How to earn cash interest paid in Bitcoin on USD deposits

River is a US-based financial services company that provides access to Bitcoin
Bitcoin
has announced a new product that combines the features of Bitcoin with the stability and predictability of the dollar: interest-bearing cash deposits paid in BTC. The company aims to expand its range of services by offering an interest rate of 3.8% and introducing a way to accumulate Bitcoin through USD-denominated cash deposits. These deposits will be insured up to $250,000 by the Federal Deposit Insurance Corporation thanks to partner banks, according to the announcement.

“Introducing a 3.8% interest rate on cash, paid in Bitcoin. Don’t let your cash lose value to inflation, even in “high-yield” accounts. “Unleash the predictability of the dollar with the opportunity to build real wealth in Bitcoin,” the company posted on its official X account.

This represents something new in the industry. Despite a similar approach of using BTC and digital assets to generate revenue outside of the user's control, River is committed to taking BTC holdings out of the equation. This means that the product only works with USD deposits that the company receives. Bitcoin remains separate from the yield-generating proposition, and the company adheres to an on-chain proof-of-reserve protocol. This allows users and clients to confirm that the company holds the exact amount of BTC that the client has deposited.

What does cash interest mean?

To learn more about this new product, we reached out to Alex Leishman, River's founder, CEO, and chief technology officer. First, he emphasized that the company owns 100% of the Bitcoins it receives, and highlighted the proof-of-reserve protocol as a way for clients and users to verify this claim.

Since the company partners with FDIC-insured banks, I asked if River could become its own bank in the future and handle this new product entirely in-house. I did. “We have very good relationships with our banking partners, and we have no plans to obtain our own banking license. That is a very big commitment,” he explained to me via X number of direct messages. I did.

“The general idea behind this product is that as the price of Bitcoin increases, the effective interest rate will be a multiple of the base interest rate,” he further explained.

Risks and cash yields of Bitcoin and crypto lenders

However, given the negative track record of products like BlockFi and Celsius (both of which filed for bankruptcy), among other financial service providers that have taken a similar path, I give Leishman what River has to offer. I asked if it was different.

“BlockFi and Celsius took your Bitcoin and did dangerous things with it to generate yield. We will not touch your Bitcoin. Your Bitcoin is 100% reserved This is only interest on cash,” Leishman emphasized.

Another important difference is that the yield comes from an FDIC-insured bank. “Behind the scenes, we are a bank that generates interest on cash. We automatically convert that cash interest into Bitcoin every day, which accrues to your account,” he explained. This is a USD-based product, meaning that if you only hold BTC in your company without USD, you “earn no interest.”

There were several points and criticisms regarding Mr. River's presentation. For example, security analyst and Bitcoin commentator JW Weatherman cited X's announcement and addressed several misconceptions in the news.

“The challenge is to find a way to preserve dollars while moving forward.” No, that's not possible. Inflation is 10-20% per year, but the @riverfinancial scammers' “yields” are far below that. The solution is to deposit directly into Strike or CashApp and sell to pay your bills,” he posted on X.

He even questioned the thinking behind the product, saying companies like River don't want Bitcoin to be adopted as a currency. “'Bitcoin companies' don't want Bitcoin to be adopted as money. The money-changing parasites feed on confusion,” he posted.

Other Bitcoin accumulation options

River’s new product enters a market that competes with other ways to accumulate BTC. For example, Fold, a Bitcoin-focused company, offers services and products designed to help people earn Bitcoin rewards through their everyday spending.

The company primarily operates as a rewards platform where users can earn Bitcoin cashback by making purchases with their Fold debit card or purchasing gift cards through the app.

There are also financing options like Ledn, a Cayman Islands-based company that allows users to earn BTC through their services. Users who deposited up to 2 BTC earned 1% APY, and users who deposited more than 2 BTC earned 2.5% APY.