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A Yankee certificate of deposit is a special type of CD that’s issued domestically by a branch of a foreign bank.

Yankee CDs, sometimes referred to as YCDs in finance, have several features that set them apart from other types of CDs, including higher minimum deposit requirements, short terms, and a lack of FDIC protection.

For those reasons, it’s helpful to understand how a Yankee certificate of deposit investment works and the potential risks involved.

What Is a Yankee Certificate of Deposit?

What are Yankee certificates of deposit? And how does a certificate of deposit work? Let’s compare the two.

First, a regular CD is a deposit account that requires investors to lock up their cash for a fixed period of time (typically a few months to a few years), and in exchange pays a higher interest rate than a traditional savings account. CDs purchased at a bank are generally FDIC insured up to $250,000 (CDs bought at a credit union are NCUA insured up to the same amount).

By contrast, a Yankee certificate of deposit is a CD account that’s issued by a branch of a foreign bank in the U.S., to U.S. customers. In general, the term of a Yankee certificate deposit is less than a year, and the minimum deposit required is more in line with a jumbo CD.

So, for example, a Canadian bank that has branches in the U.S. could offer Yankee CDs to U.S. residents. Even though the CDs would be issued by a foreign bank, they would still be subject to U.S. regulation by the Office of the Comptroller of the Currency (OCC) and the Federal Reserve Board. But a Yankee certificate of deposit would not be federally insured.

Foreign banks that operate in the U.S. can issue Yankee CDs in order to generate capital for making loans or investments. These CDs can be purchased at issuance or on the secondary market.

Recommended: What is Liquid Net Worth

How Yankee CDs Work

As noted above, Yankee CDs work much the same as other types of deposit accounts that are CDs. There are some differences, however, with regard to:

•   Minimum deposits

•   Interest rates

•   Maturity terms

•   Investment risk

Minimum Deposits

Though you might be able to invest in a standard CD with $500 or $1,000, a Yankee certificate of deposit investment might require an initial deposit of $1 million or more. Scotiabank, for instance, issues its Yankee CDs in increments of $250,000 while UBS requires a $1 million minimum deposit for Yankee CDs offered through its Stamford, CT, branch.

A CD of this size issued by a U.S. institution could be categorized as a negotiable CD or NCD. NCDs have a face value of $100,000 or more. But Yankee CDs are not negotiable CDs because they are not FDIC insured.

Fixed and Variable Rates

Interest rates for Yankee CDs may be fixed or variable, which is another difference from other CDs which typically offer a fixed rate, making them more predictable instruments for fixed-income investors.

Shorter Terms

Maturity terms for a Yankee certificate of deposit tend to be shorter (one to three years, depending on the issuer), while regular CDs can have terms ranging from 28 days up to 10 years. The investor cannot access their cash until the CD matures, without triggering an early withdrawal penalty.

Potential Risk

Perhaps the biggest difference between Yankee CDs and other types of CDs is the level of risk involved. Generally speaking, CDs are considered to be safe investments since they offer a practically guaranteed rate of return, and deposits are federally insured up to a certain amount. Yankee CDs, on the other hand, carry certain risks including credit risk and the possibility of lower-than-expected returns if you’re choosing a variable-rate option.

Recommended: Average Savings by Age

Why Does a Yankee CD Matter?

Yankee CDs are not something the everyday investor is likely to be concerned with. After all, most people don’t have $1 million or $50 million to invest into a single CD.

If you’re able to invest in a Yankee CD, however, it’s possible that you could earn a higher rate of return for your money. That’s important if you’re working on building wealth and want to diversify your portfolio.

Are CDs smart investments? They can be, if you’re comfortable leaving money in a CD account until it reaches maturity. Again, with a Yankee certificate of deposit you may be looking at a one- to three-year wait until the CD matures. So given the higher deposit requirements involved, it’s important to consider how comfortable you are typing up larger amounts for that long, and what kind of return you can expect.

From a banking perspective, Yankee CDs matter because they’re a source of capital for foreign banks, which may need U.S. dollars to cover domestic obligations.

Yankee CDs: Real World Example

Scotiabank is one example of a Canadian bank that offers Yankee CDs to U.S.-based savers. The bank, headquartered in Toronto, offers both floating-rate and fixed- rate Yankee certificates of deposit. The bank’s floating-rate products have maturity terms ranging from two to three years, with minimum deposits of $250,000 and target principal amounts ranging from $50 million to $90 million.

The fixed-rate Yankee CD earns an impressive yield and requires a minimum deposit of $250,000, with a target principal amount of $100 million. The maturity period for this CD is also two years. Scotiabank offers these CDs exclusively to institutional investors who are accredited.

