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One common criticism of cryptocurrency as an investment asset is that it offers no income from cash flow or dividends. But the criticism is not entirely true: crypto staking and lending give investors ways to generate income from their crypto holdings.

Staking lets you generate passive income on long-term crypto holdings. And in some cases, staking also helps support blockchain networks. You can also lend out crypto or deposit it in an interest-bearing account on a crypto lending platform.

Lending and staking crypto may offer greater returns than either U.S. Treasurys or high-yield savings accounts. This interest can compound over time and provide passive income for crypto investors.

Still, crypto investing also comes with unique risks that might make it unappealing to the typical income investor.

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Staking is a popular way to earn interest on crypto holdings and also helps support the security of crypto blockchains that rely on a proof-of-stake consensus mechanism, such as Cardano (ADA), Solana (SOL) and Polkadot (DOT).

Ethereum (ETH) is also transitioning from a proof-of-work to a proof-of-consensus mechanism, an upgrade known as Ethereum 2.0 that is expected later this year. Ethereum investors can already stake their ETH holdings, depending on the cryptocurrency exchange platform.

Staked coins are locked up and pledged to the cryptocurrency protocol. In return, entities staking crypto are allowed to become validators and set up whats known as a validation node.

The protocol then chooses validators to confirm blocks of transactions from among the eligible nodes. Each time a new block of transactions is verified and added to the blockchain, a small number of new cryptocurrency coins are created and distributed to that blocks validator as a reward.

Once you stake crypto, your node will be used to validate transactions and get paid to validate them, says Josh Emison, CEO and co-founder of Sansbank.

The more crypto staked, the more transactions you are allotted to validate, and the more you are paid.

In addition to staking, crypto investors can earn interest via crypto lending.

To lend crypto, investors need to find a cryptocurrency exchange or decentralized finance (DeFi) app that offers a crypto interest account, which is similar to traditional savings accounts offered by banks.

Some lending accounts pay variable crypto interest rates, and some pay set crypto interest rates for coins locked up for a specific time, similar to traditional certificates of deposit (CDs).

Investors can stake crypto through a crypto exchange or their crypto wallets. The yield investors can expect from their staked cryptocurrency varies depending on which crypto they stake and which platform they use.

Gemini, KuCoin, Kraken and Coinbase (COIN) are among some of the most popular crypto exchanges for staking.

For example, Coinbase currently advertises an annual percentage yield (APY) of up to 5.75% for staking cryptocurrency, including 3.675% for Ethereum and 2.6% for Cardano.

Crypto investors also have various choices to earn interest on crypto lending, although the market is somewhat chaotic for crypto lending platforms at the moment.

According to current Crypto.com interest rates, investors can earn up to 14.5% APY in their Crypto Earn accounts, including 6% APY on Bitcoin (BTC) and Ethereum (ETH), as of this writing.

Unfortunately, popular crypto lending platforms like Voyager Digital, BlockFi and Celsius have recently been forced to freeze customers assets as they deal with liquidity crises associated with the recent crypto winter.

Some of the latest implosions include Voyager Digital, which recently filed for Chapter 11 bankruptcy protection, and BlockFi, which is in the hot seat after a large client failed to meet a margin call on an overcollateralized loan.

There are advantages and disadvantages to earning interest on cryptocurrency holdings.

The interest rates for crypto staking and crypto lending are typically much higher than interest rates on U.S. Treasurys or high-yield savings accounts. They are even higher than the dividend yields of most U.S. stocks.

For investors who have already determined they are holding cryptocurrency for the long-term, staking or lending can be an attractive source of passive income. In addition, interest compounds over time, increasing the potential earnings power of crypto if investors reinvest their interest.

The biggest downside of earning interest on crypto is the risk associated with staking and lending. Thats partly because not all crypto exchanges or lending platforms insure account holders funds.

In contrast, the Federal Deposit Insurance Corporation (FDIC) typically insures up to $250,000 per account for savings accounts and CDs per member bank. Likewise, returns on U.S. Treasurys are backed by the U.S. government and will be paid as long as the U.S. remains solvent.

Not only is cryptocurrency not FDIC-insured, but the crypto market is also extremely unregulated. U.S. Securities and Exchange Commission Chair Gary Gensler recently said in March that many crypto exchanges are potentially operating outside of the law.

Furthermore, cryptocurrency markets themselves are extremely volatile, which creates its own risks. Even cryptocurrency investors earning interest rates of 10% or 15% are still extremely deep underwater on their investments this year. For example, Bitcoin prices are down 56% year to date, while Ethereum prices are down 67%.

Modulus Global CEO Richard Gardner says the risks associated with crypto lending extend far beyond the cryptocurrency markets volatility.

Instead, the overarching issue is that you dont really know what your lending firm is investing in because the regulatory system is currently such where there arent hard and fast rules on disclosures, Gardner says.

