What Are Crypto Savings Accounts, and How Do They Work?

On the surface, crypto savings accounts work like traditional savings accounts — they’re financial accounts that you deposit cryptocurrency into so you can begin earning interest on its value. You deposit whatever amount of cryptocurrency you’d like; whether you choose to deposit some or all of your holdings is up to you. You simply use crypto instead of a fiat currency, like dollars, to fund this type of account.

Functionally speaking, cryptocurrency savings accounts are pretty straightforward. Once you open an account with a provider, you’ll deposit your desired amount of cryptocurrency by sending it to a new crypto wallet that’s associated with your account. Once there, other platforms can borrow those crypto assets. Whenever those digital coins are borrowed, you earn interest.

The amount of interest you’ll earn is determined before other platforms borrow your crypto, giving you clear insights into the earning potential of your digital currency. However, the interest rates can change over time, meaning they can fluctuate in response to financial market conditions or adjust based on other factors. For example, when demand for cryptocurrency is high, interest rates typically rise. When demand declines, interest rates fall.

While market conditions play a big role in the equation, other elements also come into play. For instance, the provider you select matters, as some offer more competitive interest rates than others. Additionally, like all financial accounts, you could encounter savings platforms that charge fees or have other costs associated with the service, even though not all do.

It’s also important to note that the type of currency you receive as your interest payments may vary. The same goes for interest schedules, with some platforms paying interest out on a daily basis and others making monthly payments. Whether or not the interest is compounding may also change depending on the provider platform.