd-sourced list of tokens locked into a smart contract used to facilitate trades on the exchange. For contributing their currency to the pool, holders can earn fees and rewards.
These methods of earning interest may also be known as yield farming in some corners of the cryptosphere.
Pros & Cons Of Cryptocurrency Savings Accounts
8 Top Crypto Savings Accounts For 2022
Want to earn more from your crypto or get started with cryptocurrency interest? Here are some top account providers to consider.
APY On Bitcoin
Up to 3%
2.50% on USDC
7.50% on USDC
Up to 5.25%
Nexo supports a unique lending program that pays users up to 20% annual interest, a pretty incredible rate. Payouts are made daily.
Your earnings rate depends on your balance and the specific coin you deposit. There are about two dozen currencies supported, which higher rates paid when you’re willing to take rewards in Nexo’s NEXO currency.
The top rates are limited-time offers for MATIC (20%) and AVAX (17%). Stablecoins pay 12% and most others pay 8%.
Note: Nexo recently paused new deposits for Nexo Interest for US-based customers.
KuCoin is a cryptocurrency platform with a wide range of features, including an active trading exchange and a competitive staking program. For stablecoins, vary by currency. You’ll get 1.01% for Bitcoin, 1.01% for Ether, and 3.78% for Dogecoin, for example.
KuCoin makes earning very easy. You just have to transfer the currency from your trading account to your earn account to earn rewards. With support for dozens of currencies, KuCoin could be a good choice for anyone with a large number of popular cryptocurrencies.
At Crypto.com, you can earn up to 10% interest on cryptocurrencies. Rewards rates vary by currency.
You can qualify for the best rates by holding a significant stake in the CRO currency, Crypto.com’s in-house creation. However, even those without CRO can earn reasonably good rates, like 6% on USDC.
Higher reward rates unlock at $400, $4,000, and $40,000 or more in CRO deposits. You can also increase your rate by locking in your deposit for one or three months. While this system is somewhat complex, those with a high stake in CRO are rewarded with rates among the best in the industry.
Coinbase is the biggest cryptocurrency exchange in the U.S. While it’s great for buying and selling (we prefer the Coinbase Pro platform with lower fees and more features), it offers somewhat unexciting rates when you stake in your main Coinbase account.
Reward payments are automatic, but there are only six currencies supported. As examples, you’ll get 0.15% on USD Coin, 2% on DAI, and 4.5% on Ether.
Coinbase isn’t the best for staking, but if you’re looking for an easy place to buy Bitcoin and other cryptos, Coinbase is a solid choice. And you can earn a few bucks from staking along the way.
Ledn is a cryptocurrency lending platform that allows you to earn a solid return on your cryptocurrency. Their interest bearing accounts allow you to earn a solid rate and allow you to withdrawal at any time.
Right now you can earn up to 5.25% APY on your Bitcoin, and up to 7.50% on your USDC.
The cryptocurrency and decentralized finance (DeFi) marketplace is still in its infancy. So there’s likely to be many more and potentially better crypto savings accounts in the future.
But for now, cryptocurrency HODLers are wise to put their assets into an interest-earning account. It gives you a chance to earn passive income on your crypto even while you wait patiently for prices to hopefully rise over time.
Eric Rosenberg is a financial writer, speaker, and consultant based in Ventura, California. He holds an undergraduate finance degree from the University of Colorado and an MBA in finance from the University of Denver. After working as a bank manager and then nearly a decade in corporate finance and accounting, Eric left the corporate world for full-time online self-employment. His work has been featured in online publications including Business Insider, Nerdwallet, Investopedia, The Balance, HuffPo, Investor Junkie, and other fine financial blogs and publications. When away from the computer, he enjoys spending time with his wife and three children, traveling the world, and tinkering with technology. Connect with him and learn more at EricRosenberg.com.