diff --git a/client/keys/add.go b/client/keys/add.go
index cfaf526460..29908bf9ab 100644
--- a/client/keys/add.go
+++ b/client/keys/add.go
@@ -164,14 +164,14 @@ func AddNewKeyRequestHandler(w http.ResponseWriter, r *http.Request) {
 	}
 	algo := keys.CryptoAlgo(m.Type)
 
-	_, _, err = kb.Create(m.Name, m.Password, algo)
+	info, _, err := kb.Create(m.Name, m.Password, algo)
 	// TODO handle different errors
 	if err != nil {
 		w.WriteHeader(500)
 		w.Write([]byte(err.Error()))
 		return
 	}
-	w.WriteHeader(200)
+	w.Write([]byte(info.PubKey.Address().String()))
 }
 
 // function to just a new seed to display in the UI before actually persisting it in the keybase
diff --git a/client/lcd/lcd_test.go b/client/lcd/lcd_test.go
index 16793c85d2..b2595fa0da 100644
--- a/client/lcd/lcd_test.go
+++ b/client/lcd/lcd_test.go
@@ -28,8 +28,7 @@ import (
 )
 
 func TestKeys(t *testing.T) {
-	kb, db, err := initKeybase(t)
-	require.Nil(t, err, "Couldn't init Keybase")
+	prepareClient(t)
 
 	cdc := app.MakeCodec()
 	r := initRouter(cdc)
@@ -44,8 +43,9 @@ func TestKeys(t *testing.T) {
 	body := res.Body.String()
 	require.Equal(t, body, "[]", "Expected an empty array")
 
-	info, _, err := kb.Create("test", "1234567890", cryptoKeys.CryptoAlgo("ed25519"))
-	require.Nil(t, err, "Couldn't add key")
+	// add key
+	addr := createKey(t, r)
+	assert.Len(t, addr, 40, "Returned address has wrong format", res.Body.String())
 
 	// existing keys
 	req, err = http.NewRequest("GET", "/keys", nil)
@@ -59,7 +59,7 @@ func TestKeys(t *testing.T) {
 	err = decoder.Decode(&m)
 
 	assert.Equal(t, m[0].Name, "test", "Did not serve keys name correctly")
-	assert.Equal(t, m[0].Address, info.PubKey.Address().String(), "Did not serve keys Address correctly")
+	assert.Equal(t, m[0].Address, addr, "Did not serve keys Address correctly")
 
 	// select key
 	req, _ = http.NewRequest("GET", "/keys/test", nil)
@@ -72,7 +72,7 @@ func TestKeys(t *testing.T) {
 	err = decoder.Decode(&m2)
 
 	assert.Equal(t, m2.Name, "test", "Did not serve keys name correctly")
-	assert.Equal(t, m2.Address, info.PubKey.Address().String(), "Did not serve keys Address correctly")
+	assert.Equal(t, m2.Address, addr, "Did not serve keys Address correctly")
 
 	// update key
 	var jsonStr = []byte(`{"old_password":"1234567890", "new_password":"12345678901"}`)
@@ -99,8 +99,6 @@ func TestKeys(t *testing.T) {
 
 	r.ServeHTTP(res, req)
 	assert.Equal(t, http.StatusOK, res.Code, res.Body.String())
-
-	db.Close()
 }
 
 func TestVersion(t *testing.T) {
@@ -266,11 +264,52 @@ func setupViper() func() {
 	}
 }
 
-func initKeybase(t *testing.T) (cryptoKeys.Keybase, *dbm.GoLevelDB, error) {
-	os.RemoveAll("./testKeybase")
-	db, err := dbm.NewGoLevelDB("keys", "./testKeybase")
-	require.Nil(t, err)
-	kb := client.GetKeyBase(db)
-	keys.SetKeyBase(kb)
-	return kb, db, nil
+func startServer(t *testing.T) {
+	defer setupViper()()
+	// init server
+	initCmd := server.InitCmd(mock.GenInitOptions, log.NewNopLogger())
+	err := initCmd.RunE(nil, nil)
+	require.NoError(t, err)
+
+	// start server
+	viper.Set("with-tendermint", true)
+	startCmd := server.StartCmd(mock.NewApp, log.NewNopLogger())
+	timeout := time.Duration(3) * time.Second
+
+	err = runOrTimeout(startCmd, timeout)
+	require.NoError(t, err)
+}
+
+// copied from server/start_test.go
+func runOrTimeout(cmd *cobra.Command, timeout time.Duration) error {
+	done := make(chan error)
+	go func(out chan<- error) {
+		// this should NOT exit
+		err := cmd.RunE(nil, nil)
+		if err != nil {
+			out <- err
+		}
+		out <- fmt.Errorf("start died for unknown reasons")
+	}(done)
+	timer := time.NewTimer(timeout)
+
+	select {
+	case err := <-done:
+		return err
+	case <-timer.C:
+		return nil
+	}
+}
+
+func createKey(t *testing.T, r http.Handler) string {
+	var jsonStr = []byte(`{"name":"test", "password":"1234567890"}`)
+	req, err := http.NewRequest("POST", "/keys", bytes.NewBuffer(jsonStr))
+	require.Nil(t, err)
+	res := httptest.NewRecorder()
+
+	r.ServeHTTP(res, req)
+	assert.Equal(t, http.StatusOK, res.Code, res.Body.String())
+
+	addr := res.Body.String()
+	return addr
 }
diff --git a/docs/sdk/lcd-rest-api.yaml b/docs/sdk/lcd-rest-api.yaml
index 08264d5646..b4ab401e53 100644
--- a/docs/sdk/lcd-rest-api.yaml
+++ b/docs/sdk/lcd-rest-api.yaml
@@ -62,7 +62,7 @@ paths:
       summary: Create a new account locally
       responses:
         200:
-          description: OK
+          description: Returns address of the account created
       requestBody:
         content:
           application/json: