The year 2022 saw the emergence of a new asset class in the form of cryptocurrencies. People worldwide have been investing a lot of money into these digital assets and reaping advantages such as high returns, greater liquidity, and low transaction fees.
While investing in cryptocurrencies can be highly lucrative, it also carries with it a certain degree of risk. Many people are turning to cryptocurrency lending platforms to earn passive income while protecting their capital to reduce this risk.
In this blog post, we will talk about 7 highly recommended cryptocurrency lending platforms for 2023 that offer both safety and high returns on investment. To help you with that, we’ll cover the following topics:
- How Do Crypto Lending Platforms Work?
- Types of Lending Platforms
- 7 Best Crypto Lending Platforms
- How to Choose a Crypto Lending Platform
- When to Loan
- Benefits of Crypto Loans
- Risks in Crypto Lending
- Safety in the Crypto Lending Industry
- Crypto Loans Taxes 101
How Do Crypto Lending Platforms Work?
A form of decentralized finance known as “crypto lending” enables investors to lend their cryptocurrencies to various borrowers. These platforms act as intermediaries to link borrowers and lenders.
Borrowers obtain loans through the lending platform after lenders deposit their cryptocurrency into high-interest lending accounts. In return, they will receive interest payments known as “crypto dividends.”
Compared to a traditional loan, loans for cryptocurrency are the simplest and easiest to obtain. The platforms first gained popularity in 2020; since then, the total value locked on different platforms has increased to billions.
The process of lending involves depositing cryptocurrency, which is then lent to borrowers in exchange for recurrent interest payments. The ability to lend out cryptocurrency and earn interest in the form of cryptocurrency rewards is made available by cryptocurrency lending platforms for investors.
Crypto Loan Know-How
Getting a crypto loan can be a great way to get access to cash without having to sell off your investments. However, it’s essential to understand the risks involved before signing up for one. In that case, if you’re looking to get a loan in cryptocurrency, there are a few things you’ll need to know to understand how it works.
- You must sign up on the crypto lending platform of your choice and choose a particular interest rate.
- Bonds are acquired by the lender in exchange for lending borrowers access to liquid cryptocurrency funds, securing the loan made to the borrower.
- Lenders would obtain additional bonds upon interest repayment.
- The lender may return all the bonds to get the money after the predetermined repayment period.
- Smart contracts enable exchanging cryptocurrency for bonds and sending them back.
Why Investors are Getting Into Crypto-Backed Loan
Crypto lending platforms are gaining popularity among investors for a number of reasons. These platforms allow investors to lend their crypto to borrowers and earn interest on it.
It is a great way to earn passive income and a lot less risky than traditional investing. This is especially attractive to long-term investors who believe in the potential of cryptocurrencies but don’t want to miss out on potential gains by selling them.
Another reason crypto lending platforms are becoming more popular is that they offer a way to hedge against cryptocurrency price volatility. By taking out a loan and using digital assets as collateral, investors can protect themselves against downward price movements while still benefiting from any upside.
Lastly, crypto lending platforms provide an alternative investment opportunity that is not correlated with traditional markets. This diversification can help mitigate overall portfolio risk.
All of these factors are likely contributing to the growing popularity of crypto-backed loans among investors. Getting a crypto loan can be a great way to get access to cash without having to sell off your investments. However, it’s crucial to understand the risks involved before signing up for one.
Types of Lending Platforms
There are a few different types of crypto lending platforms out there. Some platforms allow you to lend your crypto directly to another person. In contrast, others will enable you to lend your crypto to a business or organization. Some platforms offer peer-to-peer lending, which means that you can lend your crypto to someone else, and they can pay you back with interest.
Centralized Lending Platform
The first type of crypto lending platform is called a centralized lending platform. These platforms work similarly to traditional banks, offering loans and accepting deposits from users.
For the duration of the loan, a lender’s assets and funds and the collateral from borrowers would be under the control of a CeFi lending platform. However, these platforms use crypto assets instead of fiat currency as collateral.
This can be a good option if you want to get a loan in cryptocurrency or if you want to store your crypto holdings in a more secure environment. Just not that a KYC procedure would be necessary, eliminating anonymity.
