Interest on idle virtual assets: How do crypto deposits work?

economictimes.indiatimes.com:

Cryptocurrency startups have begun offering investors an option to earn interest on virtual assets to battle volatility even as the industry awaits regulatory and legal clarity on the issue. Crypto startups are offering fixed returns on one’s holdings. How do these investment products work? What makes them different from conventional deposits? What should investors watch out for? Aseem Gujar & Partha Sinha find out… One can buy crypto either through an exchange’s app or invest indirectly via exchange-traded funds (ETFs) as was explained last week in this column. Cryptocurrency startups are giving another option to investors: Some call it fixed deposit or fixed income product, while others steer clear of traditional finance terminology and refer to it as interest-generating investment.

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These FD-like products promise passive income to those seeking exposure to crypto. These products have an investment tenure ranging from a week to a year and allow cashing out early if needed without any penalty. Though these seem similar to bank FDs, such crypto-linked investments are outside the regulatory purview and hence risky. Sumit Gupta, CEO and co-founder of crypto exchange CoinDCX, which has such offerings, said that there are products which allow users to monetise their idle assets.Exchanges Borrow Your Tokens Industry players said that such products are mostly targeted at those who understand crypto technology. Those who own crypto can transfer tokens to an exchange or an investment platform that offers FD-like products. Those who don’t own crypto, can