If there’s one thing that frustrates people, it’s watching their hard-earned savings stagnate due to pitifully low interest rates.
The Bank of England’s base rate is currently at an all-time low. This means you’ll be lucky to earn 0.5% on an instant access account. Even if you’re prepared to lock your savings away for longer, you may struggle to get a paltry 1.0% (May 2021).
As such, a lot of people are now looking for ways to make their money work harder.
One such option is crypto interest accounts, which pay interest on both cash and any cryptocurrency you hold in your portfolio.
Whether you’re a crypto-cynic and believe the whole thing is a speculative bubble, or you have faith in blockchain technology and how it’s changing the world, there’s no arguing the returns are eye-wateringly high compared to banks.
Interest rates of up to 12% for taking some risk
Some of the mainstream crypto accounts can offer up to 12% – if you’re prepared to take the extra risk. These accounts do not offer the Financial Services Compensation Scheme (FSCS) protection of £85,000 which you have on your bank and building society savings.
There are two main options for you to consider: crypto interest accounts that pay interest on your cash, or, if you’re after a higher rate, pay returns in cryptocurrency.
Cash savings usually offer the lowest returns. However, at around 5% at the time of writing, this is a princely sum compared to high street banks.
This is the basic rate offered by Nexo on GBP, although you can boost this to 7% if you choose to have your interest paid out in Nexo tokens, the company’s native cryptocurrency.
This means that your returns could be even greater if the Nexo token rises in value. Equally, your holding has the potential to decrease in value if the market falls.
Nexo offers various bonuses that can be unlocked by holding a minimum portion of your portfolio in Nexo tokens. Check out our Nexo review here >>
The highest rates of interest can be achieved by holding what are known as stablecoins, such as Tether (USDT) and having the interest paid in Nexo.
Again, the highest rate was available by holding Tether, although this was trailing Nexo at 9.3%.
BlockFi offers you the flexibility to have all your interest paid in the currency deposited or in a cryptocurrency of your choice. There is currently no option to hold savings in GBP.
Both companies, and the many others that are operating in this space, make their money from offering easy access loans. They also offer credit cards, with the BlockFi card featuring Bitcoin bonuses.
Aside from the primary business of savings and loans, both companies allow you to buy and sell a limited number of cryptocurrencies.
Read our guide to the top five crypto interest and savings accounts.
Easy to sign-up and start earning
Opening an account with either Nexo or BlockFi is a simple process. You’ll need to provide some personal details and a photo ID.
Once approved, which happens very quickly from our experience, you’ll be able to make your first deposits and earn interest straight away.
The loan application process is also said to be straightforward, although we haven’t tried this.
They both pitch themselves as being digital banks and both have plans to roll out further services that will cement the similarity.
Both services can be managed by either desktop or mobile apps. They are equally slick and easy to use, giving the information you need without any fuss.
One difference to note: Nexo pays interest daily which is compounded, while BlockFi pays monthly.
What are the downsides to crypto interest accounts?
There are downsides to both services. For instance, BlockFi only allows a limited number of free withdrawals a month, and a delay before your holdings will be transferred due to its security procedure.
With Nexo, the best rates of interest can only be unlocked by buying the native token, which some people may feel uncomfortable about due to the risk of the token depreciating in value and greater exposure to the crypto market.
An added complexity to Nexo comes when retaining your loyalty level.
Fluctuations in the market rate of any invested crypto can mean that your loyalty level changes without your knowing and your interest rate decreases.
To fix this, you’ll need to buy more Nexo tokens, and there’s a minimum spend of around £10.
We feel that an alert should be sent to notify account holders of the change, and there should be a lower minimum purchase amount of Nexo tokens.
Because of this, and although the rates of interest are higher on Nexo, my personal preference of the two platforms is BlockFi for its simplicity.
The interest rates on both Nexo and BlockFi are variable, but this is normal for any bank or building society, unless you’re prepared to lock your money away for lengthy periods.
Is my cash safe in Nexo, BlockFi or other Bitcoin accounts?
When it comes to the security of your holdings, this is potentially a point of concern if there’s another global economic downturn because the business model is based on loans.
Hacking is another issue that may put people off, with many well-publicised cases of cryptocurrency holders having their coins stolen from exchanges.
A lot of people ask whether it’s safe to entrust their cash or crypto to companies like Nexo or BlockFi, and others in this space.
Nexo has more than 1.5 million clients and some US$15 billion of assets under management at the time of writing.
It is licensed and regulated by the digital assets institution and has a US$375 million insurance policy on its custodial assets.
BlockFi is backed by several large and reputable companies in the crypto space, including Coinbase, Fidelity and Akuna Capital. Gemini Trust, which is regulated in the US, is the company’s main custodian.
As the cryptosphere is still largely unregulated there’s always going to be a certain degree of risk with any investment.
That said, Nexo and BlockFi appear to be legitimate and trustworthy businesses.
Like any investment, it’s essential that you do your due diligence beforehand and understand the risks of the financial product you are planning to use.
* This article is for informational purposes only and does not constitute financial or investment advice.
Adam is the founder of The Crypto Adviser which offers experts guides and reviews on all things related to Bitcoin and cryptocurrency.
Adam is Diploma for Financial Advisers (DipFA) Level 4 qualified, a Member of the London Institute of Banking and Finance (MLIBF), and has worked for many years as a journalist and PR consultant, having studied with the National Council for the Training of Journalists (NCTJ).