High-interest crypto accounts come with risks

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High-interest crypto accounts come with risks

By John Collett

Crypto savings accounts are attracting increasing attention because of the oversized interest rates they offer.

However, like all things crypto, they are opaque and investors need to accept it is merely a promise to pay interest on crypto. Nothing is guaranteed.

High-yielding crypto accounts come with significant risk.

High-yielding crypto accounts come with significant risk.Credit:FDC

Earning interest on crypto has been possible for some time. The difference now is that it is packaged in such a way as to make it easier for investors who know nothing about digital currency to do so.

There are no set interest rates on high-yield crypto accounts and two providers may offer different rates on the same digital coin.

So, how does it work?

The investor selects and then buys a cryptocurrency from a provider in Australian dollars. Smartphone apps mean it takes only minutes to sign up.

The provider then displays a savings account, with a balance showing the interest earned.

However, the investor is, in fact, lending their crypto to the provider, who then makes money from it by further on-lending it to a third-party decentralised finance platform that employs strategies to hopefully generate superior returns. The provider’s aim is to earn more on the crypto than it pays out to the original investor in interest.

The latest entrant in the crypto high-yield market is Swyftx, an Australian digital exchange, that is offering interest on a 21 digital assets, including bitcoin, ethereum, cardano, solana, together with US dollar and Australian dollar stablecoins.


Stablecoins have values that are pegged to a nominated fiat currency, so that once an investor buys them, their capital value, according to the providers, changes little. That is in marked contrast to directly investing in crypto, which can result in extreme volatility. Price swings in bitcoin of more than 10 per cent in a day are not uncommon.

Bitcoin was trading at almost US$70,000 ($101,000) at the end of last year, but it has since plunged to about US$36,000 ($52,000).

Swyftx is quoting interest on stablecoins pegged to the US dollar of up to 6.7 per cent and up to 5.3 per cent on TrueAUD, an Australian dollar stablecoin.

It quotes earnings on other crypto, such as polkadot, of up to 12.7 per cent and up to 25.7 per cent on kava, where investors are exposed to the volatility of the digital currencies.

By comparison, rival crypto exchange Block Earner promises to pay a steady interest rate of 7 per cent or up to 18 per cent, variable, on a US dollar stablecoin.

Another recent market entrant, Finder Earn pays an interest rate of 4.01 per cent on TrueAUD, with a bonus rate of 2 percentage points paid until July 1 for those with more than $10,000 invested.

Investors need to exercise extreme caution with these high-yield crypto accounts.


Deposits of up to $250,000 for each account held by an authorised deposit-taking institution (ADIs) are effectively guaranteed by the federal government’s Financial Claims Scheme, in the unlikely event the ADI fails – though the government would still have to activate the scheme.

However, fintechs providing crypto savings platforms are not ADIs are not covered.

Regulators are still grappling with these online products. They are not regulated by the Australian Securities and Investments Commission.

There has been no shortage of warnings on crypto used to generate high-yield interest.

Janek Ratnatunga, chief executive of the Institute of Certified Management Accountants, says that higher returns always come with higher risk.


If an administrator of a high-yield crypto account lends money to a third party that does not pay it back, you could lose some or all of your money with little or no recourse, he says.

Barney Tan, professor and head of the School of Information Systems and Technology Management at UNSW, has described what the account providers do with savers’ money as “opaque”.

  • Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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