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Bitcoin as collateral for loans

Bitcoin as collateral for loans

There are two types of people: those who take loans to buy Bitcoin, and those who take cryptocurrencies as collateral. Several projects from Europe, Asia and the US offer loan programs providing loans with digital currency as security. However, the conditions for getting such a loan are not very beneficial.

According to Bloomberg, at least four startups – Salt Lending (USA), Nebeus (United Kingdom), CoinLoan (Estonia) and EthLend (China) – intend to accept Bitcoin as collateral for loans. But due to BTC’s high volatility, they are forced to be cautious, so they are proposing not the most favorable conditions for the loan recipient.

For example, Salt is ready to provide a $100,000 loan with the amount of Bitcoins equivalent to $200,000 of collateral and an annual interest rate of 12-20%. Some companies require that in the event of a Bitcoin flash crash, the user has to add more cryptocurrency.

The British project Nebeus does not give out loans it helps other lenders spread their services to crypto investors. On the first day of the launch, the company helped with almost 100 loans and by the end of November, this number exceeded 1,000.

The said Salt also intends to work with banks as an intermediary between Bitcoin owners and credit agencies. But banks are cautiously responding to digital assets: first, they don’t know how to display them in the financial statement, and secondly, not all institutions can securely store cryptocurrency. And on top of that, not all states allow banks to carry out transactions with Bit- and altcoins.

 

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