How Do Crypto Savings Accounts Compare to Traditional Bank Accounts?

Traditional and crypto-backed savings accounts have quite a bit in common. Both require you to deposit funds, and both pay interest based on the amount of currency you’ve deposited. You also have the ability to deposit or withdraw funds for each type of account, though some of the rules relating to that access can vary.

One of the major differences between the two kinds of savings accounts — and the driving force behind much of the interest in crypto-backed variety — is the interest rate. The average interest rate on a traditional savings account is just 0.06%. Even with high-yield savings accounts, interest rates still often fall below 1%, barring a few outliers.

Crypto savings accounts provide far better yields. While the amount can vary depending on the provider, timing and the digital currency involved, you may find some cryptocurrency-based accounts offering double-digit returns.

When it comes to withdrawing funds, traditional savings accounts usually let you withdraw what you’ve deposited at any time, as long as you make no more than six withdrawals monthly. With crypto-backed accounts, the rules vary between providers. Some may prevent you from withdrawing the cryptocurrency for a certain length of time after depositing it. You may also encounter withdrawal fees, something you don’t see with traditional accounts in most cases.

Another big difference involves federal account protection. Traditional bank accounts are insured by the Federal Deposit Insurance Corporation (FDIC), an agency that protects accountholders and ensures they can recoup money they’ve deposited — up to a limit of $250,000 — if the bank somehow fails. The same goes for credit union savings accounts through National Credit Union Administration (NCUA) insurance.

With cryptocurrency savings accounts, there’s no guarantee that any kind of insurance is in place. If the provider or platform fails and you’re cut off from access to the wallet holding your deposits, you might never be able to recover that digital currency.