- KYC requirement promotes the integrity of the platform
- Allows for flexibility when working with regulators
- Offers fiat to crypto conversions
- Has issues regarding its utter lack of accountability, transparency, and confidentiality
- Can choose to enforce high transaction fees
- At the risk of hacking incidents
Decentralized Lending Platform
The second type of crypto lending platform is called a decentralized lending platform, and this is where crypto lending falls. These platforms are similar to peer-to-peer lending platforms but use smart contracts to facilitate the loan process.
Decentralized apps (dApps) enable users to connect to a digital wallet and instantaneously access deposit security and flash loans. This can be a good option if you want to get the most secure loan possible or if you want to avoid dealing with a centralized authority.
- Competitive rates
- Offers reimbursement in case of default borrowers
- Easy access to liquidating funds
- May require proof of good credit history or ask for a security deposit
- Missing repayments may negatively affect credit rating
- At the risk of late payouts
7 Best Crypto Lending Platforms
As it’s impossible to study all the available lending companies, we’ve compiled our recommendations to check which one fits your needs.
|Platform||Registered Users||Approximated APR/APY||Fees||Native Token||Other Coins Supported||Rating|
|AAVE||46,000||Varies on market demand||– Reserve factor|
– Instant liquidity fees
– Liquidation fees
– Portal fees
|AAVE||Ethereum-based assets, such as Gemini dollars and USDC; both lending and borrowing markets from Avalanche and Polygon; pools physical assets||4.6/5|
|CoinRabbit||Not stated but the crypto lending platform is available worldwide with few restrictions in the US and China||14% and 10%||– Conditional network fees||N/A||80+ including ETH, SOL, BTC, and AVAX||4.5/5|
|Nebeus||60,000||3.5% and 12.85%||– Withdrawal fees|
– Deposit fees
|N/A||20+ including Litecoin, Avalanche, Tether, Uniswap, and Polygon||3.5/5|
|Abracadbra.money||100,000||3.7% and 4.5%||– Protocol fees|
– Borrow fee
– Interest fee
|SPELL||SHIB, ALCX, WBTC, xSUSHI, and 15 more||3.7/5|
|SpectroCoin||500,000||8.55% and 6.95%||– Deposit fees|
– Transaction fees
– Withdrawal Fees
|N/A||50+ including 1INCH, AAVE, Cardano ADA, and CELO||4.4/5|
|CoinLoan||100,000||12.3% and 10.3%||– Borrowing fees|
– Liquidation fees
– Trading fees
– Withdrawal fees
|CLT||BTC, ETH, LTC, and XMR, among several others||3.8/5|
|Cake DeFi||1 million||14% and 5.1%||– Swap fee|
– One-time deposit fee
– Withdrawal fee
– Staking rewards fee
|N/A||30 including DASH, ETH, BTC, DOGE, and MATIC||4.0/5|
“Earn interest, borrow assets, and build applications.”
AAVE is a non-custodial protocol allowing you to borrow money by pledging your assets and earning interest on cryptocurrency deposits. In addition to lending and borrowing crypto assets, AAVE is a well-designed liquidity protocol with many additional features.
CEO Stani Kulechov invented the AAVE protocol in 2017. At first, AAVE used LEND as the token and took inspiration from the Ethereum blockchain. But it became successful in raising more than $16.2 Million after its initial offering.
Users of this platform can borrow and lend a wide variety of cryptocurrencies at both fixed and variable interest rates. AAVE contains remarkable distinguishing features in addition to the standard features found on protocols like Compound, such as uncollateralized loans, “rate switching,” and special collateral types.
Good platform governance is ensured by a long and impressive list of stakeholders who also actively participate. Particularly for new or relatively inexperienced users, this improves the community experience.
- Interest rates that are stable for some crypto assets
- Multiple digital assets are eligible for a sizable lending pool
- Offers instant lending and borrowing
- Variable flash loans
- Lacks valuable user incentives
- Few e-wallets supported
“Get Instant Funds Against Your Crypto.”
CoinRabbit enables cryptocurrency loans. The relatively new company, established in 2020, aims to make cryptocurrency function for users and lenders just like conventional money.
Guarda, a safe online crypto wallet that lets users buy coins, serves as the cold wallet storage for CoinRabbit. Through a private VPN, only chosen team members are granted access to the wallets.
