CBA partner Gemini plans ‘crypto interest’ accounts for Australian investors

US entrepreneurs Cameron and Tyler Winklevoss. Picture: AFP

The Commonwealth Bank’s New York-based crypto services partner, Gemini, is planning to launch a stand-alone income product aimed squarely at everyday Australian investors who are seeking income.

Gemini, which has already launched the ground breaking and some say controversial, income product for investors in the US, will pay Australian customers set rates to lend their personally held crypto such as bitcoin into the broader financial market.

The arrival of the income products would mark another spearhead for crypto in the heartland of Australian wealth management. Until now crypto activity has tended to be split between crypto enthusiasts using the currency for transactions and wealthy investors putting money in specialised wholesale funds.

However, the “crypto interest account” is a key product in the wider $US7bn ($9.8bn) Gemini business which was founded in 2015 by the Winklevoss twins – Tyler and Cameron – best known for their bitter disputes with Mark Zuckerberg in the early days of Facebook.

“In Australia our view would be to offer the product to the retail investors,” says Andy Meehan, chief compliance officer for Gemini Asia Pacific.

“We think CBA broke the mould in your market, which is an attractive market – in fact is it a highly developed investment market that has a long tradition of people being very quick to take up new finance technology when it arrives on the scene.

“CBA has forced the regulators to move much faster than they might have naturally desired, but you’ll see every one of your banks offer crypto services very soon,” says Meehan, who is based in Singapore.

In recent weeks CBA has strengthened its relationship with the Gemini group. In November the nation’s biggest bank said it would offer the ability to buy and sell crypto assets in a deal with Gemini’s custody and exchange platform.

More recently, the bank took a minority investment stake in the group where Tyler Winklevoss is the chief executive.

With banks continuing to cut deposit rates investors have become increasingly desperate for income products.

Remarkably, though deposit rates are at historic lows the amount of money going into deposits keeps climbing.

This week new lending figures showed that Australian households have accumulated deposits of $217bn since the pandemic began. In fact savings are growing faster than credit across the finance system.

Similarly, this week’s quarterly GDP figures showed that the national savings rate has again bounced higher in recent months heading back towards 20 per cent, which is at least four times higher than normal.

Presenting as a crypto era approximate of traditional deposit products, the “Gemini Earn” product pays different rates for different cryptocurrencies depending on their popularity.

The most poplar such as bitcoin is lent out for low rates under 2 per cent while rare currencies (there are hundreds) are lent out for much higher rates of up to 7.4 per cent. Gemini charges fees of close to 1 per cent on transactions.

High-yielding crypto interest products have attracted the attention – and warnings – from state-based regulators in the US. A rival product to Gemini – the Peter Thiel-backed BlockFi – is currently being “scrutinised” by the all-powerful Securities and Exchange Commission.

Meehan says he has yet to make any formal approach to Australian regulators on its local plans.

According to Gemini: “Gemini Earn is a lending program through which you may choose to lend your crypto to certain institutional borrowers and earn interest on your crypto.”

The rates offered on the product are “live” rather than set for periods of time, reflecting the ability of the underpinning blockchain technology to offer transparent prices in the market.

Meehan says crypto is increasingly part of the fabric of financial transactions especially in Gemini’s key markets of the US and Hong Kong, though he would not give a time frame for any launch in Australia.

Last month the Australia-based Finder group launched Finder Earn, which pays 4.1 per cent interest relating to cryptocurrency, though it operates on a different basis to the Gemini products. Finder Earn is related to stablecoin currency activity where there is value tied – or pegged – to the Australian dollar.

Any crypto-based interest products in the local market will fall well outside the Authorised Deposit Taking institution framework run by the Australian Prudential Regulation Authority, and will certainly not qualify for the government’s bank guarantee of $250,000 per person per bank.