Interest-Bearing Account

You deposit crypto, the platform lends it out, and you earn a cut of the interest. That's the whole model — and it's older than crypto itself.

The difference from a savings account is custody. When you deposit into a CeFi interest-bearing account, you're handing your assets to a company. They control the keys. You control a balance on their ledger.

How It Works

CeFi platforms pool depositor funds and lend them to borrowers — usually overcollateralized loans where a borrower puts up $150 in crypto to borrow $100. The interest those borrowers pay flows back to depositors as yield, minus the platform's margin.

Say a platform offers 5% APY on USDC. You deposit $10,000. At the end of the year, you've earned $500 in interest — paid out daily, weekly, or monthly depending on the platform. The math is straightforward. The risk is not.

Rates aren't fixed. They move with borrower demand. When demand for loans drops — as it did sharply in the 2022 bear market — yields compress. A rate advertised today isn't guaranteed tomorrow.

Why It Matters

For a crypto holder, an interest-bearing account turns a static asset into a working one. Idle Bitcoin or stablecoins sitting in a wallet earn nothing. Deployed into a lending platform, they generate yield. That yield compounds if you let it.

What to Watch

The yield is real. The risk is that your funds are unsecured deposits at a private company — not a bank, not FDIC-insured, not subject to the same capital requirements. If the platform makes bad loans, gets hacked, or mismanages its book, depositors are creditors in a bankruptcy proceeding. Celsius depositors learned this the hard way.