Special Considerations for Yankee CDs

There are two important things to keep in mind with a Yankee certificate of deposit investment. First, investors assume a certain amount of credit risk with these CDs.

The quality of these CDs is determined by the credit rating of the issuing bank. Banks with lower credit ratings may be more likely to default on financial obligations, including the payment of interest to CD holders. Tying up large amounts of money in Yankee certificates of deposit issued by banks with questionable credit ratings could therefore be risky.

Second, it’s important to keep in mind that FDIC protection does not apply to these CDs. Ordinarily, CDs issued at FDIC-insured banks are protected up to $250,000 per depositor, per financial institution, per account ownership type, in the rare event that the bank fails. With Yankee CDs, you don’t have that reassurance that your money is safe should the worst happen.

How to Open a Yankee CD

Opening a Yankee isn’t that different from opening any other type of CD. Here are the main steps involved:

•   Locate banks that offer Yankee CDs in the U.S.

•   Compare the Yankee certificates of deposit available, including the minimum deposit and interest rate.

•   Complete the application to open an account.

•   Make your initial deposit.

As noted, it’s important to choose a financial institution with good credit ratings. So you may want to take the additional step of checking credit ratings with Moody’s or Fitch Ratings to measure the bank’s financial health and strength.

Alternatives to Yankee CDs

If you’re looking for CD options that may be more accessible than Yankee CDs, there are some other possibilities. You could use any of the following to reach your savings goals:

•   Standard CDs. A standard CD is a regular CD offered by a bank or credit union that pays interest and has a reasonable minimum deposit.

•   Jumbo CDs. Jumbo CDs are similar to standard CDs but have larger minimum deposit requirements. For example, you may need $10,000 or more to open a jumbo CD.

•   No-penalty CDs. A no-penalty CD allows you to withdraw money from your C before its maturity date without triggering an early withdrawal penalty.

•   Bump up CDs. Raise your rate or bump up CDs allow you to raise your interest rate once or twice during the CD term. This type of CD might be attractive if you expect rates to rise.

•   Add-on CDs. An add-on CD allows you to make additional deposits to your account after your CD has been opened. Ordinarily, CDs don’t allow additional deposits.

You may also consider CD-secured loans if you’re interested in a CD product that can help you build credit. With a CD-secured loan your CD serves as collateral. Your money stays in the CD until maturity, earning interest. Meanwhile, you make payments to the loan which can be reported to the credit bureaus.

Once the CD matures, you can withdraw the principal and interest or roll it into a new CD. You also get the benefit of on-time payment history, which can help to improve your credit score.

The Takeaway

A Yankee certificate of deposit is issued domestically by a branch of a foreign bank to U.S. investors. Yankee CDs are designed to help investors earn a solid return while allowing foreign banks to raise capital via U.S. investors. Due to their high minimum deposit requirements (as much as $1 million or more), these CDs may be better suited to some investors than others; they’re sometimes restricted to institutional investors.

Yankee CDs may offer competitive rates, but they are not federally insured like most U.S.-issued CDs.

If you’re committed to seeing your money grow slowly and steadily over time, the good news is you don’t have to miss out on a great rate when saving money. If you’re banking with SoFi, you can take advantage of SoFi’s all-in-one Checking and Savings. You can sign up for an account right from your phone and pay zero account fees — and if you qualify and sign up with direct deposit, you can earn a competitive APY.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall. Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

Can you lose money on a certificate of deposit?

Certificates of deposit (CDs) are generally a safe, secure way to save money. It’s possible, however, to lose money with a Yankee CD if the bank that issued it is unable to meet its financial obligations and pay interest to investors as scheduled.

What are the cons of a certificate of deposit?

Certificates of deposit may offer lower rates of return compared to other investments, which means your money has potential for growth. With bank CDs, savers may face early withdrawal penalties if they take money from their accounts before the CD matures.

How do I redeem a certificate of deposit?

If your CD is reaching maturity or you need to withdraw money for any other reason, you can visit a branch to redeem your CD or do so online if your bank allows it. You’ll need to specify how much money you want to withdraw and where that money should be sent if you’re redeeming CDs online.

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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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The meaning of digital assets has morphed over time from commonly known digital items (e.g. data, images, video, audio files, etc.) to a broader definition that includes entities that can be created and/or stored using blockchain technology, are verifiably unique, and can be used to generate value.

Digital assets now include different cryptocurrencies, non-fungible tokens (NFTs), crypto assets such as utility or security tokens, and more. While trading crypto is one of the most common ways to invest in digital assets, there are many options to choose from.

What Is a Digital Asset?

Putting aside IRL forms of digital assets that can be created and stored on devices (e.g. text, images, video, audio), the real innovation in digital assetry began with the birth of blockchain technology.

