We look at the pros and cons of lending crypto vs. lending in your home fiat currencies of USD or EUR

      Are p2p lending options in Euros or Dollars as good as lending crypto?

      We like p2p lending as an investment option so we are going to look at it in more detail today.

      The main factors we are going to consider in this comparison are:

      • Availability of Platforms
      • Liquidity and lock up times
      • Types of Risk to Your Principal
      • And Taxes

      Availability of Platforms

      This one is a pretty easy comparison. In the US, you have Prosper and had Lending Club before their Radius Bank acquisition. You have some unique options like:

      • KickFurther for inventory
      • Fundrise, RealtyMogul, and Ground Floor for real estate. 

      These are the few choices you have if you are not an accredited investor. Accredited investors have more options especially in real estate with YieldStreet, PeerStreet, AlphaFlow, and others. But there aren’t many choices.

      The EU has much more open rules for investors so there are more options. Popular platforms include:

      • Mintos
      • ViaInvest
      • Twino
      • Bondora

      And since each country in the EU has its own financial rules, some regions like the Baltic states (Estonia, Latvia, and Lithuania) attract more platforms. Other places like France and Spain attract fewer. But thanks to the EU rules, many French and Spanish investors can lend their Euros on an Estonian p2p lending platform like Bondora.

      Whereas Crypto has many choices. Your only limit is which blockchain you want to use. If you want CeFi (centralized) options, then you have BlockFi, Nexo, and Celsius. Within DeFi, there are many options.

      Today’s most staked DeFi asset is PancakeSwap

      On Ethereum alone, there are more DeFi options than all the EU and US platforms combined. But they aren’t alone. AAVE, 1inch, Bancor, Curve Finance, and Uniswap are just a few examples. Here are more:

      • Binance Smart Chain: PancakeSwap and CafeSwap
      • Avalanche: Avalaunch, Trader Joe, and Pangolin
      • Harmony: DeFi Kingdoms, SonicSwap, and ViperSwap

      Your only limits are which chains or tokens you prefer to work with. Crypto definitely gives you the most choices.

      Total Value Locked (TVL) in DeFi, from Statista

      Liquidity and Lockup Times

      All fiat p2p lending platforms work the same way. You lend your money out over a one, three, or five-year period and you have no liquidity. You get your monthly payments back over that term to repay your principal and interest. And this is how most fixed-income investments work. There are only 2 exceptions: Default and Early Repayment. Default is when you don’t get paid and you lose your investment. Early Repayment is when your loan for three years pays off after one. You lose out on the remaining two years of interest but you do have your principal back so you can lend it out again.

      So liquidity is none except your monthly payments and lockup time is the term of the loan unless you get paid early.

      Crypto doesn’t work this way. In crypto, whether it’s a CeFi or a DeFi option, your money is pooled together with others lending that same crypto on the same chain like lending USDT on PancakeSwap. Your part in this pool means you earn interest but not on individual loans. You earn based on your percentage of assets in the pool. This also means that you can pull your money out at any time and all you lose is the future interest generated in that liquidity pool.

      Risks to Your Principal

      In fiat p2p lending, you carry 2 main risks:

      1. Default risk from your borrower
      2. Counterparty risk (risk of the platform going out of business)

      Many lenders have specific policies in place. Many Euro p2p lenders have an insurance guarantee on your principal in certain cases including early payment default from borrowers.

      Lending Club and Prosper have secondary servicing agreements. A separate company can keep collecting the monthly payments should their business fold. In the fiat p2p world, these risks are known. The best platforms manage these risks openly.

      In crypto lending, there is no default risk because loans are overcollateralized. There are other risks:

      1. The value of your token for payment goes down
      2. Counterparty risk

      Since if we loan DOT, we get paid in DOT, we carry the risk that we are receiving payment in a crypto that could decline in value. If DOT declines, our ROI declines. Many account for this by lending stablecoins like USDT and DAI.

      Counterparty risk is a little trickier. CeFi platforms carry this risk that the Ce part will go out of business or mismanage the money. That’s no different than the fiat p2p platforms. But even DeFi platforms carry the risk of hacks, scams or rugpulls.


      Lastly, we look at taxes. Every jurisdiction we know of taxes interest income. This means that all fiat p2p lending income is taxable with certain exceptions in places that exempt it for new residents or citizens.

      But crypto gains DO have some places where they aren’t taxed like:

      • Puerto Rico
      • Switzerland
      • Malta
      • Belarus
      • Germany (if held longer than 1 year)
      • And a few others

      So it is possible to structure your crypto lending investments so they are tax-free.

      About The Author

      Staking Rewards Research

      is a team of analysts dedicated to analyzing the economics, profitability, risks, and yield potential of various cryptocurrencies.