Crypto Lending
Crypto lending is where investors loan digital currencies to borrowers in exchange for interest payments or dividends, typically through an online platform or app. For token holders, crypto lending is seen as a way to generate passive income while for borrowers, it can be less complicated than getting traditional loans from banks.
In this guide to crypto lending, we explain how different services work, what to look for in an online crypto lending platform, and the associated risks for both loaners and borrowers, from taxes to regulations.
Best Crypto Lending Platforms
Here is a short overview of each broker's pros and cons
- CEX.IO - CEX.IO is one-stop-shop for crypto investors where you can buy and sell popular digital tokens, speculate on prices with margin trading and earn rewards through staking. Since it launched in 2013, more than five million traders have deposited over $7.5 billion. CEX.IO is registered with the FinCEN in the US and the GFSC in the EU.
- Nexo - Nexo is a centralized crypto exchange founded in 2018 in Bulgaria and today operates across some 200 jurisdictions from its base in Switzerland. It provides services including spot trading, futures trading, peer-to-peer loans, cold wallet storage and fiat-on ramps to buy crypto tokens. The crypto firm is registered with some respected financial authorities, such as the ASIC, and offers some fairly unique additional services including a credit card.
- Gemini - Gemini is a cryptocurrency exchange set up in 2014 by the Winklevoss brothers, known for their early involvement in Facebook. The exchange is among the world’s 20 largest and most popular. Gemini clients can trade and stake 110+ cryptocurrencies, with derivatives trading available in some jurisdictions, an advanced proprietary platform and additional features including an NFT marketplace.
- Coinbase - Launched in 2012 as a platform enabling users to buy and sell Bitcoin via bank transfers, Coinbase has emerged as a crypto behemoth, expanding its services to include 240+ crypto assets, developing sophisticated trading platforms for retail investors, listing on the US Nasdaq, and securing licenses with multiple regulators.
- OKX - OKX is a respected cryptocurrency firm, established in 2017, that offers a large suite of products, from mining pools to NFTs. Traders can access over 400 crypto tokens via OTC trading and derivatives. With an excellent web platform, developer tools and dynamic charts, OKX is a popular choice for technical traders.
- Swissquote - Established in 1996, Swissquote is a Switzerland-based bank and broker that offers online trading on an industry beating three million products, from forex and CFDs to futures, options and bonds. Highly trusted, it has built a strong reputation through innovative trading solutions, from becoming the first bank to offer crypto trading in 2017 to more recently launching fractional shares and its Invest Easy service.
CEX.IO
"CEX.IO continues to serve a range of crypto investors looking to buy, sell, trade, hold and earn with low fees. The tiered pricing structure will appeal to active traders while rookie investors will enjoy the straightforward platform interface and excellent education."
CEX.IO Quick Facts
| Demo Account | No |
|---|---|
| Instruments | Cryptos |
| Regulator | GFSC |
| Platforms | TradingView |
| Minimum Deposit | $20 |
| Minimum Trade | $1 |
| Account Currencies | USD, EUR, GBP |
Pros
- There's a wide range of global payment methods available including PayPal
- The proprietary terminal features an advanced charting package from TradingView, including 50+ technical indicators
- CEX.IO has remained a trusted crypto exchange since its launch, with 5+ million users
Cons
- Deposit and withdrawal fees are relatively high, including 0.3% + $25 for SWIFT withdrawals
- A maintenance fee applies after 12 months of no activity
- The broker has limited regulatory oversight
Nexo
"Nexo gives crypto traders the capability to trade, invest, lend and borrow digital assets in one place, and it’s especially good for its credit functions that pay out very high yields to lenders. However, its fees are relatively high and many day traders will prefer a more tightly regulated crypto broker."