CoinRabbit aims to build a platform where borrowers can obtain loans without worrying about losing their underlying collateral, and lenders can collect the interest without running the risk of losing their assets.
- Can withdraw deposits at any time
- Zero deposit and withdrawal fees
- No time limits for borrowing money and accruing interest
- No fund insurance
- Demands fees on loans under 30 days
- No fiat currency deposits and crypto conversions features
“Bridge your Crypto and Cash.”
Nebeus has a complete ecosystem for earning, trading, or even insuring your cryptocurrency. This London-based exchange offers you services like a bank, a lender, a cryptocurrency exchange, and a cryptocurrency wallet.
The organization provides a variety of services related to cryptocurrencies, such as instant loans backed by cryptocurrencies, savings accounts, wallets, cold storage, and the ability to easily and quickly buy and sell cryptocurrencies.
Additionally, users can choose different loan terms of varying lengths, and Nebeus doesn’t alter the interest rate based on the loan’s term. This allows borrowers to select longer loan terms and the freedom to repay the total amount whenever they want without incurring any fees.
Nebeus is almost entirely vertically integrated, in contrast to most wallets, which only offer a few features. Using a single wallet, you can hold cryptocurrencies, buy and sell altcoins, stake coins, connect money accounts directly, and obtain crypto loans.
- Allows both fiat and cryptographic assets in the same wallet
- Unlimited bank transfers and payments
- Secured offline cold wallets
- Not available in the US
- Not beginner friendly
- Insurance is for institutional investors only
“Make your interest-bearing assets liquid.”
Abracadabra is a cross-chain lending protocol that uses a stablecoin. It enables users to borrow money using interest-bearing assets like USDT, SUSHI, and other similar assets. These assets serve as collateral for the platform.
With the help of yield-bearing tokens from other decentralized lending platforms, users of Abracadabra Money can generate passive income. Daniele Sesta and a person using the alias “Squirrel” developed the lending platform in 2021.
Users can borrow magic internet money ($MIM). This proprietary stablecoin can be exchanged for any conventional stablecoin in exchange for pledging collateral. Generally speaking, the Abracadabra formula is simple: collateral in, stablecoin out. What happens to the collateralized tokens is that they are returned once the borrower delivers the MIM to the smart contract.
Originally constructed on Ethereum, the platform has since added Fantom, Avalanche, BNB Chain, Arbitrum, and Optimism. Abracadabra uses these assets as collateral to create stablecoins, allowing users to unlock their locked funds (MIM).
- Increases the MIM Curve pool’s liquidity provider rewards to high-yield farming returns to investors
- Expanding ecosystem
- High liquidation risks
- Vulnerable to data leaks or bugs
- Few supported assets
“Buy, sell and exchange popular cryptocurrencies.”
A service for purchasing, selling, and exchanging digital assets between each other and with fiat currencies is the SpectroCoin exchange. It is a comprehensive cryptocurrency platform that provides the following:
- digital wallets for bitcoin and other digital currencies
- prepaid debit cards
- loans using bitcoin as collateral
- a cryptocurrency exchange
On the SpectroCoin website and mobile app for popular mobile and Microsoft operating systems, users can access their SpectroCoin accounts (on the Microsoft store – free of cost). Additionally, it provides hot and cold storage for cryptocurrencies, and two-factor authentication protects accounts. There are many ways to deposit and withdraw money, such as bank transfers, phone transfers, Sepa, Skrill, and other platforms.
- Fast and efficient registration process
- Allows fiat deposits
- Helps business transfer into the blockchain
- Fewer cryptocurrencies than other platforms
- No reversal of accidental transactions
- Low trade volume
“Manage Digital Assets in a Safe Way.”
- Interest Account
- Account Takeover Protection
Ales Faliushin established the cryptocurrency lending platform CoinLoan in 2017, and it holds an Estonian license. It evolved into a one-stop shop where you can earn, borrow, and trade cryptocurrency.
Since its inception, the platform’s stated objective has been to make crypto loaning and borrowing services more accessible while also offering all of the features of a conventional crypto trading platform. The purpose of CoinLoan is to increase both borrowers’ and lenders’ views of financial amenities like loans. It also makes life easier for cryptocurrency enthusiasts who want to put all their trading and lending instruments on a single platform.
