Kraken launches Bitcoin Vault with up to 2.5% BTC yield

Kraken launched Bitcoin Vault on Wednesday, offering users up to 2.5% in bitcoin rewards while keeping custody of deposited BTC on the regulated exchange. Customers retain exposure to bitcoin’s price movements.

The product is part of Kraken’s Earn lineup and is powered by DeFi infrastructure provider Veda. Kraken explained the vault allocates deposited BTC to on-chain lending protocols such as Aave, Morpho and Tydro, where borrowers take loans and pay interest that is returned to depositors as yield.

Kraken positioned Bitcoin Vault for bitcoin holders who want passive yield without moving assets off the exchange or interacting directly with decentralized finance applications. The headline rate is up to 2.5% in bitcoin rewards; account balances continue to rise or fall with bitcoin’s market price.

Bitcoin does not have a native yield mechanism like proof-of-stake tokens, so exchanges and protocols create alternatives that generate returns by lending or other means. In on-chain lending, supplied funds go to lending pools where traders and institutions borrow assets and pay interest that becomes depositors’ yield.

The launch follows Kraken’s DeFi Earn initiative introduced earlier this year, which includes staking, an Auto Earn feature and other DeFi-focused vaults. Kraken noted growing customer demand for simpler yield products and reported that its USDC Vaults have accumulated nearly $250 million in deposits without promotional incentives.

John Zettler, Kraken’s director of product for Earn & Trade, commented in a statement: “Many Bitcoin holders on Kraken have made it clear they want simple ways to earn on the Bitcoin they already plan to hold. Bitcoin Vault is built for that mindset.”