The 5 Safest Crypto Lending Platforms To Use

When it comes to the safety of a user's digital assets, two factors come into play: the security against any theft and the management of user assets for earning yield.

Bishal Kumar Chanda10 min read
The 5 Safest Crypto Lending Platforms To Use

With the falling trust in traditional financial systems and the advent of cryptocurrencies, more and more users are driven towards crypto derivatives. Today, the world of digital assets is more user-centric and transparent. Numerous platforms allow users to lend and borrow cryptocurrencies. These platforms provide far better yield while mimicking the traditional lending service, making crypto lending more lucrative. But among all the options out there, which are the safest crypto lending platforms?

When it comes to the safety of a user's digital assets, two factors come into play: the security against any theft and the management of user assets for earning yield. Poorly written code and backdoor exploits can result in user funds and collateral loss. Security can be ensured by going through a platform's track record and checking the underlying platform architecture.

Each platform has its own set of practices for earning yield on users' crypto assets regarding crypto lending or borrowing. Some platforms only lend it out to overcollateralized borrowers, some trade with the deposited assets, some do yield farming, and some engage in a mix of everything.

Apart from that, there are several other factors that users must keep in mind while selecting any lending platform:

  • Interest rate: With several crypto lending platforms in the market, the interest rates are highly competitive. Users can decide by the interest rate on a particular coin or by the overall interest rate paid by the platform.
  • Fees: Different platforms charge different fees on different coins. Users should check and compare the different fees applied among all the platforms.
  • Type of returns: Some platforms pay users' interest in their own token, some pay in kind, while some give users the option to choose between both.
  • Miscellaneous: Other factors like flexible loan durations, no minimum deposit limit, and a simple user interface are important. 

However, we got you covered. Keeping these factors in mind and focusing on the safety aspect, Bitcompare brings you a list of the five safest crypto lending platforms to use.

1. BlockFi

BlockFi manages more than $10 billion in crypto-assets, and users can expect up to 11% APY on different cryptocurrencies, paid every month. There are no minimum or maximum deposit limits, and it is one of the few services to provide a compound interest. Almost all major tokens are supported on the platform, and users get one free withdrawal for each coin every month. Some of the compelling benefits of BlockFi are:

  • Identity Authentication: BlockFi uses multi-factor authentication (MFA) and KYC identity verification needed. The security system is top-notch to protect your crypto assets.
  • Cold Storage: Gemini Custody's industry-leading cold storage solutions store all digital user assets.
  • Insurance: BlockFi or its custodian, Gemini, doesn't cover user assets.
  • Track record: The site has never experienced any security issues to date. 
  • Regulation: BlockFi's custodian, Gemini, is regulated by the New York State Department of Financial Services. After recent events, BlockFi plans to introduce a regulated crypto lending product. 
  • Yield Generation: BlockFi generates most of its yield by giving out collateralized loans to retail and institutional borrowers. However, recently it was uncovered by the SEC that BlockFi often lends to institutions without any collateral.

One of the downsides of this platform is its high withdrawal fees. While it is necessary for platform liquidity, platform cost, and various other reasons, it might be a problem for regular users. The fee per currency varies, but it's usually around $10.

Users might even face great delays in withdrawing funds. BlockFi only allows withdrawals during working hours, so it would mean waiting for days before you can withdraw your funds. While this ensures additional security, it can be a very frustrating experience for a user.

2. Celsius Network

The Celsius Network is one of the most borrower-friendly services where users can borrow cash at a 1% interest rate. Users can expect up to 16.45% APY on certain coins, paid out on a weekly basis. According to the platform's tier system, users can earn extra rewards in CEL tokens. Lenders can withdraw their money anytime without paying any additional fees. The safety advantages include:

  • ISO 27001 Certification: The Celsius Network platform meets high international standards for information security and is ISO 27001 compliant.
  • Insurance: All user wallets are insured for up to $100 million in case of a breach.
  • Third-party custodians: User funds are stored with third-party custodians like PrimeTrust and Fireblocks.
  • Track record:  In December 2021, Celsius Network lost about $54 million from the BadgerDao protocol hack. Except for that, Celsius Network has never had a hack, security breach, or loss of funds in the last four years of business.
  • Regulation: Celsius Network is a regulated and SEC-compliant platform.
  • Yield Generation: A great percentage of Celsius Network's money comes from lending user assets and collateral. Its platform requires collateral against loans, but it also lends to uncollateralized borrowers. Other than crypto loans, Celsius Network is involved in yield farming and other methods to generate yield.