- Competitive interest rates
- Fee-free withdrawal and deposits
- Affordable loan charges
- Few assets offered
- Requires origination fees
- Inactive customer support
7. Cake DeFi
“The most transparent, safe, and easy way to invest in DeFi and Web3.”
Cake DeFi, despite its “DeFi” nametag, is a custodial platform that provides a number of features based on different DeFi products.
A cryptocurrency exchange and investment platform called Cake DeFi enables users to profit from their digital assets. The platform based in Singapore offers so-called Lapis rounds, where investors deposit their cryptocurrencies in exchange for interest over a four-week period.
A variety of financial services are available through Cake DeFi, including ways to invest your digital assets. Different levels of investing knowledge in cryptocurrencies might be necessary for each service. The platform takes pride in developing strategies for users to generate passive income from their cryptocurrency holdings.
The lending rates offered by Cake DeFi are dynamic with those of their genuine DeFi rivals. With reward returns if the native coin price increases during the lending period, it advertises a “guaranteed” Base APY.
Users transfer digital assets (BTC, ETH, USDC, or USDT) to be loaned in “batches,” The coins are then locked in options contracts for four weeks. The batch has a 28-day duration, beginning and ending on Fridays.
Users have three options following the four-week period: opt for an automatic rollover into the next batch, withdraw their complete principal and put it back in their Cake Wallet, or just withdraw the proceeds.
- Own blockchain
- Rewarding and has various earning opportunities
- Offers investors an additional return if the invested currency rises above a specific threshold
- Requires long locking-up periods to earn high APYs
- Low base-lending APY
- Very few coins supported
How to Choose a Crypto Lending Platform
Choosing among the best crypto lending platforms to borrow cash or get a crypto loan doesn’t have to be complicated – as long as you take the time to do your research, you should be able to find one that’s perfect for your needs. You first need to identify what you want to see in a platform to help you decide whether it’s the one for you or not. It will help if you consider the following factors when looking into crypto loan platforms:
- Platform risks. When it comes to lending platforms, there are a few different risks that you need to consider. There is the risk of the platform itself and the potential for the platform to fail or be hacked. This could lead to you losing your investment.
- Interest rates. Interest rates vary as some platforms offer higher prices, so comparing rates is essential before deciding on a platform. You’ll also want to ensure that you understand the terms of the loan and that you’re comfortable with them. Make sure to read all the fine print before signing anything.
- Collateral. One of the key considerations when it comes to choosing a crypto lending platform is the collateral requirements. The decision of what kind of collateral to use will depend on a number of factors, including your personal preference, the type of asset you’re looking to borrow against, and the interest rates offered by the platform.
If you’re looking to take out a loan against cryptocurrency, then it’s important to make sure that the platform you choose offers adequate security for your collateral. Some platforms provide insurance for deposited assets, while others may have cold storage facilities for extra security.
- Lending Duration. This term refers to the length of time you’ll be lending your crypto assets, which can vary significantly from platform to platform. Generally speaking, the longer the lending duration, the higher the interest rate you can expect to earn. That’s because platforms are taking on more risk by lending for a more extended time.
However, choosing the longest lending duration is not always the best. That’s because you may need access to your crypto sooner than expected, and if the market takes a turn for the worse, you could end up losing money. It’s essential to strike a balance between earning a higher interest rate and having access to your funds when needed.
- Fees. Before you decide on a crypto lending platform, it’s important to consider the fees associated with each one. Some platforms charge a flat rate, while others charge a percentage of the loan amount. There may also be other fees, such as application or origination fees.
When considering the fees, compare them against the interest rate you’ll earn on your loan. A higher interest rate may offset some fees, so it’s essential to do the math to see which option is best for you. Don’t forget to factor in any promotional offers that may be available, so be sure to take advantage of them if you can.
- Minimum Deposit Limits. Always consider the minimum deposit limit when looking for a crypto lending platform. This is the minimum amount of money that you will need to deposit in order to start earning interest on your account. The best platform for you will depend on your investment goals and how much money you are willing to risk.
