Key Takeaways for 2025
- Crypto lending is great for passive income and can help build your portfolio as you earn interest.
- You have a choice between two types of crypto lending platforms – centralized (CeFi) or decentralized (DeFi) platforms.
- Each platform has different rules, supported assets and annual percentage yield (APY).
- Our top picks? Nexo for CeFi and Aave for DeFi.
What is Crypto Lending, Exactly?
You know how normal loans work, right? A traditional bank gives you a bunch of money so you can buy a thing—a house, a car, a dope new weight-lifting set—and then you promise to pay back the loan principal over time, plus interest.
Crypto works much in the same way—with a key difference...Crypto works much in the same way—with a key difference... A traditional loan comes from a centralized institution like a bank. A traditional loan comes from a centralized institution like a bank. A crypto loan comes from another person, like yourself. Instead of asking the Bank of Milkington for dough, borrowers ask people like you, who have some crypto sitting around.
In both DeFi and CeFi the dynamic is the same: The borrower pays interest to the lender.
So how do you find people who want to borrow your crypto? After all, part of what makes the traditional loan work is that borrowers go to an easy-to-find bank to request it. Enter the crypto lending platform (also called crypto lenders.)
Lending platforms connect you to borrowers. The structure is similar to a money market that pools lender deposits to supply borrowers.
They lend your crypto out on your behalf. The interest you earn is called “yield”. Your yield starts accruing immediately, paid according to your share of the lending pool.
Pros and Cons of Lending Your Crypto
Pros
- Earn money on your crypto in a different way than just riding the market
- Earn money at better rates than you would with a traditional loan/bank
- Start with as small an amount as you’d like
- Any crypto owner can participate
Cons
- If a platform goes under, so does your money—there’s no Federal Deposit Insurance (FDIC) to insure your funds
- If there’s market volatility and you’ve lent out your crypto, your hands are tied
- A borrower could default on all or part of the loan
Who Should Lend Crypto?
Crypto lending isn’t for everyone, but for some people, it could be a good fit.
- People who want to earn interest on crypto. If you’re investing for the long haul, you can get paid to wait for future price appreciation.
- People who can afford to wait. Lending crypto often comes with lock-up periods during which you can’t withdraw, use, or sell your crypto.
- People who can ride out market volatility. Crypto prices swing dramatically sometimes, making stocks and other assets look like calm seas. When lending, you may have to weather the storm if your crypto is locked in loans.
How To Lend Crypto In 4 Steps
Step 1: Pick a Crypto Lending Platform.
A lending platform is the middleman you’ll need to find borrowers. Not sure how to choose a lending platform? Don’t worry; we’ll cover a few popular platforms and how to choose in just a bit.
Step 2: Connect Your Crypto Wallet To The Lending Platform.
Okay, so you sifted through the options and finally landed on the lending platform you’d like to use. Congrats! The platform needs access to your crypto in order to lend it out. You’ll need to connect your digital wallet—the place you store your crypto—to the lending exchange. The exchange will give you directions on how.
Step 3: Deposit Your Crypto.
Now it’s time to decide how much crypto (and which token) you want to lend. Three Ethereum? Half a Bitcoin? You decide. Then follow the platform’s instructions to move the crypto from your wallet (the one you connected in Step 2) to the lending platform.
Step 4: Start Earning Money On Your Crypto.
Sit back, relax, and watch that sweet, sweet cash come trickling in.
Which Crypto Can You Lend?
If someone wants to borrow a crypto, you can lend it. It’s that simple.
Different protocols allow for lending a wide range of tokens and stablecoins including:
- $BTC
- $WBTC
- $SOL
- $ETH
- $XRP
- $USDC
- $USDT
- and many more
Where to Lend Crypto
Once you’ve determined that people want to borrow the crypto you have, it’s time to find a lending platform to help you do it.
Crypto lending is supported by dozens of different platforms. Each platform has different rules, crypto assets they support, and rewards. You’ll want to shop around to find a platform or protocol that aligns with your goals.
There are too many exchanges for us to list here, but we’ll give you a quick TL;DR on some of the more popular lending platforms.
Lending platforms fall into two categories: Centralized finance (CeFi) platforms or Decentralized finance (DeFi) platforms.
Note: If you’re in the US, you’ll want to skip ahead to DeFi platforms because securities regulations make most, if not all, CeFi lending platforms shy away from the USA. You can borrow against your own crypto in the US, but lending crypto to others on a centralized exchange is pretty much out of the question for now.
