Kraken launches Bitcoin Vault offering up to 2.5% annual BTC yield

Kraken has introduced Bitcoin Vault, a product within its Kraken Earn suite that allows Bitcoin holders to earn up to 2.5% annual yield in BTC‑denominated rewards while keeping full exposure to Bitcoin’s price movements [1]. The service, powered by DeFi infrastructure firm Veda and risk‑managed by Sentora, is available through Kraken’s web, app and Krak platforms, except in the UK, UAE, and Australia [1].

Key takeaways

• Up to 2.5% variable APY is offered on Bitcoin deposits, after a 25% performance fee is applied [2].
• Deposits are wrapped to kBTC, supplied as collateral, and allocated across protocols such as Aave, Morpho and Tydro [3][4].
• Withdrawals can be initiated at any time but require a five‑day processing period [2][4].
• The product is non‑custodial; only depositors can move their funds, and rewards auto‑compound in Bitcoin [3][4].
• As of the first ten hours, more than $30 million in Bitcoin from roughly 4,000 wallets had been deposited [3].

How Bitcoin Vault works

Kraken’s Bitcoin Vault converts deposited Bitcoin into Kraken Wrapped Bitcoin (kBTC), a token that mirrors BTC’s price. The kBTC is then placed in a non‑custodial wallet on the Ink network and handed to a Veda vault overseen by Sentora. Within the vault, the kBTC is used as collateral to borrow stablecoins, which are subsequently deployed into lending platforms such as Aave, Morpho and Tydro to generate yield [4]. Rewards earned in stablecoins are swapped back to kBTC, auto‑compounded, and credited to the user’s Kraken account. The APY is variable and not guaranteed; Kraken does not control the underlying third‑party protocols [1][2].

Product rollout and early adoption

The launch on May 27 2024 follows Kraken’s broader DeFi Earn initiative, which amassed more than $240 million in assets since its January debut [2]. Within ten hours of launch, Veda reported that Bitcoin Vault had attracted over $30 million in deposits from 4,000 unique wallets [3]. The service is offered to users in the United States (excluding New York and Maine), the European Economic Area, Canada, and other eligible jurisdictions, with no minimum deposit required [4]. Withdrawals are processed over a five‑day period, and a 25% performance fee is taken from the rewards before the advertised yield is presented [2][5].

Why it matters

Bitcoin Vault reflects a growing trend among centralized exchanges to provide DeFi‑backed yield products that preserve exposure to the underlying asset while simplifying user interaction. By handling the on‑chain complexities internally, Kraken aims to attract long‑term Bitcoin holders who seek passive income without managing multiple protocols themselves. The product’s non‑custodial design and transparent fee structure address regulatory scrutiny that has affected earlier high‑yield offerings from other exchanges. As the vault scales, its performance will depend on the health of the underlying DeFi protocols and the ability of Sentora’s risk management to navigate market volatility.