Gardner says the high-interest rates offered by crypto lending platforms can indicate the risks those platforms are taking with their loans.

Once you lend money to somebody elses investment, if it goes belly-up, they cant pay you back, Garner says. He noted the downfall of Celsius is a prime example of this type of poor risk management.

Dan Ashmore, cryptocurrency data analyst at CoinJournal, says many crypto lenders have acted more like high-risk hedge funds than banks by gambling with their deposits.

With the lack of regulation in the space, it is difficult to quantify the risks involved in lending your crypto out via these third parties, Ashmore says.

Ashmore says crypto lending may not be the best fit for investors with lower risk tolerances.

Staking specifics vary from blockchain to blockchain, so while it is difficult to generalize and assert, which suits investors better overall (not to mention the fact that each investor will have their own risk tolerance, financial circumstances and investment goals), staking is generally considered a safer investment option, he says.

Earning interest in crypto may be an attractive option for long-term cryptocurrency investors with a high-risk tolerance. But the 2022 turmoil in the crypto markets, particularly among crypto lenders, demonstrates that crypto interest income is far from a safe bet.

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How to Earn Interest on Crypto Forbes Advisor - Forbes

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Arman Shirinyan

Large cryptocurrency investors are making comeback on market, according to Coinbase Premium Index

Coinbase Premium can be used to determine the sentiment among institutional and retail traders from the U.S. as it reflects the discount or premium on the Coinbase Pro trading platform mostly used by large crypto investors.

During the crypto crash, the metric showed one of the strongest dips in its history, suggesting that market makers on Coinbase were struggling to find enough liquidity on the market, which caused a large discount.

Since Coinbase Pro is mostly used by large investors, their average order size is significantly greater than the average order you see in a centralized exchange. To avoid unlikely volatility on the market, market makers inject more liquidity on the market prior to completing an order.

The metric's recovery is a direct sign of returning buying power on the market and whales' accumulation. With the rise of the buy volume on the market, traders and investors are pushing the premium higher.

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We are already seeing the effect of returning buying volume on the market as Bitcoin has finally broken through the consolidation channel that has been forming since June 19. Unfortunately, BTC retraced after reaching the $22,000 price range.

One of the main sources of selling pressure on the first cryptocurrency could be gone from the market as the largest cryptocurrency miners announced that they have successfully realized most of the funds they used for stabilizing their operations.

Another source of pressure is the U.S. Dollar's rally that suppresses almost every financial asset on both cryptocurrency and traditional markets.

At press time, Bitcoin is moving in the $21,000-$22,000 trading range and changing hands at $21,788.

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Institutional Investors Are Getting Back in Bitcoin and Cryptocurrency Market - U.Today

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Friday 08 July 2022 3:40 pm

By Andrea Ramoino, Chief Strategy Officer at Contis

The UK government has announced that it intends to regulate stablecoins, turning the page onto a new chapter for cryptocurrencies.

For the uninitiated, these coins are a form of crypto asset which aim to maintain a stable value which is linked to another asset like sterling or gold.

You may be pondering the significance of this: What does it mean for businesses and the everyday spender? Why would I use stablecoins in my own life? And will this mean the UK holds its position as a leader in the digital payments sector, leading to growth and job creation at a time when the country desperately needs it?

Answering these questions requires a look at the crypto story so far, including how this asset class veered from its true purpose as a safe, traceable, and spendable currency.

Whats in a name?

Cryptocurrencys intended purpose is apparent in both name and configuration. These currencies were born out of frustration with the payments system we currently use a system built in the 1970s. Cases in point: individuals and businesses still often wait days for settlement.

A crypto coin is a digital token which can be sent electronically between users located anywhere in the world. Unlike traditional finance and payment systems, cryptocurrency networks are not run by a single company or central authority. Instead, they are operated by a global, decentralised network of computers, which means transactions are virtually impossible to fake or hack, and there is no single point of failure.

Crypto was born off the back of a complacent sector which has for years controlled the speed of transfers, as well as their cost. Peer-to-peer crypto payment systems cut out the middleman offering much cheaper and real-time payments. Liken it to being as simple and quick as handing a five-pound note to a friend. Larger savings will come via businesses cross-border payments, reducing fees, chargebacks, and settlement times.

These virtues have been clouded by the fact that crypto has gained global popularity as an investment vehicle over the last ten years, with thousands of headlines about volatile prices and massive potential gains from major coins like Bitcoin. A knock-on effect of this has been a lag in crypto payment acceptance, as the perception of crypto has moved from payment system to speculative investment.

Cryptos use as a high-risk investment has led to a vicious cycle forming as day traders conduct leveraged crypto trades. Many popular coins now regularly see weekly drops and gains of 20 percent or more.

