Gemini Launches Interest-Earning Program ‘Earn’

Crypto exchange Gemini has launched a new interest-earning program called Earn, which offers up to 7.4% yield. The program, initially available for select Gemini customers, will roll out to all 50 U.S. states later this month.

Gemini Earn supports all 26 crypto assets the exchange features on its trading platform, including decentralized finance (DeFi) coins such as Uniswap and Aave.

The highest yield (7.4%), however, is only available on Filecoin. For the rest of the supported coins, the interest rate ranges from 1.54% to 5.83%.

Meanwhile, Gemini rival BlockFi offers up to 6% interest rate on Bitcoin deposits and 5.25% for ether deposits. For comparison, that’s more than 100 times the national average of 0.05% on savings accounts in the U.S. However, BlockFi’s feature supports limited coins and is not available for users based in New York.

Nonetheless, Gemini Earn appears to be riskier. According to the terms, “Loans made through the Program are unsecured. You have exposure to Borrower credit risk, and Borrowers are not required to post collateral to you or to Gemini.”

This means users could lose all of their deposits if a borrower defaults. “The Borrower is not required to custody or maintain the Loaned Digital Assets with Gemini or any other Gemini-controlled account,” per the terms.

“Gemini will not be responsible for any Digital Assets once they leave Gemini’s custody. Loans are not insured by Gemini or any governmental program or institution.”

On the other hand, BlockFi’s offering has both secured and unsecured loans. “We have vetted institutional lending partners, such as Genesis Global Capital,” Gemini COO Noah Perlman said.

High Demand For Crypto Among Institutional Borrowers

“There is a high demand for crypto among institutional borrowers who use it to fund their operations and investment strategies, so they are willing to pay competitive market rates to borrow crypto.”

The launch of Gemini Earn comes shortly after the exchange’s credit card launch announcement last month. 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 company also plans to offer interest on its dollar-pegged stablecoin, the Gemini dollar, in the coming months. As for whether Gemini is planning to become a full-fledged crypto financial services firm like BlockFi and others, Perlman had this to say: “We will continue to provide a broad suite of financial products that blend offerings from traditional finance and the cryptocurrency industry.”

Gemini is a New York trust company regulated by the New York State Department of Financial Services. The company says it’s able to offer such high rates by lending out crypto to institutional borrowers through its lending partner, Genesis Global Capital, in exchange for interest payment.