A centralized finance platformis run by an institution and people. CeFi platforms are similar to a bank. You give them your money, you follow their rules, and you have faith that your money will be there when you go to withdraw it. Centralized lending platforms can be easy for beginners to navigate because they look and feel similar to online banking and loan platforms. While no exchange is 100% secure, CeFi exchanges often offer security features that make them less likely to get hacked.
A decentralized finance platform is not run by people. Instead, it’s run by math and computer programs called “smart contracts.” A smart contract is a series of actions that occur when certain conditions are met.
For example, if a borrower wants to borrowFor example, if a borrower wants to borrow stablecoin to buy a dairy farm, they can put up their more volatile crypto like Ethereum or Bitcoin as collateral.
The catch: The value of the collateral must be more than the loan itself and often several times higher depending on volatility.
A smart contract would be programmed to ensure that remains the case—so if the value of the collateral dips below, say, 1.25 times the value of the loan, the smart contract would sell some or all of the collateral to ensure the lender doesn’t lose any money.
In a way, a smart contract is kind of like a thermostat that’s programmed to heat a room (the action) once the temperature drops to a predefined number (the condition).
Best CeFi Crypto Lending Platforms
Regulations set by theRegulations set by the Securities and Exchange Commission (SEC) make crypto lending a challenge for centralized finance platforms in the US. As a result, most CeFi platforms don’t offer crypto lending in the US. But in other countries, you’ll find CeFi lending options.
4.3Trusted by over 7 million users worldwide, Nexo is a premier digital assets platform, offering one of the most comprehensive product suites for growing, preserving, and managing your crypto wealth. You can trade, borrow, and earn with your digital assets in a seamless and secure ecosystem.Clients who choose to receive their earnings in NEXO Tokens can unlock up to 2% in bonus interest — an exclusive Loyalty Program benefit designed to maximize returns. Depending on your tier, you can also access lower borrowing rates, enhanced crypto cashback, and free monthly withdrawals.
- Present in 150+ jurisdictions
- Flexible and fixed-term savings options
- Annual savings interest rates of up to 15%
- Low-interest credit lines from just 2.9%
- Personalized client care 24/7
- Comprehensive fiat on/off ramps
- A variety of top-up methods
- Institutional-grade risk management
- Robust infrastructure security
- Free withdrawals (limited by loyalty level)
4.4Specialised in Bitcoin-based lending and borrowing, SALT is a platform that lets you lend / borrow cash or other cryptocurrencies using your Bitcoin as collateral. Been in the space since 2016, individuals and business alike have trusted SALT to go about their $BTC lending and borrowing business.
- The original provider of Bitcoin-backed loans
- Attractive APYs
- Wide range of assets
Risks: CeFi Lending
- A centralized exchange can go under. The volatile nature of crypto isn’t limited to the market—some of the biggest platforms in the category could be one big The volatile nature of crypto isn’t limited to the market—some of the biggest platforms in the category could be one big crash away from bankruptcy. But don’t take our word for it. For example, in 2022, crypto lender Celsius made headlines when it announced it was halting all client withdrawals from its platform, then filed for bankruptcy, leaving investors scrambling to recover their funds.
- A centralized exchange is subject to evolving crypto regulation. As governments around the world grapple with how to regulate crypto, centralized platforms must abide by new rules—or face a shutdown. New laws may, for example, limit certain crypto trades to accredited investors or establish restrictions on the kinds of trades that can be made.
Best DeFi Crypto Lending Platforms
4.6Similar to Compound, Aave’s DeFi platform uses a series of smart contracts that allow lending and borrowing. Where Aave differs from Compound is in its range of blockchains and tokens; Aave supports 13 blockchains compared to the 7 on Compound. Aave also offers more token choices for lenders and borrowers.
DeFi without risk? There’s no such thing. But Aave offers a Safety Module, an investor-funded insurance pool that insures against shortfall events. For example, smart-contract bugs could cause lenders to lose money. Losses can also occur when the market moves quickly, slowing or preventing collateral liquidations.
- Aave supports 13 different blockchains.
- Easily swap cryptocurrencies on Aave to capture a better rates; if you see a chance to lend / borrow with more competitive rates, you can exchange your tokens for those tokens without leaving Aave.
- Biggest decentralized lending & borrowing platform in crypto
3.2Compound Finance is the OG lending & borrowing platform in the DeFi space. It's been around way before Aave was even born. Lending & borrowing rates vary based on demand. The platform supports lending & borrowing in $ETH, $WBTC, $USDC, and several other major cryptocurrencies.
