Cryptocurrency Backed Fiat Loans
Cryptocurrency backed fiat loans have exploded in popularity in 2018. An industry that hardly existed in 2017 is now arguably the largest crypto lending industry. And the reasoning for this, makes sense. Why sell your cryptocurrency, pay taxes, and miss out on potential future gains when you can just borrow against it?
The concept really flows into the “HODL” culture of cryptocurrency. The idea of “HODL” ,which has become a meme stemming from a drunk reddit post, is to hold onto your cryptocurrency long term through the ups and downs.
Historically this strategy has been very effective. As year over year cryptocurrency has been one of the best performing investments of the decade. However, it also had some very major corrections on upwards of 85% as the world works on price discovery for this futuristic new asset.
How it works
The idea is pretty simple. Deposit your cryptocurrency as collateral and take out a fiat loan with fairly competitive interest rates against it. If you don’t pay the collateral gets liquidated. If you do pay you get your cryptocurrency back. It’s simple and it works.
Criteria
As its impractical for us to test and review every service we have come up with some criteria for aiding in your decision which service to use. These criterias are:
- Age: The longer a company has been around in the crypto space the better and less likely its a scam.
- Country of Origin: Some countries are more friendly than others when it comes to crypto.
- Supporting Services: Helpful tools like credit/debit cards and built in exchanges can make borrowing money against crypto easier
- Popularity: The more well known and used a service is the more likely its legitimate.
- Loans funded: A sign of competent business and a solid customer base
Top Pick:
- NEXO:
Nexo was founded in 2007 as a tech company looking to disrupt online loans. They were successful in their pursuit and in 2016 took it a step further incorporating Bitcoin into their platform. Realizing this potential in 2017 Nexo introduced the world’s first instant crypto backed loan.
Nexo requires verification for the banking and credit card part of the platform so it has KYC. they have a set interest rate of “from 8%” a year which is fair in crypto terms but maybe a little high in the low interest fiat world. They have also launched the NEXO token which main purpose seems to be as a way to get 50% off your interest payment for future loans. The token brings some concern of regulation but they seem to have lots of experience and have the situation under control.
Overall:
Overall Nexo has done a great job and is an exciting service for the cryptocurrency space. They currently support 5 different currencies for crypto backed loans (BTC, ETH, XRP, NEXO, BNB) and combine a professional easy to navigate and use website with years worth of expertise in the fiat lending side of things. Their partnership with Bitgo means all cryptocurrency is stored in a very secure complaint matter and their credit card like system is a fantastic addition and is a valuable service.
Crypto Backed Loans Table
|
Company |
Base |
Available To |
Currently Funding Loans? |
Crypto Collateral Types |
Quoted APR Rates |
Other Services |
Founded |
|
|
NY, USA |
Anyone |
Yes |
 Bitcoin  Ethereum |
11-16% |
none |
2017 |
|
|
NY, USA |
Anyone |
Yes |
|
8-12% |
none |
2017 |
|
|
UK | Anyone | Not yet, Reserve a spot | |
0% ** Interest free |
Prepaid Card, BTC Wallet, |
2014, Feb |
|
|
EU |
Anyone |
Yes |
|
14.97% |
none |
2014 |
|
|
UK |
Anyone |
Yes |
|
14% |
none |
|
|
|
UK |
Europe Banking |
Yes |
|
20% |
Exchange, Debit Card, Vault |
2014 |
|
|
UK |
Europe Banking |
Yes |
|
8% |
Credit Card |
2007 |
|
|
US |
Anyone |
Yes |
|
5.99% |
none |
2017, Sep |
|
|
TX, USA |
US |
Yes |
|
12-18% |
none |
2017 |
|
|
Yes |
|
5% |
||||
|
|
EU | Anyone | Yes |  |
0-100% | none | 2017 |
Crypto backed loans focused on institutional investments. Minimum loan amount of 100k puts it out of reach of most people reading this article anyways.
NY based platform build specifically for offering crypto backed fiat loans. Venture capital backed by some big names, there will likely be a good service. However, the platform is headquartered out of NY so expect the highest amount of regulation and reporting in the US.
Celsius is a cryptocurrency mobile app for “Banking on the Blockchain”. The service offers crypto backed fiat loans similar to other services. However, they also have interest bearing accounts for various cryptocurrencies. Along with cryptocurrency loans and the ability to short coins with peers.
Coinloan takes crypto backed fiat loans a step further. Like competitors borrowers can deposit crypto and borrow against it. But Coinloan also lets fiat investors deposit and lend out fiat funds for interest which is a fun new twist.
Started as a Bitcoin wallet, way to purchase BTC via credit card, and a prepaid card provider. The crypto backed loans feature is planned and has not launched yet. The result should be a competitive natural fit for their existing platform and compete with Nexo.
While currently in Beta the platform looks to be a promising competitor in the space. They are planning on offering their service globally and leveraging off their acquisition of European P2P lending platform Savvy.
Kambo is a UK based service founded by Global Capital group which seems to be a conglomerate of financial related tools. They have offices around the globe and offer an initial 14% APR loan against BTC and ETH.
SALT is a US based company who is well known for its SALT token ICO in the heart of the 2017 crypto boom. Initially facing regulatory battles, they have slowly built the availability of their crypto back loan service to most US states and some other countries. Their SALT token is used for membership purposes and they currently offer loans backed in BTC, ETH, LTC, and DOGE.
Unchained Capital is a Texas based company that offers crypto backed loans in a very transparent way. They offer their secure service with open source smart contracts and currently offer their crypto backed loans backed by BTC and ETH.
Nebeus is a UK based cryptocurrency debit card company that is soon adding loans against cryptocurrency. They are looking to be a cryptocurrency bank and offer all related services such as exchange and vault services in addition to its crypto backed loans. Currently listing BTC and ETH as collateral types for loans with listed 20% APR on advertisements. They are currently fundraising, and list $2M of loans issued.
Wrap up
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