Blockchain technology is a decentralized, transparent, append-only digital ledger that can be used to track or record almost any type of asset, from goods and services to patents, smart contracts, decentralized apps (dApps), and more.

Blockchain technology relies on cryptography and a system of peer-to-peer verification, or consensus mechanisms, to secure transactions and, in the case of cryptocurrency, to mine coins and tokens.

Although most people think cryptocurrency is synonymous with blockchain technology, in fact blockchain technology is increasingly common for a range of digital products and functions — especially the creation and storage of digital assets.

Types of Digital Assets

Broadly speaking, most digital assets fall into two general categories:

1.    Cryptocurrencies

2.    Cryptographic tokens

Cryptocurrencies

There are thousands of different types of cryptocurrency beyond Bitcoin (these are often referred to as altcoins). As of August 12, 2022, some of the top crypto include:

•   Ethereum (ETH)

•   Binance Coin (BNB)

•   Ripple (XRP)

•   Tether (USDT)

•   Polkadot (DOT)

•   Litecoin (LTC)

In general, though, crypto digital assets are decentralized forms of currency; they exist on a blockchain platform, and are secured by either a proof-of-work (PoW) consensus mechanism (which involves mining), or a proof-of-stake system (PoS), where users lock up or stake some of their coins in order to become validators.

Of the many types of crypto, the vast majority have emerged from new projects. But some are hard forks from existing blockchains (e.g. Litecoin launched in 2011 after a hard fork from Bitcoin).

Others are stablecoins, meaning they’re pegged to a fiat currency like the dollar, euro, or yen, and aim to keep a 1:1 value with that currency.

💡 Interested in crypto? Learn the basics with our Crypto 101 Guide.

Cryptographic Tokens

Tokens are digital assets that can serve a variety of purposes on a blockchain platform. One of the most common types of tokens is known as a utility token, which is a token that serves a specific function within a blockchain ecosystem.

For example, as blockchain technology has advanced and the DeFi space (decentralized finance) has grown, users typically need utility tokens native to each platform to execute certain functions on that platform.

One common example is how ERC20 tokens are used on the Ethereum platform to pay for goods and services (e.g. dapps and smart contracts).

Another example of a utility token would be the Basic Attention Token (BAT). BAT is the native token of the Brave web browser, which is built on Ethereum and seeks to protect users’ privacy with a new advertising model.

There are even digital assets for social networks that reward users in the form of crypto when they create and curate quality content, like Steemit does with the STEEM token.

Digital Assets in Marketing

These days, with so many types of digital and blockchain-based digital assets, many organizations have come to rely on Digital Asset Managers (DAMs).

DAM cloud software plays a vital role for businesses that need a way to catalog and store all the various forms of data and media relevant to that company, including images, video and audio files, social media, as well as cutting-edge material like VR and AR.

In particular, marketers make use of DAM software in order to manage the brand’s entire library of digital assets, to streamline online and offline channels.

Digital Assets in Investing

Perhaps the most important aspect of digital assets for investors is that each one is unique and stored on a blockchain, therefore they provide a form of real world value that can rise and fall like any other asset (e.g. stocks, bonds, mutual funds).

Digital assets present a range of new opportunities for investors. Not only can you buy and sell the many forms of crypto, you can trade NFTs, stake tokens, and more.

Legacy markets have certain limitations that crypto markets in general and digital assets in particular may help solve, especially in regard to cross-border transfers, minimum capital requirements, and the availability of certain asset classes. Because digital assets are decentralized, meaning they are created and stored without the need for middlemen, there are new possibilities for all market participants.

Virtual Assets vs Digital Assets

Virtual assets predate digital assets, in the sense that the acquisition and trading of virtual assets has been core to the online gaming industry for years. It’s important to note however that virtual gaming assets could not be traded in a liquid market initially, whereas the digital asset market allowed for limited liquidity trading.

History of Blockchain Digital Assets

The Bitcoin white paper, also known as the Satoshi Nakamoto white paper, was published on October 31, 2008. About two months later, on January 3, 2009, the Bitcoin network went live, the first Bitcoin was created, and a new asset class (cryptocurrency) was born thanks to the emergence of blockchain, a peer-to-peer, decentralized technology that would soon change the world.

While the pioneering Bitcoin protocol helped establish the market for crypto digital assets, it wasn’t long before developers and entrepreneurs seized on the potential of blockchain technology to innovate in the DeFi space.

In 2015, the Ethereum network launched (following a 2013 white paper). From the start, Ethereum was meant to build on Bitcoin’s foundation. It was built as more than a form of crypto, but rather a programmable blockchain platform with the capacity to support smart contracts, dapps (decentralized apps), and other DeFi projects.

