High Stablecoin Interest Rates: What They Are and Where to Find Them
High Stablecoin Interest Rates: What They Are and Where to Find Them

High Stablecoin Interest Rates: What They Are and Where to Find Them

In a low-rate environment, stablecoins offer a safe haven for yield-chasers—to the tune of 14%.

Liz Aldrich

Updated Feb 2, 2023

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Interest rates are abysmally low right now, which means if you're leaving a lot of cash sitting in a savings account, you're actually losing money to inflation. Unfortunately, the only way to earn enough to combat inflation is to invest that money, which means taking on the risk of losing it.

If you're looking for a lower risk way to earn more on your money, stablecoin interest rates can help. Stablecoins are a form of cryptocurrency that offers more stability by being pegged to an external asset, such as the US dollar or gold. This means their prices don't fluctuate as much—but crypto accounts can offer sky-high interest rates if you deposit your stablecoins with them. This might sound like the best of both worlds, but keep in mind that stablecoins are still riskier than cash. 

Whether you already invest in crypto or you're just looking to earn more on your money, here's what you need to know about stablecoin interest rates and where to find the best interest rates on your crypto.

How does interest on stablecoins work?

When you deposit money into an interest-bearing savings account, you earn interest on that money. Similarly, when you deposit crypto into an interest-bearing account or crypto exchange, you'll earn interest on that crypto. 

Banks, both traditional and crypto banks, are able to offer interest to consumers who deposit money with them because they lend out that money to borrowers. Borrowers pay interest to the bank, and the bank can pass a portion of the interest on to you, the account holder.

Interest on stablecoins is usually paid out either daily or monthly, and it can be paid out in cryptocurrency (Ether, Bitcoin, USD Coin, and more) or regular currency (USD, EUR, or GBP).

How high are stablecoin interest rates?

Stablecoins are a popular way to earn higher interest rates because in addition to earning the generous APY you get from a crypto account (think 8% to 14% compared to the .01% to 0.20% typically offered by cash savings accounts), stablecoins are less volatile than other cryptocurrencies like Bitcoin. Their value is often pegged to a relatively stable asset like US dollars (USD), so you don't have to worry as much about your account balance crashing when crypto takes a dip.

Let's say you put $5,000 into a savings account that offers a 0.40% APY and another $5,000 worth of stablecoins into a crypto account that offers a 12% APY. In one year, your cash savings account would be worth about $5,020—and your crypto account would be worth $5,634, assuming your stablecoins didn't lose value.

Why are stablecoin interest rates so high?

While stablecoins are often considered less risky than other forms of cryptocurrency, they're still riskier than cash. When you deposit cash into a regular savings account, you can't lose money—in fact, the best savings accounts are FDIC-insured on up to $250,000. When you deposit stablecoins into a cryptocurrency account, there are no guarantees—you can lose money if that stablecoin tanks. In other words, high stablecoin interest rates are offered to compensate for the increased risk you're undertaking by investing in them.

Another reason stablecoin interest rates are so high is the high demand for stablecoins from borrowing, combined with the fact that cryptocurrency transactions are far more efficient and low-cost than cash transactions.

Best stablecoin interest rates

A number of different crypto exchanges and crypto banks offer high stablecoin interest rates, although you have to deposit a qualifying stablecoin. Most of the best stablecoins will qualify for higher interest rates.

BlockFi offers an easy way to store your crypto with their interest account, and you can earn up to an 8.6% interest rate on your coins. Interest accrues daily and is paid out at the end of each month in Bitcoin, Ether, Litecoin, USD Coin, or Gemini Dollar. When it comes to stablecoins, you can earn a 9% APY on up to $40,000 worth of USD Coin (USDC), Paxos Standard (PAX), Dai (DAI) and Binance USD (BUSD) and 9.5% on up to $40,000 worth of Tether (USDT) as of November 2021.

Crypto.com lets you deposit your crypto and earn up to 14% in interest on over 30 different cryptocurrencies. With their Crypto Earn account, you can earn up to 8% on popular stablecoins if you want a plan that lets you withdraw at any time and up to 14% if you're willing to lock up your coins for at least 3 months. Stablecoins that earn interest on Crypto.com include USD Coin (USDC), Paxos Standard (PAX), Dai (DAI), Tether (USDT), TrueUSD (TUSD), TrueCAD (TCAD), TrueAUD (TAUD), TrueGBP (TGBP), PAX Gold (PAXG), and Terra (LUNA).

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