Michael MacKenzie, Reviewer
Nexo Quick Facts
| Bonus Offer | Loyalty scheme with various bonuses, plus referral program and bonus paid to lenders on credit line |
|---|---|
| Demo Account | No |
| Instruments | Cryptos |
| Platforms | Nexo Pro |
| Minimum Deposit | $10 |
| Minimum Trade | $30 |
| Account Currencies | USD, EUR, GBP |
Pros
- Value-add tools integrated into the trading platform including social media analysis and newsfeeds by asset
- Traders benefit from bonuses and incentives including free trading funds paid to lenders and cashback in the form of the exchange’s native Nexo token
- Reputable crypto exchange that has been in business since 2018 and has taken some steps toward regulation
Cons
- High deposit and withdrawal fees for cards and e-wallets will price many traders out of the most convenient payment methods
- High maker/taker fees mean day traders will pay more to trade derivatives than they would at rival exchanges like Binance
- Although Nexo has registered with some reputable watchdogs, it is riskier to trade with than established crypto brokers like AvaTrade and Vantage
Gemini
"Gemini’s ActiveTrader platform and TradingView integration make it a good choice for serious crypto traders seeking a reliable charting environment, though we were disappointed by some unnecessary fees and previous security breaches."
Gemini Quick Facts
| Demo Account | No |
|---|---|
| Instruments | Cryptos |
| Regulator | NYDFS, MAS, FCA |
| Platforms | ActiveTrader, AlgoTrader, TradingView |
| Minimum Deposit | $0 |
| Minimum Trade | 0.00001 BTC |
| Account Currencies | USD, EUR, GBP, CAD, AUD, HKD, SGD |
Pros
- The trading app features a user-friendly, modern design and intuitive interface, with an excellent range of charting tools for day traders
- There is a decent range of educational guides and tutorials suitable for beginners
- The TradingView integration delivers top-quality tools, including backtesting and algo trading capabilities
Cons
- Some larger coins by market cap are not available to buy through Gemini
- The exchange has a history of concerning incidents including the collapse of its Earn program and a phishing breach
- The 'convenience fee' for using the mobile app seems arbitrary and makes it inefficient to use this feature
Coinbase
"Coinbase is ideal for beginners looking for an intuitive platform to buy and sell a wide variety of cryptocurrencies, with robust security and regulatory compliance. However, its fees are higher compared to competitors in our tests, and it’s not as tailored for short-term traders."
Christian Harris, Reviewer
Coinbase Quick Facts
| Demo Account | No |
|---|---|
| Instruments | Crypto |
| Regulator | FinCEN, FCA, CBoI, MAS, OAM, DNB, BdE |
| Platforms | Coinbase, Advanced Trade, Wallet, NFT |
| Minimum Deposit | $0 |
| Minimum Trade | $2 |
| Account Currencies | USD, EUR |
Pros
- There are platforms for all levels: beginners can use the simple Coinbase app, while Advanced Trade provides lower fees and pro-level tools.
- As a Nasdaq-listed company, Coinbase follows strict financial regulations, with licensing across the US, UK, and Europe. Security includes FDIC insurance for USD balances (up to $250,000) and two-factor authentication (2FA).
- Coinbase supports 240+ cryptocurrencies, including Bitcoin (BTC), Ethereum (ETH), Solana (SOL), and more recently listed altcoins like $Trump, giving early access to emerging tokens.
Cons
- Frustrating customer support during testing, with most help options hidden behind login, making it tough for locked-out users or non-account holders to get assistance.
- There are woeful research tools; Advanced Trade has TradingView charts but lacks features like news feeds, economic calendars, and AI market insights.
- High crypto fees based on tests, especially compared to competitors like Kraken and BitMEX, and notably on the standard dealing platform.
OKX
"OKX is a top pick for crypto traders looking for emerging coins and crypto projects to invest in. Traders can also make use of the broker's copy trading service and automated bots."
OKX Quick Facts
| Bonus Offer | $10 in BTC |
|---|---|
| Demo Account | Yes |
| Instruments | Spot, futures, perpetual swaps, options |
| Regulator | VARA |
| Platforms | AlgoTrader, Quantower |
| Minimum Deposit | 10 USDT |
| Minimum Trade | Variable |
| Account Currencies | USD, EUR, GBP, INR, JPY, SGD, RUB, AED, SAR |
Pros
- OKX maintains an excellent reputation with 20 million global clients and a license from the Dubai Virtual Assets Regulatory Authority
- There's an impressive range of blockchain products, including DeFi services, NFTs and games, alongside 400+ established and emerging coins
- Traders can access historical market data for spot and futures combining OHLC data, aggregate trades and trading history
Cons
- The firm offers limited regulatory oversight, though this is common among crypto brokers
- The broker's platform and features may be complex for novices
- The quality of customer support was inconsistent based on testing
Swissquote
"Swissquote is an excellent choice for active traders looking for a customizable platform, such as its CXFD, which integrates Autochartist for automated chart analysis to aid trading decisions. However, its average fees and steep $1,000 minimum deposit might make it less accessible for beginner traders."