- Costs. When it comes to choosing a crypto lending platform, one of the key things you need to consider is the costs associated with using the platform. There are a few different ways platforms can charge fees, and it’s important to understand how each of these works before choosing a platform. Be sure to check all of them before you select a platform so that you know what you’re getting into.
- Restrictions. When looking for a crypto lending platform, it is crucial to consider the limits that may be in place. Some platforms may only lend to certain countries or regions, while others may have stricter requirements for borrowers. Some crypto lending platforms have minimum loan amounts, while others require collateral for loans.
It is also important to consider the repayment terms of a loan. Some platforms require weekly or monthly repayments, while others offer more flexible terms. Borrowers should choose a platform that provides repayment terms that fit their needs and budget.
When to Loan
For owners who are confident in the long-term growth of their crypto assets but require cash for immediate purchases, crypto loans are appealing. Applying for a crypto loan demands much less time than applying for traditional loans. Nevertheless, they have inherent risks, such as the need for supplementary collateral once the value of your cryptocurrency declines and harsh penalties for late payments.
Generally, it is a good idea to take out a loan against your crypto when you need money for something important, and you don’t want to sell your crypto. For example, if you need to make a big purchase or invest in something but don’t want to sell your crypto, taking out a loan against it can be a good option.
Crypto lending is unregulated, and unregulated crypto lending means there’s no governing body or institution overseeing or regulating the industry. So if you choose to loan against your crypto, you’ll want to be extra careful about who you’re doing business with.
One crucial factor to consider is the loan to value (LTV). LTV is the ratio of the amount you borrow to the value of the property you’re buying. The higher the Loan To Value, the riskier the loan and the more difficult it will be to get approved.
Benefits of Crypto Loans
The crypto lending market is growing at an alarming rate. This is because crypto loans offer a number of benefits. Here are some of them:
- Much faster and easier to obtain than traditional loans
- May tend to have lower interest rates, which makes them more affordable
- It can be used for a variety of purposes, including purchasing new cryptos, paying off debts, and more
- Faster funding than a traditional loan
Risks of Crypto Lending
When it comes to individual crypto lending platforms, there are a few risks that you should be aware of. Take note of the following:
- Potentially risky and insolvent
- Could be hacked and compromised personal information
- The value of the cryptocurrencies you lend could go down
- Not backed by any government or the financial institution (unregulated crypto lending platforms)
How to Minimize Risk with Crypto Lending
Knowing that when you are lending your crypto assets, you need to be aware of the platform you are using is essential. There are many different crypto lending platforms, each with its own set of rules and regulations.
You need to ensure that you understand the terms and conditions of the platform before you start lending your assets. Most of the time, when you lend your crypto assets, you will be doing so through a smart contract. This means that you will need to be familiar with the code running on the blockchain.
If something goes wrong with the smart contract, your loan could have severe implications. So you should only use a platform that you trust, and that has a good reputation. Therefore, it is important to make sure that you understand the risks involved in lending your crypto assets.
Crypto Loans Taxes 101
If you are considering taking out a crypto loan, one of the most important things to understand is how taxes work. We will briefly dive into the basics of crypto loan taxation so that you can make an informed decision on whether it is right for you.
Here are a few possible cryptocurrency loan scenarios that may have an impact on your taxes:
Inability to make loan payments
If you cannot pay on time and make up for your losses, the lender may sell all or a portion of your asset. This may lead to capital gains or losses as a result.
The borrower will be liable for capital gains tax on any increment in the collateral’s value between the purchase date and the duration the lender sold the asset once the collateral is liquidated due to an unmet margin call.
Note: The parties should not be subject to taxes if a crypto loan is appropriately managed and the terms of the loan are upheld by all parties. Since the IRS views cryptocurrencies as property, using your assets as collateral for a loan is not regarded as a trade or sale of cryptocurrencies and is, therefore, not a cryptocurrency-taxable event.
Crypto lending platforms can be a great way to diversify your portfolio, increase income from crypto assets, and even protect yourself against market volatility. We hope our list has given you a better idea of what is available in this space and allowed you to make an informed decision regarding choosing one that fits your needs. Whether you are looking for a long-term investment or just want to earn extra money with minimal effort, these platforms provide many options for investors of all types.