• One of the OG platforms in the crypto space • Occasionally provides more competitive rates on stablecoins • Clean interface
Risks: DeFi Lending
- A decentralized exchange can be exploited.Yup, much like its CeFi counterpart—albeit with a twist. Because a DeFi lending platform relies on underlying code to function, that very code is a target for hackers. The biggest DeFi protocols are time-tested and invest inYup, much like its CeFi counterpart—albeit with a twist. Because a DeFi lending platform relies on underlying code to function, that very code is a target for hackers. The biggest DeFi protocols are time-tested and invest in smart contract audits, so don’t get too wound up about this. But it’s important to remember that whenever you connect your wallet to a new service, you could be at risk if someone exploits the contract.
- Rug pulls are a thing. When you deposit crypto into a lending smart contract, how do you know what’s really going on in the code? Is there a way for the developers to remove the funds at will, never to be seen again? It can happen: Meerkat Finance ($31 million) and Uranium Finance ($50 million) are two examples of DeFi projects that were drained of user funds. Generally, it’s safer to lend on established DeFi lending platforms with well-audited code, such as Aave or Compound.
If you want to mitigate risk, consider reading our guide on the best crypto research toolsfor traders.
Crypto Lending vs. Staking
Crypto lending and crypto staking are among the most popular ways to earn a yield on crypto.
- When you lend crypto, you make interest (yield or APY) on money you’ve lent to a borrower, and it comes with all the risks you’d expect with letting someone borrow your hard-earned cash.
- When you stake crypto, you commit crypto tokens to a computer (validator) on the blockchain. Typically, validators with higher amounts of tokens staked have a better opportunity to build a new block, for which the validator earns rewards. In short: A validator needs your crypto to attract earnings and distributes most of those earnings to stakers (like you) after taking a fee.
Crypto Lending vs. Staking Crypto
| Crypto Lending | Come from borrowers of your crypto paying interest. | Loaned tokens cannot be used for anything other than earning interest while locked up. | If centralized platforms become insolvent or experience liquidity issues, your funds may be at risk. |
|---|---|---|---|
| Crypto Staking | Come from the transaction fees of the crypto protocol itself | With a technique called "liquid staking," you receive a "liquid staking token (LST)" that can use in other DeFi apps to earn additional yield. | If chain validators don't perform well, they run the risk of having (your) delegated tokens slashed by the protocol. |
To Sum It Up
Lending crypto can be a great way to earn a yield — and it's often easier than lending in traditional finance.
But is crypto lending a good idea? Maybe. For some, it's an effective strategy to earn an extra yield on cryptocurrencies you plan to hold anyway. But you'll have to do your homework (and check it twice) before transferring any crypto to a custodial lending platform or approving a lending smart contract.
Frequently Asked Questions
Most crypto assets earn anywhere between 3% and 10% APY (annual percentage yield) when loaned out, which is several times what you could earn with your bank these days. But some risks can threaten those outsized returns, some involving the crypto lending platforms themselves. As with all things crypto, it’s important to do your research before you dive in.
Yes. The interest you earn is taxable.
When you lend crypto, you’re putting your crypto into a lending pool. Borrowers borrow from this pool, paying interest on their loans. That interest is shared between the lenders in the pool according to how much each has contributed. Today’s crypto lending platforms make the process easy, handling the loans, repayments, and interest payments. Don’t worry, you won’t have to collect the funds yourself.
Yes. You can take out a loan in a fiat currency (like the US Dollar) or a cryptocurrency by depositing cryptocurrency as collateral and borrowing against its value. Expect to deposit more than the loan amount, though; crypto loans are overcollateralized (higher crypto value than the loan value) because crypto prices can move quickly.
Over-the-counter (OTC) lending caters to people (or companies) lending large amounts of capital. OTC lending platforms usually work with clients through account specialists and provide higher lending rates for corporations, banks, and high-net-worth individuals who want to lend crypto. In short: OTC is for the crypto whales, whereas other lending platforms are designed for both average investors and larger investors.
Crypto lending is usually one of the less risky ways to earn a yield on crypto, but there are still some things that can go wrong.
- Centralized crypto lenders sometimes close up shop — putting your crypto at risk. Both Celsius and BlockFi filed for bankruptcy in 2022. Lenders on the platforms found their funds trapped.
- DeFi lending platforms bring some risks as well, including the risk of smart contract exploits.
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