Swissquote Quick Facts
| Demo Account | Yes |
|---|---|
| Instruments | CFDs, Forex, Stocks, Indices, Bonds, Options, Futures, ETFs, Crypto (location dependent) |
| Regulator | FCA, FINMA, CSSF, DFSA, SFC, MAS, MFSA, CySEC, FSCA |
| Platforms | CFXD, MT4, MT5, AutoChartist, TradingCentral |
| Minimum Deposit | $1,000 |
| Minimum Trade | 0.01 Lots |
| Leverage | 1:100 (Retail), 1:400 (Pro) |
| Account Currencies | USD, EUR, GBP, CAD, AUD, NZD, JPY, ZAR, TRY, SEK, NOK, CHF, HKD, SGD, PLN, AED, SAR, HUF, THB, QAR, MXN |
Pros
- Swissquote supports powerful platforms for day trading, such as MetaTrader 4/5 and its own CFXD (previously known as Advanced Trader) which impressed during testing with customizable layouts and access to advanced charting tools and technical indicators.
- Swissquote is highly trusted owing to its position as a bank, its listing on the Swiss stock exchange, and authorization from trusted bodies like FINMA in Switzerland, FCA in the UK, and CSSF in Luxembourg.
- Swissquote provides advanced research services like Autochartist for technical analysis and integration of real-time news from Dow Jones. Its proprietary Market Talk videos and Morning News reports deliver expert analysis daily, appealing to active traders.
Cons
- Analysis shows Swissquote’s fees are on the high side, with forex spreads starting at 1.3 pips on Standard accounts, compared to 0.0 pips at brokers like Pepperstone or IC Markets. Transaction fees for non-Swiss stocks and ETFs can also add up for frequent traders.
- Unlike brokers such as eToro with social trading features, Swissquote lacks tools for community engagement or copying successful traders, limiting its appeal for those who value peer-to-peer learning.
- Swissquote primarily caters to pro and high-net-worth clients, with high minimum deposit requirements (eg $1,000 for Standard accounts), making it less suited for smaller traders who can find higher leverage at the growing number of brokers with no minimum deposit.
Crypto Lending Overview
Token holders are increasingly looking for access to fiat money by leveraging their crypto supply. Fortunately, holders of cryptocurrency can borrow physical money such as USD, EUR, and GBP or lend their digital assets in return for interest payments. Crypto lending is available on dozens of popular coins and stablecoins, including Bitcoin and Tether.
Lenders and borrowers are connected via an online platform or exchange such as Binance, Kraken, and Coinbase. Platforms act as a third-party and intermediary, managing the transaction between the borrower and lender.
The two primary crypto lending strategies are centred around:
- Stablecoins – these tokens are typically pegged to a major fiat currency, such as the US Dollar, bringing some stability to an otherwise unpredictable market. Stablecoins are generally considered the lower risk option.
- Traditional cryptocurrencies – well-known cryptos and altcoins are usually more volatile and therefore the amount of interest you can earn can be unpredictable. This strategy suits those with a larger risk appetite.
Some investors also use crypto lending to capitalise on interest rate arbitrage. This is where you borrow an asset from one platform and lend it out on another at a higher price, profiting from temporary price discrepancies.
Crypto Lending For Investors
Investors can deposit their digital currencies into wallets on crypto lending platforms and receive weekly or monthly interest payments. Lending interest rates vary but can range from 3-7% for Bitcoin. Interest rates for more stable assets can be much higher, sometimes up to 17% for coins like USD Coin (USDC) and Binance USD (BUSD).
The worry of borrowers not repaying a loan is somewhat reduced with crypto lending as borrowers must stake between 25% and 50% of their own coins as security for the loan.
Crypto Lending For Borrowers
Crypto lending also allows you to borrow physical money so you can avoid selling your digital assets. Borrowers could be individuals or businesses looking for a temporary loan.
