Recently, topics related to cryptocurrency lending have been frequently appearing. In an era where bank deposit interest rates are around 0.1%, the promise of earning annual interest rates of 3% to 10% naturally draws attention. However, with the Financial Services Agency’s (FSA) council officially announcing policies in December 2025, this industry is about to face a major turning point.

The basic mechanism of cryptocurrency lending involves lending out the digital assets you hold to exchanges or lending service providers, in exchange for earning interest. Legally, it is based on a consumer loan agreement, and the ownership of the lent cryptocurrency temporarily transfers to the service provider. The provider may re-lend or invest these assets in other users or trading funds, and a portion of the profits generated from these activities is distributed as interest.

Understanding the difference from staking is also important. Staking involves locking coins in a PoS (Proof of Stake) blockchain to serve as a validator and receiving network rewards. Assets are often managed separately, and the impact of a provider’s insolvency is considered limited. In contrast, in lending, a consumer loan agreement applies, and ownership of the lent cryptocurrency transfers to the provider. Under current regulations, there is no obligation for segregated management. If the provider goes bankrupt, users may be treated as general creditors. Although interest rates are higher in lending, the associated risks are also greater.

It’s also important to note the differences from DeFi lending. Protocols like Aave and Compound operate on smart contracts that execute automatically on-chain. In contrast, services provided by domestic exchanges or dedicated providers are centralized, with procedures completed in Japanese, and identity verification conducted within the framework of domestic regulations.

What are the benefits of cryptocurrency lending? First, it offers significantly higher annual yields than bank deposits. As of April 2026, the interest rate on regular deposits at major banks is about 0.1% per year, but cryptocurrency lending can offer loan rates of around 1% to 10% annually. Dedicated lending providers may offer around 8% per year for Bitcoin and Ethereum, and about 10% for stablecoins.

Another advantage is that you can generate income while holding your assets. Unlike stocks, simply holding cryptocurrencies does not generate dividends. By using lending, you can wait for price appreciation while increasing your holdings, potentially benefiting from compound interest over the long term. Additionally, starting with small amounts is also attractive. Many domestic exchanges allow applications from a few thousand yen to tens of thousands of yen, and some even permit lending with as little as 0.01 Bitcoin.

However, there are also significant risks and disadvantages. The biggest concern is the risk of exchange insolvency. Since consumer loan agreements apply, ownership of the lent assets transfers to the provider, and under current regulations, there is no obligation for segregated management. If the provider goes bankrupt, users may be treated as general creditors, and full repayment is not guaranteed. Cases like BlockFi and Celsius collapsing in 2022 show that recovering user assets can take a long time.

Price fluctuation risk is also significant. Because interest is paid in the same cryptocurrency being lent, a sharp decline in price during the lending period can reduce the asset’s valuation in Japanese yen. During the loan period, assets generally cannot be sold or transferred, so you cannot quickly dispose of assets during a price drop.

Restrictions on early withdrawal also pose liquidity risks. Many lending services do not allow early termination as a rule, or charge fees for early withdrawal. In market volatility or urgent need for funds, you may not be able to withdraw your assets immediately.

Attention should also be paid to changes following the 2026 Financial Instruments and Exchange Act regulations. The FSA’s working group published a report on December 10, 2025, indicating that lending services will be subject to the Financial Instruments and Exchange Act. If the revision bill is enacted, providers will be required to establish internal control systems, manage risks, and disclose information. Discussions are also ongoing about protecting user assets under these new regulations.

Understanding the difference between exchange-type and dedicated providers is also crucial. Exchange-type services like GMO Coin, bitbank, Coincheck, and SBI VC Trade can be used through existing trading accounts, with the reassurance that they are registered with the FSA as cryptocurrency exchange operators. However, since the lending part is based on consumer loan agreements, it is not directly protected under exchange regulations. Interest rates tend to be lower (around 3-5%) compared to dedicated providers, but they are generally considered more stable.

Dedicated lending providers often achieve higher interest rates by re-lending to crypto asset funds or exchanges. For example, BitLending offers around 8% annually for Bitcoin and Ethereum, and about 10% for stablecoins like Tether and DAI (as of April 2026). However, many of these providers are not registered with the FSA, meaning they are not directly supervised. You need to assess their credit risk yourself. Discussions are ongoing about requiring registration for dedicated providers in the 2026 legal revisions, which could significantly change the regulatory environment.

Looking at the list of cryptocurrency lending services, each has different conditions. GMO Coin’s “Lending Crypto Assets Basic” supports 22 coins with annual rates of 1% to 10%, with lending periods of 1 or 3 months. Early termination fees are set at 10% of the expected interest. bitbank’s “Lend Crypto Assets to Grow” supports 44 coins with annual rates from 0.1% to 5%, with a fixed 1-year term. Early withdrawal results in zero interest and a 5% cancellation fee, making it suitable for long-term holding.

Coincheck’s “Lending Crypto Assets Service” offers five different lending periods from 14 to 360 days, supporting 36 coins. Longer periods generally offer higher interest rates. SBI VC Trade’s “Lend Coins” allows applications starting from 0.01 Bitcoin and is favored by users who trust the SBI Group’s brand. BitLending is dedicated solely to lending, with a minimum of 1 month, and supports early termination.

To start cryptocurrency lending, first open an account at a domestic exchange and verify your identity using a My Number card or similar. Next, deposit Japanese yen and purchase the cryptocurrencies you want to lend. Bitcoin and Ethereum are available on many services, making them good options for beginners. Then, access the lending page from the exchange’s management screen, select the lending asset, period, and amount, and apply. After maturity, the principal and interest are returned to your account. Some services offer automatic re-lending, allowing you to continuously earn interest.

From a tax perspective, interest earned from cryptocurrency lending is generally classified as miscellaneous income. It is combined with other income such as salary income for comprehensive taxation. Discussions are ongoing about shifting from aggregate taxation to separate self-assessment taxation (flat 20.315%), which could make the tax structure more similar to stock investments if implemented.

It is necessary to accurately record the timing and market value of interest income from lending, and using profit and loss calculation tools can help organize transaction histories and simplify tax calculations.

Ultimately, cryptocurrency lending is increasingly used as a way to generate interest income from digital assets. Even assets like Bitcoin, which are not staking targets, can generate income, which is a unique feature compared to other investment methods. However, the current system’s lack of obligation for segregated management poses structural risks, and the December 2025 FSA report recommends strengthening regulation under the Financial Instruments and Exchange Act.

When choosing a service, it is important to compare registration status, operational structure, lending conditions, and to use only within your available funds. Keeping an eye on regulatory and tax developments, and adapting accordingly, is essential. Using the interest rate list as a reference, selecting a service that matches your risk tolerance is key to success.