Ethereum and other like-minded projects that emerged around the same time revolutionized how blockchain was used and how digital assets were formed.

Pros and Cons of Investing in Digital Assets

How should investors consider the various opportunities in the digital asset space? Here are some advantages and disadvantages.

Pros

Individual Sovereignty

Bitcoin allows people to become their own bank. When storing assets at a traditional bank or other financial institution, an individual becomes vulnerable to the risk of that institution going bankrupt or mismanaging their funds. This risk is known as counterparty risk.

Because digital assets and crypto are mainly decentralized, they can eliminate counterparty risk.

By holding their own private keys in a crypto wallet, investors can have total ownership of their digital assets and cryptocurrency. Other than gold or silver, no other asset has this quality.

Diversification

Bitcoin has been the best performing asset class of the last decade by far. During eight of those years, the returns from holding Bitcoin exceeded that of any other asset in the world. (That said, as with any investment past performance is not an indication of future performance.)

Cryptocurrency can diversify an investment portfolio in a way no other asset class can. Crypto is known as a “non-correlated asset,” meaning it tends to have little or no correlation to other traditional securities (although this has changed at times and is no guarantee of future performance).

Inflation Hedge

While all investing carries risk, investors often fail to factor in the one risk inherent in every investment denominated in fiat currency (stocks, bonds, mutual funds, ETFs, etc.): Inflation risk.

The law of supply and demand dictates that when the supply of something increases, its price will decrease absent an equal or greater increase in demand. With central banks creating tens of trillions of new currency units in recent years, some investors have begun looking toward digital assets and cryptocurrencies that have fixed supply limits, like Bitcoin.

It should be noted that the only cryptocurrencies that can serve as viable inflation hedges are those that have a fixed supply. Like gold, scarce commodities tend to increase in value during times of inflation.

In addition, global uncertainty and turmoil tend to increase demand for safe haven assets.

Cons

Digital assets can be extremely volatile, whether you’re talking about the ups and downs of cryptocurrencies or the value of NFTs.

In addition, while digital assets can be considered secure because they are created and stored using decentralized technology and peer-to-peer verification systems, the reality is that when blockchain networks are hacked, those digital assets are at risk. Also, many scams are built around fake digital assets.

The market for digital assets is largely unregulated. Investors have to proceed with caution, verifying procedures, and networks, in order to avoid losses.

Digital Assets and Risk

As noted above, the vast majority of altcoins are highly speculative in nature. Most have small market capitalizations of less than $1 billion or even less than $100 million, so their prices can swing dramatically in short periods of time due to a lack of liquidity. And in the long run, it’s not unheard of for altcoins to drop to zero, meaning investors lose everything.

Bitcoin might be a little different because it has the most secure network (due to having the highest hashrate), the longest track record, and the largest market cap by far. Still past performance is no guarantee of future results, so it’s important for crypto investors to understand the risks inherent in investing in digital assets.

Best Practices for Investing in Digital Assets and Cryptocurrency

Anyone considering investing in digital assets and cryptocurrency would do well to educate themselves on related subjects.

The more a potential investor familiarizes themselves with crypto terms like bitcoin halving, bitcoin forks, and how crypto exchanges work, the less confusing this type of investment will seem.

Due to the volatile nature of digital assets and cryptocurrency, one possible investing strategy is dollar-cost averaging. Rather than trying to time the markets, investors can buy fixed dollar amounts at certain intervals. An example would be an investor setting a recurring buy for an automatic purchase of $50 worth of crypto every two weeks.

The Takeaway

Digital assets is a broad term. It has morphed over time from more tangible digital items like text and images to a definition that includes entities that are created using blockchain technology. Unlike tangible digital assets, today’s digital assets generate real-world value and are an asset class unto themselves.

Digital assets not only include cryptocurrencies and non-fungible tokens (NFTs), but also crypto assets such as utility or security tokens, and more. Trading these assets comes with certain risk factors, but considering how new this area is, there are also many opportunities for investors.

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INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
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Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments. Limitations apply to trading certain crypto assets and may not be available to residents of all states.

²Terms and conditions apply. Earn a bonus (as described below) when you open a new SoFi Digital Assets LLC account and buy at least $50 worth of any cryptocurrency within 7 days. The offer only applies to new crypto accounts, is limited to one per person, and expires on December 31, 2023. Once conditions are met and the account is opened, you will receive your bonus within 7 days. SoFi reserves the right to change or terminate the offer at any time without notice.

First Trade Amount		Bonus Payout
Low	High
$50	$99.99	$10
$100	$499.99	$15
$500	$4,999.99	$50
$5,000+		$100

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