Generally, borrowers can use either crypto or fiat assets as collateral to secure a loan. Those borrowing against crypto assets normally need to ‘overcollateralise’, meaning they will need to lock up more than the overall value of the funds they are borrowing. Once you have paid back the loan, plus the incurred interest, the crypto collateral is returned. The key risk to highlight is the danger that the crypto collateral depreciates in value.
Crypto Lending Rates
Providers charge borrowers interest fees on their loans. Each crypto lending site will also have its own mark-up to take into account. Charges vary, but firms are fairly transparent about the fee structure at the sign-up stage.
The typical annual percentage yield (APY) for stablecoins is 10% to 18% while for standard cryptos, it’s 3% to 8%. The Kucoin exchange has even offered an APY of more than 25% for users lending cryptocurrency.
Note, if you don’t pay back your crypto loan, lenders can liquidate all or part of your collateral to recoup their losses. Also, collateral can be liquidised because of an unmet margin call—where platforms inform borrowers that they need to increase their collateral due to a change in the value of cryptos.
Pros Of Crypto Lending
Crypto lending has advantages for both borrowers and lenders:
- Easy access – you don’t need a bank account or credit check to start crypto lending or borrowing
- Automated – minimal effort is required with many crypto lending platforms. Simply activate the bot and sit back
- Cheap borrowing – compared to credit cards and unsecured loan rates, interest rates are relatively low. You can even use lending services without putting down any collateral
- Speed – crypto loans are often approved with minimal checks, giving users access swift access to cash
- Flexible – users can switch between multiple tokens on the same crypto lending platform
Risks Of Crypto Lending
There are also a few drawbacks to crypto lending services:
- Volatility – due to the volatile nature of cryptocurrencies, the collateral needed can change at any time. This is why most crypto loans are overcollateralised, though stablecoins offer a means to avoid this
- Risk – borrowing money is always risky, especially if you cannot pay the funds back. Prospective users should think carefully before getting started
- Limits – users are limited on how much they can borrow based on the percentage of crypto needed to stake the loan
- Restrictions – some programs require borrowers to stake their crypto for a fixed period, for example, 30 days
How To Get A Crypto Loan
Use our step-by-step guide to obtaining a crypto loan:
- Choose a platform – this is a key decision – see our detailed guidance below on choosing between providers
- Request a loan – once you’ve signed up with a platform, use the self-serve form on the provider’s website to log your request
- Collateral – the platform will calculate how much crypto or fiat collateral you need to put down to secure the loan. Note, you won’t get your stake back until you have paid back the loan
- Deposit – deposit the collateral amount using the account details provided on the crypto lending platform
- Receive funds – once your application has been approved, you will see the funds loaded into your account
- Payments – depending on the terms of your loan, you will likely need to pay weekly or monthly interest on the funds borrowed
Note, you can also get unsecured crypto loans, which offer borrowers short-term liquidity and can be paid back in either fiat or crypto cash. The fees and risks with these forms of loans tend to be higher for the borrower and investor.
Comparing Top Crypto Lending Platforms
There is a good range of companies, apps and platforms available today that offer crypto lending. The key distinctions are around the coins available and the interest rates charged. Security, customer reviews and mobile access are also worth including in your comparison. We’ve broken down the important considerations in more detail below.
Centralised Vs Decentralised
Crypto lending platforms can be either centralised or decentralised. Centralised ecosystems, such as Binance, allow lenders and borrowers to agree on the terms of a loan while the management and transfer of funds are facilitated by the platform. These crypto lending platforms essentially act as a middleman.
Users generally need to create an account and go through KYC protocols to help prevent fraud. Some centralised crypto lending platforms protect assets via insurance or keep them in cold storage with a wallet like Ledger.
Decentralised crypto lending platforms remove the third-party element and simply connect borrowers to live lenders. Algorithms and sophisticated protocols automate loan payouts. These websites tend to offer less in the way of KYC checks and are subject to reduced regulations. Interest rates also tend to be lowered on DeFi platforms.
Fixed Vs Flexible
Crypto exchanges typically offer two types of loan: fixed and flexible. Fixed loans lock your deposit in at a predetermined rate for a set period (usually 3 months/90 days). The reward for leaving your crypto alone is higher interest payments.
