Crypto banks’ savings rates are ten times greater than high street, but are they safe?
Matthew Shillito does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
Leading crypto banks such as BlockFi and Nexo are attracting a lot of attention. Customers can earn an APY (annual percentage yield) of up to 12%, dwarfing high-street savings accounts, whose interest rates are sub-1%. But before you rush to transfer your hard-earned savings, there’s some important things to be aware of.
First you need to realise what these banks are offering interest on. Apart from Nexo, which pays up to 12% interest on pounds, US dollars and euros, most crypto banks only allow customers to save in cryptocurrencies such as bitcoin and ethereum, or stablecoins like Tether or USDC which trade one for one with the US dollar.
Their highest rates are paid on stablecoins: for example, Nexo pays up to 12% on USDC and Tether but 8% on bitcoin, while BlockFi pays 8.6% on USDC, 9.3% on Tether and 5% on bitcoin. In other words, you could change US$1,000 (£720) into USDC1,000, leave it in a BlockFi account for a year, then theoretically withdraw US$1,086.
