Loans of some form have been around for thousands of years – dating back to ancient civilizations when farmers borrowed seeds and used grain as repayment.
The introduction of fiat currencies changed the way economies were run at the time. In fact, one could argue that we are now experiencing such a seismic shift as cryptocurrencies become a larger and more influential part of the global financial ecosystem.
If done right, crypto lending has the potential to improve the playing field – and give consumers a kind of flexibility they might not otherwise be used to. The interest rates offered by the banks have been lukewarm to say the least for a number of years. In some countries, even the most generous savings accounts pay less than 1% interest – even if the funds are frozen for several years.
Given that inflation has risen sharply recently, in part due to money printing in response to the coronavirus pandemic, signing up for one of these accounts means a saver’s money would have less purchasing power across the board.
Crypto loans offer three strong advantages over the status quo. First, it’s possible to find more competitive deals that will ensure that capital actually grows – with interest sometimes paid weekly or monthly. Second, many platforms offer lenders a much-needed level of flexibility, which means they don’t have to lock their money on hold for long periods of time and can withdraw their money however they want. And third, it can act as a strong incentive when markets tend to behave erratically.
Before we even discussed the fact that crypto can be far more practical as collateral from a lender’s perspective than real estate – an asset that is quite illiquid and can be quite time consuming to sell.
Not only do lenders benefit
All of this, of course, sounds like good business to lenders – the people with capital left over. But it can also be beneficial for borrowers. In the current financial ecosystem, where a single flaw in an otherwise pristine credit history can deny a responsible consumer access to the best interest rates, crypto platforms can provide an invaluable lifeline.
Banks often have an opaque list of requirements when it comes to finding the people they want to lend to. And in a world in which more and more consumers are self-employed, otherwise creditworthy applicants can be excluded from the market because they do not have a classic nine-to-five job – regardless of whether they actually earn more money in their current arrangement.
The crypto world can help promote inclusivity here, but there are challenges. A number of lenders in this space are offshore and unregulated – which can make them less attractive to everyday consumers. This also limits the number of partnerships crypto platforms can enter into with fintech companies.
A new approach?
One platform that aims to shake up the world of lending is Baanx, a crypto-as-a-service fintech that aims to bridge the world of crypto and fiat. The company enables brands to offer interest-free forms of secured lending to their customers and communities, along with high savings rates for those who use their digital assets. All of this is achieved via APIs that can be quickly integrated into any DeFi, Exchange or Wallet app or website.
This form of interest-free and low-cost secured lending is offered to those who use BXX, the utility coin associated with Baanx. Loans can then be moved to crypto wallets or physical and virtual cards. Lending ratios of up to 50% are available for those using Bitcoin and Ether as collateral, and approval can be obtained with one click.
Baanx is on the list of temporarily registered crypto asset companies with the FCA and also uses a loan license. The project’s whitepaper states that it will “lend against any digital asset, including cryptos, stocks, bonds and the emerging NFT asset class.”
The amounts of money that can be offered through loans depend on the amounts of tokens that are deployed in its system.
Baanx figures suggest the platform has now sold more than 600,000 white label cards and accounts around the world – almost entirely through branded corporate customers, including the Tezos Crypto Life app, DeFi protocols, exchanges, and wallets. Providers. It is also planned to launch with a major wallet provider in the US in the fourth quarter of 2021.
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