Kraken launches Bitcoin Vault with up to 2.5% APY on BTC holdings
In brief
- Kraken Bitcoin Vault offers up to 2.5% APY on BTC holdings with automatic reward accrual
- On-chain lending protocols including Aave, Morpho, and Tydro power the yield strategy via Sentora
- Users can withdraw anytime, though processing takes 5 days to return funds
- Rewards derive from actual on-chain strategies, not token subsidies or promotional rates
- Feature launches amid regulatory scrutiny of centralized exchange yield products
How Bitcoin Vault Works
When users deposit BTC into Bitcoin Vaults, the funds are put to work in on-chain vaults powered by DeFi infrastructure firm Veda, with risk and strategy controlled by institutional DeFi firm Sentora. Sentora builds and executes lending and borrowing strategies using on-chain protocols including Aave, Morpho, and Tydro to generate the yield.
The fee structure is transparent. The yield providers take a 25% performance fee from the rewards, though the projected yield of up to 2.5% is inclusive of this fee. Customers can withdraw their funds at any time, but withdrawals are subject to a 5-day processing and return time.
Kraken emphasized a key distinction in its messaging. The firm highlighted that the rewards rate comes directly from on-chain strategies, and is not the result of token subsidies or promotional rates. This framing matters in the current regulatory environment.
Regulatory Context
The move arrives amid heightened scrutiny of yield products from centralized exchanges. Previous yield-bearing products from centralized exchanges, like Gemini Earn, drew scrutiny from regulators and significantly impacted consumers who were alleged to have been misled about the actual risks. The SEC investigated defunct crypto lender BlockFi for its high-yield Bitcoin and Ethereum lending products during the Biden administration.
Kraken's approach of routing funds through transparent on-chain protocols and disclosing the fee structure upfront suggests an attempt to sidestep those earlier pitfalls. The product targets a straightforward use case: customers who already hold Bitcoin and want passive income without complexity.
