Will regulators wipe interest-bearing crypto accounts?

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  • Companies in several markets are offering crypto products that behave like bank accounts, and regulators have taken notice.
  • These crypto accounts have no deposit protection, so interest-bearing products should be treated like other assets in the broader crypto market.
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What caught our eye: Crypto companies offer high-yield products that behave like custodian accounts.

Top motivation of UK/US cryptocurrency holders for buying crypto charts


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Blocknom, which said on Friday it had bagged $500,000 in a pre-seed round, plans to offer a depository crypto product in Southeast Asia, according to TechCrunch. The fintech accepts stablecoin deposits at high-yield annualized rates of up to 13%.

In the USA, Celsius promotes accounts earning interest of up to 17%, and Krypto.com offers up to 14.5%.

AQRU based in the UK encourages Earn up to 12% interest.

Binance that was Founded in China, but has no headquarters yet, offers two Crypto Savings Products. One allows unlimited withdrawals with interest of up to 20%, the other has lock-up periods and up to 25% annualized interest.

State scrutiny: US regulators weren’t too keen on these account-like products that do not have FDIC or NCUA protection for savers.

BlockFi I Agree reached a $100 million settlement with the SEC last month for not registering its accounts as lending products. It stopped Offering accounts for US customers though wants to return into the room after filing a registration statement with the SEC.

The SEC is also investigating Celsius, Gemini and Voyager for their escrow products. Per January 2022 report by Bloomberg. As with BlockFi, the SEC can determine that these offerings must be registered as securities.

And Coinbase dropped its plans for US crypto savings accounts in September 2021 after a critical SEC response, Per CNBC.

The Big Take: While high returns can lure customers to crypto-based accounts, regulators need to ensure the public doesn’t see them as a comparable risk to insured bank accounts.

These accounts have no deposit protection, so interest-bearing products should be treated like other assets in the broader crypto market.

This outlines that depositor risks include:

  • Companies holding the assets could fail.
  • Deposits could be subject to fraud and hacking.
  • Certain cryptos may lose tradability if their markets disappear.
  • Crypto markets can be illiquid and volatile.

This claims that it has broad authority over crypto, but Congress could step in and legislate dealing with interest-bearing crypto accounts. And other countries could also take action should these accounts gain prominence, complicating growth plans for companies looking to enter the space.

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