Have you ever wondered if you could keep your Bitcoin in a fixed deposit (FD) or a term deposit and earn interest on them? Well, wonder no more. Coinbank claims to be giving out the highest interest rate anywhere in the world on Bitcoin.
“We have two plans for three-month and six-month Fixed Deposits. On three months we are offering a one percent rate of interest and on a six-month deposit, we are offering 1.25 percent. This is the highest rate of interest offered on Bitcoin globally by anybody.”
Indians love their fixed deposits
Indians traditionally have a love for fixed deposits and almost every household has some money in FDs or would at least aspire to keep some in one. Transporting that concept to Bitcoin is interesting.
“Billions worth of Bitcoins are saved in people’s wallets on various platforms and since Bitcoin is an established store of value it can be lent and hence can and should earn interest like any other real world asset, whether that be your tillable land or piece of gold or fiat currency itself,” says Amit Bhardwaj. “Hence, with this philosophy, we are launching Coinbank, the world’s first bank which is offering real like interest rates or rather better rates on your fixed deposits.”
The question of regulation
In India at least fixed deposits are issued by banks or by companies such as Non-Banking Finance Companies. In both these cases, there are regulators like the Reserve Bank of India involved.
We were told by Amit that since they are only dealing with Bitcoin, they do not need a license from the RBI.
“We might have needed a license from the local authorities,” he explains, “only if we had been either accepting deposits in a local fiat currency or offering interest earnings in the same. We are doing neither.”
How will it all work out?
Coinbank is offering two types of ‘fixed deposits.’ You can invest in their six-month plan which will offer an interest rate of 1.25 percent per month or their three-month plan on which you will get one percent per month.
However, since your Bitcoins will be locked up, you can only withdraw your money if you accept a lower interest rate of 0.25 percent per month pro rata on any premature withdrawal.
There is, however, a minimum 15 day lock-in period during which no withdrawals are possible at all. Unlike traditional banks, Coinbank has no plans to lend Bitcoins but they would be investing money in Bitcoin mining and that is how they will be able to offer any interest according to Amit.
Is it safe?
Any investments should be made carefully and only after due-diligence. We asked Amit Bhardwaj about the fiduciary responsibilities that they are entering.
“We have put in best-in-class security measures for storage of earned Bitcoins. The Bitcoin community has seen enough hacks of consumer funds and it cannot and should not face another one and especially not from professional miners.”
It is an interesting concept and if a wallet offers interest, there is always an enticing possibility that it may attract users. It now remains to be seen if most other wallets will also start offering interest or if it will remain confined to a minority of service providers such as BSave.