Celsius Network's low-interest-rate makes it the best choice for borrowers, but lenders can also earn from industry-standard yields. Lenders can find a calculator on Celsius Network's official website, where they can calculate their potential earnings.

3. CoinLoan

It ought to be on our list as one of the oldest lending platforms. CoinLoan's user-friendly interface comes with zero deposit and withdrawal fees.

  • Cold storage: All user assets are stored in offline multi-signature wallets hosted by BitGo.
  • Insurance: All the user accounts are covered under Lloyd's $200 million insurance in a security breach.
  • Manual processing: All the withdrawals are processed manually, causing some delays in transactions but increasing the security significantly.
  • Regulated: CoinLoan is regulated under the Estonian Financial License. 
  • Yield Generation: CoinLoan earns the highest interest from lending out user funds deposited in their Interest Accounts against crypto collaterals. 

However, CoinLoan has a minimum deposit requirement of $100, with a limited user base. Despite restricting the platform's usefulness, other features easily make up for that.

4. Nexo

The Nexo platform supports all major tokens and other cryptocurrencies across 200 jurisdictions. Borrowers can even get crypto loans as low as $50, making them more accessible to regular users. As a user, you can earn as much as 17% APY for certain currencies like TerraUSD (UST), which is substantially higher than most other platforms. Despite the high yield, Nexo stands out the most in its security features:

  • Cold Storage: All the user funds are stored offline in segregated multi-signature cold wallets, making them safe from hackers.
  • Insurance: Nexo provides $375 million of insurance across all wallets, protecting user assets in case of a breach. 
  • Identification: Nexo is compliant with global AML and KYC standards, using biometric-based identity verification. There are withdrawal confirmations, login alerts, and round-the-clock support to keep user funds safe from fraud.
  • Server: The platform has an extensive firewall server architecture, making it immune to most attacks.
  • Regulation: In February 2022, Nexo voluntarily announced changing their yield products to comply with US regulations.
  • Yield Generation: Nexo uses an under-leveraging model to lend out loans to retail and institutional borrowers. It also has yield farming products through which it earns interest.

All these features make Nexo an extremely safe investment platform. While it provides better facilities for lenders than borrowers, Nexo is an excellent choice overall.

5. Binance

Binance is the world's largest crypto exchange and is a familiar name to even beginners. Its loan and yield services are similarly significant, supporting more currencies than most crypto lending platforms. Users are not limited by deposit limits and can have the option to choose between fixed and flexible deposits. The safety factors include:

  • Identity Authentication: Binance authenticates user log in through two-factor authentication (2FA) using SMS or Google Authenticator app, address whitelisting, device management, and blacklisting. 
  • Insurance: The platform provides FDIC insurance on all dollar balances. It started the Secure Asset Fund for Users (SAFU) in July 2018 to ensure users against security breaches.
  • Cold storage: The majority of the user funds are stored in cold storage. 
  • Regulation: Binance is an unregulated entity, but according to its CEO, efforts are being made to make it a fully regulated centralized platform. 
  • Yield Generation: Binance generates yield mainly through providing loans, yield farming and liquidity pools.

 While supporting all major cryptocurrencies, it does not support fiat currencies. There are some restrictions in user withdrawals, unlike other alternatives. In 2019, it was the victim of a large-scale security breach, losing about $40 million worth of Bitcoins. For more information on this platform, read our Binance Review, where we break it all down for you.

Final Say

You might notice that Coinbase is missing from this list. While Coinbase did have plans for launching a lending service, scrutiny from the SEC (Securities and Exchange Commission) shut it down. Crypto lending platforms will soon replace traditional bank savings accounts with advanced security, transparency, and profitability. The first platform on the list, BlockFi, recently paid a $100 million fine to SEC because it was against its security regulations. Following BlockFi, Nexo has disabled its high yield product for US-based customers. However, if you are from anywhere outside the United States, you can freely use these lending platforms to add an extra stream of passive income. Check out the Best Crypto Savings Accounts of 2022 and get started.

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