Bitcoin Forum

FIRST BITCOIN-BACKED LOAN ISSUED IN CANADA

The first Bitcoin-backed loan has been issued to a Canadian company allowing cryptocurrency holders to liquify their assets without selling. Bitcoin Loan

Read more:
https://www.trackcoinmarket.com/crypto-news/37762/bitcoin-backed-loan-issued-canada

Is it possible that this will happen in other countries?

how does the process work and does not make it difficult for bitcoin owners?

and if ever, will there be tax every proces?

It's great that an organization already notices the potential value of bitcoins and how they can serve as a collateral in handing out loans. Though I'm not an ardent fan of loans and such, still I consider this as one step towards further acceptance on the said cryptocurrency. Those without any important assets that can be used as collateral but still have bitcoin on their arsenal can now apply loans and get cold hard cash faster with this type of loan. It will take time for other banks to follow suit as surely they would still need to assess the situation and the financial capabilities of the borrower/

That's pretty neat. To me it still looks more like an outlier than the beginning of a trend, but if accepting Bitcoin as a collateral for loans becomes more widespread we're looking at a large step towards further legitimization.



If ever... what? Providing cryptocurrency as collateral is not the same as selling and is unlikely to be a taxable event. It's even mentioned in the article:

This is a great way for the banks to adopt bitcoin.As a collateral,instead of accepting crypto deposits or loans.I'm not sure how the central bankers will react to such financial innovation.Bitcoiprice isn't considered stable enough to serve as a collateral,but this can be bypassed by using bigger collaterals,that cover 150 or 200% of the loan.

It's great as long as the price has a bias towards the upside, which can't always be guaranteed, especially if the bear market turns out to drag on for years.

If Ledn ends up shorting a small percentage of their BTC holdings (which is what payment gateways do as well), they could potentially work around the risk of falling prices, but I can't read anywhere if that's something they will be doing. It would make sense if they did, because regardless of how much potential they believe hides within Bitcoin, there are limits for everyone runnig a business.

Positive side is that if large enough parties take out a loan with their coins as collateral instead of dumping them on the spot market, we may face less selling pressure.  :)

This is a great development and should even be applied in other parts of the of the world. There is no point for people forced to liquidate their crypto holdings simply because they needed some cash and they are not interested in selling at the moment. At the moment, I believe the amount interest would be high which is understandable due to the inherent risk is what is being used as a collateral but eventually when the volatility embedded in crypto is minimised, this would become something so common in every part of the world.

I wonder what the actual terms on the loan are though. I feel like it's going to have either a huge interest rate or something else that would make it a terrible deal. Banks aren't going to offer a decent rate given the volatility of bitcoin.

Risk-management appears to be the biggest challenge here. Apart from hedging via shorts as mentioned by 1Referee, I assume that for the most part they'll either charge rather high interest rates as mentioned by clrpod (think subprime loans and junk bonds) or require a rather high amount of collateral as mentioned by davis196.

I think two aspects are quite interesting in this regard:

1) If, as a lender, you only work with crypto as collateral you're highly exposed. Banks can at least spread their risk by making use of a wide selection of asset classes with little market correlation and of varying volatility. Obviously didn't work out so well during the housing crisis but that was mostly due to banks being overexposed to a single asset class (ie. real estate). Would be interesting to know how Ledn plans to manage its exposure to crypto (if at all, maybe they are simply all-in).

2) Assuming that at one point using crypto as collateral becomes widespread, meaning not only Bitcoin but also alt coins, we're likely to see some sort of rating system for cryptos, similar to the credit ratings for businesses and governments. For better or worse.

Yup. Not one single detail about the ins and outs of this. Before declaring this as the next step we need to know whether it's sustainable or affordable. I just do not see how it's going to work for the masses. No doubt it's something many places have looked into. Most of them will have discarded it.

While bitcoin loaning platforms sound like other online shared moneylenders, there are key contrasts:

- Bitcoin platforms decide your financial soundness utilizing criteria that contrasts from peer-to-peer platforms that loan in dollars.
- Bitcoin platforms will focus on your online presence, and they frequently couldn't care less about your record of loan repayment or the amount you owe somewhere else.
- Interestingly, distributed plaforms that utilize fiat cash, similar to Canadian dollars, couldn't care less about your identity yet put a ton of weight on your FICO rating and different parts of your monetary history.
- Bitcoin loans are much less regulated than dollar loans. There's almost no underwriting contrasted with dollar peer lenders.

There's likewise at times no plan of action for banks to get compensated if the borrower lives in another nation and defaults. Bitcoin loans tend to default at a considerably higher rate, making them less secure from the investment end.

As good as it sounds, the sustainability of the investment or project is very keen and need to be properly understood before getting on board.

Aside, it confirms that the global world is watching and getting more confident in Bitcoin and the blockchain technology.

Maybe I misread your post, but it seems like your talking about loans being made out in Bitcoin, rather than fiat ;)

The company mentioned in OP gives loans out in fiat currency, while using Bitcoin as collateral. That's something vastly different.

Sounds too good to be true actually. I'm not even sure how that works right now if you cash out Bitcoin to USDC (Coinbase's stablecoin) for example. Common sense tells me that the same rules apply when you cash out to fiat.

If it is supposed to be a proxy to fiat, which it is, it would make sense that you are taxed similarly. If it isn't yet, I'm sure governments will do everything they can to catch up on stablecoins to get rid of that legal loophole.

