Kraken launches “Bitcoin Vault” so BTC holders can earn up to 2.5% APY
Kraken on Wednesday unveiled a new product that lets users earn yield on Bitcoin held on the exchange. The “Bitcoin Vault” allows customers to lock BTC and receive Bitcoin-denominated rewards that accrue automatically to their Kraken accounts — advertised at up to 2.5% APY.
How it works
- Deposits placed into Kraken’s Bitcoin Vault are deployed on-chain via infrastructure partner Veda.
- Institutional DeFi firm Sentora manages risk and constructs the lending/borrowing strategies that generate yield.
- Strategies deploy capital to well-known on-chain protocols such as Aave, Morpho and Tydro.
- Providers collect a 25% performance fee from the rewards; the advertised up-to-2.5% yield is net of that fee.
- Rewards are paid in BTC and Kraken says rates come from on-chain strategy returns rather than token subsidies or temporary promos.
User experience and liquidity
- Kraken positions the product as a simple, low-friction way for long-term Bitcoin holders to earn yield. “Bitcoin Vault is built for that mindset,” said John Zettler, Kraken’s Earn & Trade Director of Product.
- Customers can deposit from their Kraken accounts and are able to remove funds at any time, though withdrawals carry a 5-day processing and return window.
Regulatory context and caveats
- Kraken emphasizes the returns are sourced from on-chain activity, but centralized exchange yield products have faced regulatory scrutiny and consumer fallout in recent years. High-profile examples include the shutdown of Gemini Earn and investigations into other crypto lenders after the FTX collapse, as well as earlier SEC scrutiny of BlockFi’s lending programs.
- Kraken’s announcement highlights the product’s on-chain strategy and the involvement of third-party risk managers, but users should weigh counterparty, smart-contract and platform risks before participating.
Bottom line
Kraken’s Bitcoin Vault brings a custodial, Bitcoin-native yield option to its user base that aims for simplicity and BTC payouts. The product combines DeFi protocols and institutional strategy management, charges a 25% performance fee on rewards, and offers up to 2.5% APY inclusive of that fee — with withdrawals subject to a five-day processing period.
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