HomeCryptoCeFi: what are crypto banks

CeFi: what are crypto banks

Decentralized Finance, DeFi, also has a centralized counterpart, CeFi: both enable access to loans collateralized in cryptocurrency, but while DeFi requires the use of private keys, centralized finance of crypto banks requires the user to trust a centralized custodian.

Even if this concept goes against the libertarian ideal of cryptocurrencies, CeFi has carved out a market of its own thanks to its offer with better rates for both loans and interest payments as well as for credit cards.

By replacing the risk inherent in the DeFi code with the risk associated with third parties, crypto banks mitigate the risk of hacking by offering institutional-grade security guarantees. Deposits are usually secured by third party entities and cryptocurrencies are managed on cold wallets of leading custodian agents.

Like traditional banks, these crypto-friendly banks are authorized and regulated financial institutions, so identity verification is required before accessing services through KYC/AML procedures. 

On the one hand, this guarantees emergency access in case of losing access credentials, but on the other, it represents an entry barrier that is absent in DeFi, where only private keys matter.

The 4 largest crypto banks on the market

Nexo is one of the first crypto lending banks to appear in the industry, with funds guaranteed by BitGo Custody up to $100 million through Lloyd’s. Born from a spin-off of Credissimo, a Bulgarian fintech group with a solid reputation and supervised by several European banking and financial regulators, the lending bank claims to have processed $700 million so far. 

Nexo allows customers to deposit fiat and crypto money and receive fixed compound interest on a daily basis on their deposits, and soon the debit card will also arrive for European clients. One of the few accessible from a website in addition to the app.

Crypto.com, formerly Monaco, is a crypto bank in Hong Kong that provides lending services.  It offers the best interest rates in the market on stablecoins (up to 12%), provided that users lock up their funds for 3 months. 

Accessible only through the app, it has two tokens, MCO and CRO, which respectively allow users to have benefits on credit cards (which will soon arrive for the European market) and to use the domestic exchange. Users’ funds are stored in cold wallets managed by Ledger Vault and are covered up to $250 million by an – unspecified – market leader in institutional-level cryptocurrency custody services.

BlockFi is a New York-based crypto bank established in 2017 and backed by several rounds of private funding operating in accordance with US federal law. 

It offers interest on deposits in BTC, ETH, LTC, GUSD and USDC, as well as the ability to receive a loan by collateralizing cryptocurrency. Initially, a minimum deposit was required both to earn interest and to take out a loan, but now this barrier has been lowered substantially. Unlike other lending platforms, interest rates are variable. In terms of security, the storage of user funds is managed by Gemini on cold wallets and secured according to US federal laws (which do not apply to European citizens).

Celsius Network was founded by Alex Mashinsky, serial entrepreneur known for having invented VoIP, as a result of an ICO that raised $50 million in 2018. Accessible only by smartphone apps, it offers weekly compound interests on a wide range of cryptocurrencies and uses BitGo Custody for cold wallet management and insurance.

In recent statements during regular AMA sessions, CTO Nuke Goldstein said the team is working on a technology that would allow users to collateralize their funds directly from their addresses.


There are some important aspects that are not at all clear. While there is maximum transparency for DeFi platforms with regard to cryptocurrency movements, statistics and business model, crypto banks do not provide regular reports on loans and interest

In theory, it should be the interest on loans that finance the loans on interest, but in the absence of transparent data, it is questionable whether the business is sustainable.

In essence, CeFi products are not open to all users, they use centralized oracles for price feeds, centrally manage interest rates and operate on non-transparent cryptocurrency fractional reserves, just like a traditional bank.