Crypto Loan is a lending system where you can borrow in fiat currency (e.g. USD, EUR) or another cryptocurrency by putting your cryptocurrency (e.g. Bitcoin, Ethereum) as collateral.
How do crypto loans work?
- Collateral: You deposit a certain amount of cryptocurrency with a lending platform.
- Borrowing: You are given a loan based on a certain portion of that crypto (usually 50%–70% Loan-to-Value or LTV).
- Interest and time: The loan has to be repaid within a certain period of time, plus interest.
- Reimbursement and collateral: When the advance is reimbursed, your cryptocurrency is returned.
Example:
Let’s say you deposited 1 BTC (worth $60,000). Now you can borrow up to $30,000. If you repay the loan on time, you will get your BTC back.
Popular crypto lending platforms
Crypto Loan Benefits
- No credit score required to get a loan
- Cash available without selling crypto
- Fast transactions
Crypto lending risks
- Collateral may be liquidated (sold) if market price falls
- High interest rates
- Dependency on platform security and stability
Which countries are crypto loans available for
Crypto loans are currently available in many countries, but it depends on each country’s laws, policies, and stance on crypto. Below are some country-by-country figures:
Countries where crypto loans are generally available and legal:
United States
- Platforms like BlockFi, Nexo, Celsius etc. were active here, although some legal hurdles came up.
- DeFi platforms like Aave, Compound can also be used here.
Canada
- Crypto loans are available in some provinces, albeit unregulated.
United Kingdom
- DeFi platforms can be used despite some restrictions from the FCA (Financial Conduct Authority).
Germany
- Switzerland, Netherlands, etc. European countries Many countries have regulated crypto lending opportunities.
Australia
- Some authorized platforms for crypto lending are operating.
Singapore
- A crypto-friendly country, where Nexo and DeFi platforms operate.
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Cryptocurrency ETFs
In early 2024, more of these piggy banks began allowing people to invest directly in Bitcoin. After years of regulation and negotiations, the government’s main financial watchdog, called the SEC, finally approved the first of these Bitcoin piggy banks in 2024.
That’s because a court ruled that it should be allowed. Now, we’ll learn more about how these piggy banks work, what concerns the government still has, what good things they can bring, and what that means for those looking to invest.
These piggy banks make it easy for regular people to invest in Bitcoin without having to buy and store the coins themselves. However, they usually cost more than other piggy banks, and since the actual market where coins are bought and sold isn’t always closely monitored by the government, there are concerns about fraud or unfair practices.
Think of a cryptocurrency exchange-traded fund, or ETF, as a big piggy bank that holds a bunch of different digital currencies, like Bitcoin. Instead of buying the coins themselves, people can buy a piece of this piggy bank on the regular stock market, just like buying shares in a company.
That way, they can try to make money when the value of the currency rises without having to deal with the complexities of owning the digital coin directly.
Related topics: Home Loan IDLC
What Is a Blockchain?
Since Bitcoin was created in 2009, many other things have been created using blockchain, such as new forms of money, digital collectibles called NFTs, and smart computer programs that perform automated tasks.
People most commonly use blockchains for digital money called cryptocurrencies like Bitcoin. But they can also be used for many other things, such as keeping important information secure.
Because records cannot be changed, there is no need to trust just one person or one bank to keep everything honest. Instead, everyone can see and agree on what is written.
