The New York trust company Gemini founded by Tyler and Cameron Winklevoss is launching a savings scheme for its U.S. users. This new service, which the twins will call “Earn,” will allow U.S. based investors to deposit cryptocurrencies and earn a robust savings rate. The cryptocurrencies that will qualify for the program include bitcoin, Ethereum, and Litecoin. Currently, there are no accounts that provide investors with a savings rate for holding cryptocurrencies. Any gains or losses in cryptocurrency trading are generally through capital appreciation.
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What Will the Account Produce
According to the Winklevoss twins, Gemini will offer interest rates as high as 7.4% annualized. This interest rate compares to less than 1% that many U.S. investors can get on savings accounts. Gemini is regulated by the New York State Department of Financial Services, a robust regulatory body. The company says it can offer such rates by lending out crypto to institutional borrowers through lending partners like Genesis Global Capital in exchange for interest payment. This scheme can work in conjunction with your bitcoin trading. If you plan to purchase a cryptocurrency and hold it, you can deposit it in a Gemini account and earn a robust interest rate.
Why is this Happening
Gemini can pay a robust interest rate on cryptocurrencies because there is a high demand for crypto among institutional borrowers who use it to fund their operations and investment strategies. They are willing to pay competitive market rates to borrow crypto. In essence, these institutional investors are leveraging using borrowed cryptocurrencies to generate robust returns for their investors. According to Gemini, their partners Genesis Global Capital, find these borrowers and lend crypto funds in exchange for an interest payment.
Who Will Have Access to the Program
According to Gemini, the “earn” savings program will only be available to U.S. clients, not those in international markets like Canada and Britain. Gemini rolled out its services in the U.K. last year, after obtaining an electronic money license from the Financial Conduct Authority. Gemini said its Earn feature would let customers save with no minimum balance required to get started and no fees to transfer or redeem funds.
The program is for people who are willing to purchase cryptocurrencies using a cash account. You cannot use a CFD or ETF to earn the interest. Gemini needs to lend your cryptocurrency out to investors daily, and in turn, will generate an interest rate from lending. By paying investors to deposit in Gemini, the company will earn the difference between the rate they pay you and what they receive from institutional investors.
The Bottom Line
There is no way for investors to purchase cryptocurrency and earn interest when it sits in an account. Gemini proposes the “earn” feature will allow an investor to make up to 7.4% annualized when they deposit cryptocurrency in an account. This feature will provide investors with another way to earn money by holding a cryptocurrency asset class. It will also broaden the appeal of holding cryptocurrency, as the rate that is a currency available is more than 10-times the amount that a U.S. saver can earn at a U.S. bank. Currently, the only strategy that is employed is to generate capital appreciation when purchasing cryptocurrencies. The “earn” feature issued by Gemini will provide investors an income-based way of generating revenue. The strong demand for cryptocurrency at institutions is the reason that Gemini can offer such competitive interest rates.