Flexible lending and borrowing crypto is more aligned with a savings account at your local bank. Users can withdraw crypto at any time but the rate of return is lower. Gemini is a flexible crypto lending provider, paying a daily APY so you can earn compound interest on your coins.
Automation
There are two main types of crypto lending platforms: automated and manual. Automated platforms, such as Celsius, generate dividends for lenders as soon as they deposit assets into the platform’s digital wallet. This is a hassle-free option for users seeking passive income.
Conversely, manual crypto lending sites require you to personally stake and manage your assets to generate dividends. Borrowers set their requirements, from interest rates and the coins for collateral to loan volume and duration. Investors can then choose to accept or negotiate the terms of the loan.
Coin Offering
Not all cryptos are available on every platform. Also, each crypto has a different yield. For example, the yield on stablecoins typically ranges from 10% to 18% while standard crypto tokens come in at between 3% and 8%. It may be worth testing out several crypto lending platforms to diversify your investments and to spread risk.
Other considerations include:
- Lending duration – is the lending period fixed or variable? Platforms with no fixed requirement offer increased flexibility, especially for beginners
- Deposit limits – does the crypto lending platform require a minimum deposit? Platforms may ask for a significant up-front sum in collateral which won’t suit some newcomers
- Mortgage lending – some users are turning to crypto lending platforms to borrow the funds needed for deposits on homes. Whilst such loans are a risky option and not accepted by many mortgage providers, profits from crypto lending could, in theory, be used to fund a house deposit
Final Word On Crypto Lending
Crypto lending offers a means of generating additional income for holders of popular tokens while for borrowers, services offer fast access to cash. There are, of course, serious risks to take into account, especially with the volatility of the cryptocurrency market. Also, some believe that the industry is in a bubble so caution is advised.
Use this guide to get started crypto lending, from choosing from the list of best exchanges to understanding the risks involved.
FAQs
What Countries Is Crypto Lending Available In?
Crypto lending is available in many jurisdictions around the world, including Australia, Canada, India, Singapore, Germany, the UK, and the USA. Despite this, some regulators in Europe and further afield are clamping down on websites with Indonesia’s Financial Services Authority identifying and blocking more than 300 illegal peer-to-peer lending platforms in 2019. In addition, only a limited number of providers hold reputable regulatory licenses.
Is Crypto Lending Halal Or Haram?
Investing and using cryptos such as Bitcoin (BTC) and Ethereum (ETH) is generally considered Halal, so long as you are not gambling with your tokens. With that said, some believe that crypto lending, given the interest rate element, is considered Haram. It could be worth speaking to your local religious leader before getting started.
Is Crypto Lending Worth It?
Some spectators believe that the market size of crypto lending and borrowing is expected to reach $20.3 billion by 2027. Platforms can provide much-needed access to cash for borrowers while lenders can generate returns from tokens sitting idle. Of course, the cryptocurrency market is notoriously volatile so beginners should conduct thorough research before taking out a loan.
How Does Crypto Lending & Borrowing Work?
Individuals with tokens, such as Bitcoin, can loan their digital assets to others or put down their coins as collateral to get a fiat loan. Both centralised and decentralised platforms facilitate crypto lending services. Use our guide to finding the best providers with definitions of key terms explained.
Is Crypto Lending Safe?
Like most things, crypto lending is not risk-free. Prospective users should carefully consider the risks before getting started. It’s also important to choose a reliable platform with positive customer ratings.
What Are The Top 5 Crypto Lending Platforms In 2021?
There are several leading options on the market. Celsius is among the best with high lending rates on both stablecoins and standard cryptos. The platform offers 41 lendable coins including XRP and USDT. YouHodler is another popular option with high yields and close to 25 available coins. BlockFi is the largest crypto lending platform in the USA but has fewer lendable coins. Alternatively, Crypto.com, based in Hong Kong, offers among the highest yield rates and a large choice of coins but limits investment periods to 90 days. Other popular borrowing platforms include Genesis, Fulcrum, Nexo, Nuo, Gate.io and FTX. Solutions offer competitive lending rates, among staking pools, free aggregator calculators, micro lending, and more.