2022 was not a great year for cryptocurrency interest accounts; the industry’s largest and most trusted crypto interest account providers (notably, BlockFi and Celsius Network) froze customer withdrawals and filed for bankruptcy within just a few weeks of each other, leaving billions of dollars of user funds to be decided upon in court.
Hundreds of thousands of users were prevented from withdrawing a collective few billion dollars of their assets, which are currently being sliced and diced in bankruptcy courts to pay back various creditors. Users will likely only receive less than half of their deposits, if any.
Not quite the optimistic fanfare one would expect from an article titled “Best Cryptocurrency Interest Accounts,” but we’re just giving it to you straight.
While we believe there is a future for a cryptocurrency interest account offering, the industry is unfortunate and weird.
Books can be and will be written about the series of catastrophes in crypto in 2022, and our guides such as Why Did Cryptocurrency Interest Accounts Fail? and Celsius Network Review, go into greater depth.
In broad strokes, the LUNA/UST fiasco triggered a collapse that directly or indirectly severely impacted Celsius Network, BlockFi, FTX, Hodlnaut, Voyager, Genesis, Gemini Earn, Hodlnaut, Three Arrows Capital, SALT lending, Abra, and more, plunging many of them in lengthy and costly bankruptcy proceedings.
The public and users had no visibility of how the companies operated internally, only spoonfed company communications and rumors on social media. In the days before each account collapse, the company’s founders assured users everything would be okay:
- Do Kwon reassured all LUNA holders before the collapse
- Alex Mashinsky reassured all Celsius holders before the Celsius collapse
- Su Zhu reassured everyone before the 3 Arrows Capital collapse.
Both users and institutions were bamboozled by a handful of companies.
A clearer picture emerged as information became public in bankruptcy courts: the centralized companies were using their customer’s deposits to undertake aggressive and highly leveraged investment strategies and found themselves vulnerably entangled in an incestuous mesh of collapsing projects, funds, and DeFi protocols.
There are a few questions we’re eager to find the answers to:
- Can the crypto interest account space ever rebound?
- How can the cryptocurrency interest account industry as a whole earn users’ trust again?
- How can a centralized crypto company provide concrete customer protections so an event like Celsius Network suddenly pausing withdrawals never happens again?
- Will the regular pendulum swing too far in the other direction and make it prohibitively complicated and expensive to launch this sort of company?
For now, we’ll use this article as a timestamp, hopefully of a transitionary period where the industry can move past the events of 2022, and people can trust cryptocurrency interest account platforms again.
Understanding the Cryptocurrency Interest Account Niche
Cryptocurrency interest accounts and cryptocurrency lending platforms are functionally similar to high-interest savings accounts in traditional banks but with a few key differences.
Traditional banks have historically gone through much greater regulatory scrutiny, and deposits are covered by FDIC insurance up to $250,000.
Cryptocurrency assets are not covered by FDIC insurance, nor is there similar adequate insurance protection for depositors.
Users who deposit their assets in a cryptocurrency interest account platform (or any other custodial platform) entrust the holding company with their assets.
As seen with the Celsius Network saga, users didn’t have visibility into how their funds were being utilized. Rather than simply being lent out, Celsius was involved in highly leveraged schemes, such as DeFi lending, trading, and more. Since it was a centralized company, few but the internal team at Celsius and other “insiders” knew what was going on.
Cryptocurrency lending introduces several new risks:
- Cryptocurrency is an incredibly volatile and risky asset class.
- Custody risk when entrusting a platform to hold your assets.
- Smart contract risk if DeFi protocols are engaged.
As such, we caution our users to view any centralized company in cryptocurrency with a high degree of scrutiny.
90% of the crypto interest account competition got nuked, each for various reasons such as exposure to LUNA/UST, uncollateralized loans to the collapsing 3AC, or getting essentially rugpulled by Sam Bankman-Fried and FTX.
If there is any market demand for a legitimate cryptocurrency interest account that won’t implode in the next bear market, we’d hope the winner is one with ironclad legal user protections rather than just catchy FinTech copywriting.
As of writing, Nexo is the only cryptocurrency interest account that has survived the nuclear 2022 without any significant indications it would go under.
Nexo, like most other centralized crypto companies, has come under attack from anonymous social media spreading unconfirmed claims about insolvency, hacks, etc, and it has staked its ground against this potential fake news in a blog piece titled The Anatomy of Fake News: The Latest Attack on Nexo.
