The Winklevoss’ bitcoin trade is pushing into banking with a brand new financial savings product

Cameron (L) and Tyler (R) Winklevoss.

Adam Jeffery | CNBC

Gemini, the cryptocurrency exchange founded by Tyler and Cameron Winklevoss, is launching a savings scheme for its U.S. users.

From Tuesday, the Gemini app will add a new service called “Earn” that lets clients move their holdings in cryptocurrencies like bitcoin, ether and litecoin into interest-bearing accounts.

Gemini says it will offer rates of up to 7.4% APY (annual percentage yield). For comparison, that’s more than 100 times the national average of 0.05% on savings accounts in the U.S.

“This product is available for all 26 cryptos that Gemini supports,” Noah Perlman, Gemini’s COO told CNBC in an interview. “And it’s the only cryptocurrency exchange that offers the opportunity for users to earn crypto in every state in the U.S., including New York.”

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. Deposits aren’t protected by the Federal Deposit Insurance Corporation, and rates are adjustable based on supply and demand.

The 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.

The news signals a larger move into banking from Gemini and other crypto companies, which are looking to develop more ways to lure in the uninitiated. BlockFi, a crypto lender backed by tech billionaire Peter Thiel, offers rates of up to 8.6% APY on deposits.

But BlockFi’s interest account isn’t available in New York, which the firm says is down to state regulations on crypto.

“We have security protocols on par with those offered by top financial institutions,” Gemini’s Perlman said. “We still think that crypto empowers individuals in a way that traditional banks don’t.”

“But, at the same time, there is a reason why Wall Street and traditional banking has been around as long as it has,” he added. “It provides lots of safeguards, and we think that we can get the best of both worlds and offer that to our customers.”

The move toward services like lending and savings in crypto highlights a shift in an industry mostly known for investing. Last year saw the emergence of decentralized finance, a buzzy new trend in crypto that tries to replicate traditional financial products with blockchain technology.

It also comes at a time when U.S. interest rates have been pushed down significantly by historic monetary easing. Meanwhile, some investors say they’ve taken to bitcoin during the coronavirus pandemic in response to massive government stimulus and the potential debasement of sovereign currencies.

Last month, Gemini said it had acquired fintech start-up Blockrize to help build its own credit card offering rewards of up to 3% in bitcoin or other cryptocurrencies.

Virtual currencies have gained a reputation for their wild volatility, with bitcoin more than quadrupling in price last year and rising to a record high above $40,000 at the start of 2021 before plunging as low as $28,845 later in January.

As of 6:17 a.m. ET on Thursday, bitcoin was trading 3.7% higher at a price of $35,233, according to CoinDesk data.

“Each customer has to assess their own risk tolerance,” said Perlman. “As a general matter, cryptocurrency — like tech stocks — can be volatile and subject to price swings.”

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 plans to offer interest on its dollar-pegged stablecoin, the Gemini dollar, in the coming months.

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