Coinbase Introduces High-Interest Savings Account to Compete with UK Banks

Coinbase is expanding its reach into Britain’s retail banking market with the launch of a new savings account that offers a competitive interest rate of 3.75% AER variable interest. This move aims to challenge traditional banks in the UK.

Key Takeaways

Coinbase has launched a new savings account in the UK offering a 3.75% AER variable interest rate.
The account allows for daily interest payments, instant deposits/withdrawals, and FSCS protection for balances up to £85,000.
This initiative positions Coinbase as a competitor to traditional banks like Barclays, HSBC, and NatWest.
The move is part of a broader trend where cryptocurrency products could impact traditional banking deposits.
Recent proposals by the Bank of England suggest a £20,000 cap on individual stablecoin holdings, while Coinbase's account allows up to £85,000.

Coinbase Launches Savings Account to Rival UK Banks, Offers 3.75% Interest

In an official announcement, Coinbase revealed that it has teamed up with ClearBank to provide daily interest payments, instant deposits and withdrawals, along with Financial Services Compensation Scheme (FSCS) protection for balances up to £85,000. This makes Coinbase the first crypto-native exchange to introduce a bank-style product in the UK.

Eligible UK users can open this savings account directly within the Coinbase app, earning 3.75% AER paid daily on their GBP balances.

The partnership with ClearBank, a regulated UK financial institution, ensures that deposits are safeguarded under the FSCS, offering protection comparable to that provided by major banks such as Barclays and Lloyds.

Keith Grose, Coinbase's UK CEO, stated: “Supporting a high interest and instant access savings account alongside our trusted crypto exchange with stablecoins and over 260 assets is a step towards modernizing the financial system in the UK.”

Coinbase's Competitive Rate Compared to Traditional Banks

The average savings rate for easy-access accounts in the UK currently ranges from 4.2% to 4.5% AER, based on findings from MoneySavingExpert and Money.co.uk.

While Coinbase’s 3.75% interest rate is slightly below the top offers in the market, it still outperforms many basic flexible accounts. Major high-street banks like HSBC and NatWest typically offer interest rates between 1.15% and 3.5% for comparable deposits.

Grose further emphasized, “Our goal is to create the UK’s top financial app.” This suggests that the company aims to position itself more like Revolut rather than Binance.

In the UK market, as Coinbase competes with traditional finance, it could also be viewed as a potential contender against Revolut in Europe, similar to how it matches up against Robinhood in the United States.

“While Barclays, NatWest, and HSBC may meet or exceed the 3.75% rate, none provide the ability to switch from GBP to BTC within the same app,” remarked Simon Taylor, a fintech analyst based in London.

“It’s not just about the interest rate; it’s about attracting users who want easy access to both their GBP savings and crypto assets,” Taylor noted, and he sees Coinbase becoming a go-to option for UK customers, challenging banks to keep pace.

Concerns About Banking and Cryptocurrency

This launch occurs amidst rising concerns that crypto-related products could divert deposits away from traditional banks. Standard Chartered recently projected that over $1 trillion may move from emerging-market banks into stablecoins by 2028.

Coinbase Launches Savings Account to Rival UK Banks, Offers 3.75% Interest

The Bank of England has repeatedly issued warnings that the increased use of digital currencies might lead to “bank disintermediation,” where people transition their deposits to digital forms, potentially threatening financial stability and impacting credit availability.

Ronit Ghose from Citigroup drew comparisons to the late 1970s when money market funds surged from $4 billion to $235 billion in just seven years, siphoning off bank deposits.

However, Faryar Shirzad from Coinbase argued that the narrative claiming that “stablecoins will destroy bank lending” overlooks key facts. He noted that “Most stablecoin demand arises from outside the US, which actually enhances dollar dominance globally rather than posing a threat to local banks.”

UK Stablecoin Regulations vs Coinbase's Savings Account

Coinbase’s savings account launch comes shortly after the Bank of England put forth a proposal to impose a £20,000 cap on individual stablecoin holdings.

In contrast, Coinbase permits deposits of up to £85,000, complete with FSCS protection.

This positions Coinbase’s offering as more attractive than the proposed stablecoin limitations, which could entice more UK consumers to choose its savings product.

Tom Duff Gordon, Coinbase’s vice-president of international policy, told the Financial Times that “Capping stablecoin holdings is detrimental for UK savers, harmful for the financial sector, and unfavorable for sterling.”

Simon Jennings from the UK Cryptoasset Business Council commented that “in practice, limits are ineffective” because issuers are unable to monitor token holders in real-time effectively.