The company did have to settle a $45 million fine with the Securities and Exchange Commission for violating federal securities law in 2023; The S.E.C. found its interest program qualified as a security, and that Nexo had failed to register it.
Nexo’s token, NEXO, currently trades at about a seventh of its all-time-high price.
Nexo Services no longer offers its services to residents of the USA or Canada. The site’s communications lean heavily on its lending model; optimistically, this points to the company developing a sustainable business model fueled by lending.
You can read our Nexo review here.
Which Crypto Interest Accounts Might Fail?
The verdict is still out on the following account providers. In our humble opinion, signing up is not worth the risk.
Out of the handful of survivors, there are a few that might not be too far in the clear.
Abra is a crypto interest account founded ten years ago; it offered users around 2% and 10% APY on various coins, compounded daily.
State security regulators have claimed Abra has been insolvent since at least March 21st, 2023, and the company was served an emergency cease-and-desist order. Although users can still withdraw their funds, the regulators are seeking more information.
According to the regulators, Abra has nearly $80 million with companies in various liquidation or bankruptcy processes ($30 million with Babel Finance, $30 million on Genesis, and $10 million on Three Arrows Capital.)
The Hong Kong-based Crypto.com was founded in 2016; it lists four co-founders: CEO Kris Marszalek, CFO Rafael Melo, CTO Gary Or, and Head of Corporate Development Bobby Bao.
The company offers a Visa debit card, an app exchange, an instant loan product, and a cryptocurrency “crypto earn” product.
Crypto.com offers higher than average rates, provided you lock your deposit up for three months buy and stake (lock-up) 25,000 CRO (about $2,000).
Its CRO token is treading at a sixteenth of its ATH value, and the company has watered down some of its most appealing features.
For instance, the benefits of its card used to reimburse users for things like Spotify and Netflix, and it no longer supports this feature.
The APY offers are a bit pathetic compared to the risks of custodying your assets– 1% APY on Bitcoin at its lowest tier and 1.5% APY if you locked up $40,000 in CRO for three months.
What is the Best Cryptocurrency Interest Account Platform? FAQ
Before you move a single Satoshi or stablecoin, you must be clear on a few aspects of cryptocurrency interest accounts.
Is a cryptocurrency interest account risky?
Given the events of 2022, cryptocurrency interest accounts are much scarier than before. Plenty of evidence suggests how a combination of negligence, incompetence, and poor judgment can run a centralized company to the ground. That’s in addition to the risks of holding digital assets. Don’t put in anything you cannot afford to lose.
Are cryptocurrency interest accounts FDIC insured?
No. FDIC insurance covers Most U.S. bank accounts up to $250,000, but cryptocurrency accounts are not. FDIC insurance doesn’t cover digital assets such as Bitcoin, Ethereum, and even fiat-pegged stablecoin deposits such as USDC, GUSD, and USDT. Federal insurance wouldn’t cover any loss of funds due to theft.
A cryptocurrency interest account should be viewed as an investment, not a savings account.
Are cryptocurrency interest rates guaranteed?
How Do crypto interest accounts work?
How is paying high interest on cryptocurrency deposits sustainable? How do cryptocurrency interest account companies make money? Cryptocurrency interest account providers claim to make money by lending user deposits, much like a traditional bank. You can also get a cryptocurrency loan from any provider. People borrow crypto for multiple reasons: getting more leverage on their trades, the simplicity of a one-stop crypto loan versus the traditional loan path, and not wanting to liquidate their cryptocurrency assets, likely for tax purposes. Our primary focus for this article is the interest account.
What is the highest APY cryptocurrency interest account?
The highest APY cryptocurrency interest account offering is Nexo.
The Top Cryptocurrency Interest Account Promotions
Nexo offers $25 for new users signing up with $100 or more.
Final Thoughts – Are Cryptocurrency Interest Accounts Worth It?
Once upon a time, crypto interest accounts looked appealing.
After the events in 2022, it’s understandably difficult to trust most centralized companies to hold your assets.
We remind our readers that our content is purely educational and informational; a single dollar or satoshi shouldn’t leave your wallet without professional advice. As evidenced by the implosion of Celsius Network, any custodial account is risky, especially so in a bear market.
However, as soiled as the crypto interest account industry’s reputation is, we believe there is potential.
Are cryptocurrency accounts worth it at this moment in time? Probably not– the sector still deals with the scorched earth and fallout from 2022. However, we believe that some APY offerings may fill the void left by many of the industry’s most prominent players– and it better have some transparent third-party audits and firm user protections.
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