Naturally, it would be incredibly unappealing to use crypto as a payment when there is uncertainty as to whether that morning coffee could cost 3 or 10. But this problem will be largely solved through the introduction of stablecoins.

Stablecoins and Central Bank Digital Currencies (CBDCs) remove the volatility that has made every day crypto spending impractical. They are a key piece of the spendable crypto puzzle.

Britcoin hit the headlines last year, after a 2021 BIS survey found 86 percent of governments globally are exploring CBDCs, while the decision to regulate stablecoins is set help increase the chances of wider scale adoption.

Stablecoins are also being backed by major banks across the world a potential gold rush which tells us why the UK has made the decision to move them inside the regulatory perimeter.

Meanwhile, industry leaders are now offering technology that means crypto companies can issue cards which allow customers to spend these assets like normal money and could unlock the benefits to people and businesses alike.

Looking ahead, a report from PWC revealed that more than 80 per cent of central banks are considering launching a central bank digital currency or have already done so, indicating the strong future for digital money and a clear signal that crypto cannot be ignored.

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Stablecoins are a clear indicator that cryptocurrency can't be ignored - City A.M.

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Six people have been indicted in four separate cryptocurrency fraud cases involving more than $130 million in losses, including the single largest NFT scheme charged to date, federal prosecutors said this week.

That scheme, prosecutors said, involved a group called the Baller Ape Club that claimed to sell NFTs, or nonfungible tokens, in the form of cartoon images of apes.

A group with a similar theme, the Bored Ape Yacht Club, is one of the worlds most popular NFT distributors, with endorsements from Snoop Dogg, Tom Brady and other celebrities. Its NFTs have sold for hundreds of thousands of dollars, though prices have dropped sharply in recent weeks.

Le Anh Tuan, 26, of Vietnam was charged in California with one count each of conspiracy to commit wire fraud and conspiracy to commit international money laundering in connection with the Baller Ape Club scheme.

Shortly after Baller Ape Clubs public sales began, Tuan and unnamed co-conspirators rug-pulled investors, deleting the groups website and taking $2.6 million in investments, according to the U.S. attorneys office for the Central District of California.

Tuan and the others laundered the money, prosecutors said, by moving it through cryptocurrencies and cryptocurrency services.

If convicted, Tuan faces up to 40 years in prison.

In a separate case, the founder and former chief executive of Titanium Blockchain Infrastructure Services was charged with one count of securities fraud in connection with the companys initial coin offering.

New cryptocurrency projects use ICOs to raise funds, similar to an initial public offering of a companys stock.

Federal prosecutors in California said CEO Michael Alan Stollery, 54, of Reseda falsified paperwork sent to prospective investors testifying to the projects purpose and falsely claimed that his business had relationships with the U.S. Federal Reserve Board and companies such as Apple, Disney and Pfizer.

The ICO raised about $21 million from investors.

Stollery faces up to 20 years in prison if convicted.

In a third case, a Las Vegas man was charged in California with four counts of wire fraud and one count each of obstruction of justice, conspiracy to commit wire fraud and conspiracy to commit commodities fraud.

David Saffron, 49, used his cryptocurrency investment platform Circle Society to raise about $12 million from investors to a fraudulent crypto fund that purported to trade on the futures and commodity markets, prosecutors said.

Saffron allegedly told investors he used a trading bot to generate returns up to 600%. He held investor meetings at homes in the Hollywood Hills and traveled with armed security guards to create the false appearance of wealth and success, prosecutors said.

In reality, Mr. Saffron was operating an illegal Ponzi scheme to defraud victim investors and used the funds for his own personal benefit, said Ryan L. Korner, special agent in charge of the IRS Los Angeles criminal investigation field office.

Saffron faces up to 115 years in prison if convicted.

The fourth case announced by prosecutors this week was charged in the Southern District of Florida.

Emerson Pires and Flavio Goncalves, both of Brazil, and Joshua David Nicholas of Stuart, Fla., were charged with one count each of conspiracy to commit securities fraud and conspiracy to commit wire fraud in connection with a crypto-Ponzi scheme that prosecutors said defrauded about $100 million from investors. Pires and Goncalves, both 33, were also charged with conspiracy to commit international money laundering.

Pires and Goncalves, founders of crypto investment platform EmpiresX, worked with head trader Nicholas, 28, to promote the platform using false guarantees of returns for investors, prosecutors said.

Blockchain analytics shows that Pires and Goncalves then laundered investors funds through a foreign-based cryptocurrency exchange and operated a Ponzi scheme by paying earlier investors with money obtained from later EmpiresX investors, the U.S. attorneys office said.

If convicted, Nicholas faces up to 25 years in prison; Pires and Goncalves each face up to 45 years.

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Six indicted in cryptocurrency and NFT fraud schemes - Los Angeles Times

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