APY vs APR in Crypto: The Difference That Changes What a "20% Yield" Actually Pays
Two acronyms that look interchangeable and aren't. Knowing which one a platform is quoting changes what you'll actually receive.
By Firoz Khan|1 September 2026|Updated 26 September 2026|4 min read
APY and APR get used almost interchangeably in crypto marketing, and the gap between them widens the more frequently returns compound. On a headline yield figure, that gap can be the difference between a return that looks realistic and one that's been dressed up to look bigger than it is.
APR: the simple, non-compounding number
Annual Percentage Rate is the straightforward annual return with no compounding factored in. A 10% APR on £1,000 returns £100 over a year, full stop, regardless of how often interest is calculated or paid out along the way.
APY: the number that includes compounding
Annual Percentage Yield includes the effect of reinvesting returns as they're earned. The more frequently compounding happens, daily rather than annually, for instance, the bigger the gap between the APR feeding into it and the resulting APY becomes. A platform can quote the more flattering APY figure while the underlying rate is meaningfully lower.
A worked example
Say a platform quotes 20% APR, compounded daily. On £1,000, simple interest would give £200 over a year. With daily compounding the same £1,000 grows to about £1,221, so the APY is about 22.1%. The gap is real but modest at this rate. It only appears if rewards are actually reinvested as they arrive, and it grows with the rate and the compounding frequency, which is why a very high APR turns into a much higher APY.
Why crypto platforms lean on whichever number looks bigger
Because APY structurally produces a higher headline figure than the APR it's derived from, and platforms competing for deposits have an obvious incentive to lead with it. Two platforms offering genuinely identical underlying returns can display very different headline numbers depending purely on which measure they choose to advertise.
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What to actually check before depositing
Confirm which figure is being quoted, and whether it's fixed or variable, since crypto yields in particular can and do change without much warning as market conditions shift. A high APY on a lending or staking product is also frequently compensation for real risk sitting underneath it, smart contract risk, counterparty risk, or the underlying asset's own volatility, not a free lunch. Also ask whether rewards are paid in the same asset you deposited, whether a lock-up period applies, and whether the rate can change without notice.
How this compares with a UK savings account
UK savings accounts quote AER, the Annual Equivalent Rate, which works like APY because it includes compounding. That makes one AER directly comparable with another. Crypto platforms mix APR, APY and other labels, so convert to a single basis before comparing anything.
A savings account also has Financial Services Compensation Scheme protection, up to £120,000 per person per authorised bank, building society or credit union since 1 December 2025. A crypto yield product does not. The FCA says crypto is largely unregulated in the UK and that it is highly unlikely you would be covered by the FSCS.
Tax on crypto yield
HMRC's guidance on staking says that, unless the activity amounts to a trade, the sterling value of rewards at the time you receive them is taxable as miscellaneous income. If you keep the tokens, you may also owe Capital Gains Tax when you later dispose of them. So a quoted APY is a before-tax figure, and if the rewards are paid in a token that then falls in value, the Income Tax is still based on the value when you received them.
A policy paper HMRC published on 13 July 2026 will change how Capital Gains Tax applies to some crypto lending and liquidity pool arrangements from 6 April 2027, treating certain deposits as no gain, no loss. It deals only with capital gains, not with Income Tax on rewards.
A reminder
The FCA risk warning still applies to higher-risk crypto content. Always assess how much risk you are willing to take before buying.
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