I think this is good news. If bitcoin can be loaned, it means that people trust in its long-term value. It's nice that people can make sure they loan btc safely, scam-free and Canada. Let's hope more countries will follow. I can see many platforms offering bitcoin loans online, but I believe that this company is the only one that's making everything 100% legit.
Yeah, while money per se is not taxed, operation with income-related things are. I am pretty sure that the company is not loaning money for non-commercial purposes, so some sort of taxation is probably applicable.

this is a good development, bitcoin has entered every platform, and can make transactions easier.

the growth of bitcoin in Canada is very good, the geographical conditions and public enthusiasm there for bitcoin is very large.

In 2017, Canada banks conducted a survey, that 60% of Canada society uses bitcoin for investment.

60% seems very high ~~lots of people still frown at bitcoin --they probably secretly have holdings...

lots and lots of storage businesses and farms are up here though for low power costs and frigid air to cool their units 8)
~secretly widely accepted lol

What pathetic bollocks.

Canadian banks have basically done everything in their power to stop crypto trading which makes Localbitcoins stats even more relevant than elsewhere.

So hey presto here is the weekly activity of the 22 million Canadian Bitcoin owners -  https://coin.dance/volume/localbitcoins/CAD

$693,000.

Great stuff.

You can almost guarantee that will be the case, bitcoin is terrible in terms of collateral. At least for now. You can barely get a good interest rate using a house as collateral and they've been proven over many decades to have an ever increasing price so I can't see any bank offering decent interest on a bitcoin backed loan.

very good and interesting development in the financial lending field! I hope more and more financial firm jumps into this trend (Bitcoin Backed Loans) and people will appreciate a lot.

that's actually great! nice way of handling with Bitcoin. Opens a new way for many players.
I hope it takes not much longer till we see it in Europe.

Additionally another big news about EthLend for US: https://blog.ethlend.io/ethlend-open-for-us-borrowers-8d66a5f5bfcd

There is a project that Roger VER advises. His name is MoneyToken. It has a similar function. BTC, ETH, USDT and a few more cryptocurrencies began to be loan money. Many projects like this bank and project can be realized soon.

Wow, great news...huge....

https://www.ledn.io/

https://i.imgur.com/itr1bMg.png

Isn't it great?
For a 10 000 CAD you'll be needing just a collateral of 3.3 BTC or roughly 300% of the sum you try to get.



They say 1-1.5% monthly, and T&C may apply so...we can safely assume something around 2-3%, and that is monthly:P

great . People are holding the bitcoin and they can use it to borrow money. This is opening up a new development trend for bitcoin and I believe it will soon expand and grow in many countries. But what I'm curious about here is what interest rates will be. Can you share more knowledge?

Oh boi, so both the collateral are incredibly high and the interest rate is hilarously steep. Well, that's one way to manage your risk. I guess they also break your legs if you're late with your payments? :p

oh this is great, I think we should appreciate it. and this is the beginning of good news this month. although I have to check the truth of this news.

Very good path and bitcoin is always makinf difference. Its very profecient way for holders and am sure with time some more countries will incoporate this  brilliant idea.

It is good news for crypto users. and canadian people.

I don't see any meaning in issuing loan. Sometimes these permissions are given to rip Civilian money.In India riches ripped Government Banks Billions of dollars and ran away to Other Countries and to bring them back again Govt has to spend money and get Nothing.

Well, that tells me that at least they're being realists about this. I'd expect those figures from somewhere that knew what the score was and how potentially ruinous it could be for everyone involved.

I think it will revolutionize the lending business if all the countries start giving out loans keeping crypto as collateral. It will be a good thing for the new potential projects who have raised good amount of BTC or ETH and dont wanna sell them till the release of their platform.

I still wonder that the rules for these loans. If this loan is paid based on the amount of Bitcoin you borrow, the downside market will create opportunities for you with loans to pay. But if the market goes up this is scary because the loan will increase many times.

Wow, thanks for digging in to that for us. It really is terrible then, it makes no sense for anyone to do this. Just sell to fiat and take out a loan in fiat where you'll get much better terms. I can't think of any person who would actually benefit from this. Maybe only someone who's extremely cash strapped and over invested in to bitcoin and doesn't want to sell that bitcoin? But it's not a sound financial decision.

this is a good and great step. it only goes to show bitcoin is covering more ground and will continuously be accepted and adopted by all with time. I hope other countries do something similar too. nice one from canada

This a great news for the cryptocurrency community and bitcoin users. It goes to show the world is gradually accepting the use of bitcoin and making it convenient for their citizens from different parts of the world. This is just the beginning, we will see more countries do same in time coming.

Maybe for me it still looks like an outlier from the start of the trend, but if accepting Bitcoin as collateral for loans becomes wider, I see a big step towards the legitimacy going forward.

It's really nothing new to the bitcoin community. We've been doing this for years now on the lending subforum where bitcoin or other cryptocurrencies can be used as collateral for a fixed fiat currency loan.

Loans offered that way is exactly what this bank is doing, here. Obviously, the scale is going to be much bigger and it might even be targeting big time traders or institutions, but the principle is the same.

They mention tax advantages in the article, which is a huge plus instead of cashing out and incurring a capital gain. There may well be more institutions offering these types of loans in the future given the continued recognition of bitcoin as a liquid form of currency.

This is such a great news. What this means is that very soon, we shall no longer need the banks for loans anymore. Bitcoin and cryptocurrency gradually taking over.

I believe with you and your argument about bitcoin never dies

this first bitcoin backed loan in canada is an interesting financing option.  There may be strong interest from retail investors in Asia