Fidelity to Offer Bitcoin-Backed Cash Loans via BlockFi
The two digital currency firms are partnering to offer a new institutional service.
- Fidelity Digital plans to offer Bitcoin-backed cash loans via BlockFi.
- Loans are backed at a rate of 60% due to Bitcoin's price volatility.
- The service is mainly aimed at institutions, but there are several alternative lending services for retail users.
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Fidelity Digital Assets has announced that its institutional customers will be able to use Bitcoin as collateral against cash loans.
Though Fidelity offers various services including crypto custody, this is the first time its clients will be able to use Bitcoin as collateral.
That means that investors will be able to deposit Bitcoin as backing whenever they obtain a cash loan. Due to Bitcoin’s price volatility, loans will be backed at a loan-to-value rate of 60%.
Fidelity is offering the new option through a partnership with BlockFi. This means that Fidelity customers will need a BlockFi account in order to take advantage of the service.
Service Could Gain Popularity
Fidelity believes that its decision to offer crypto-backed loans could become part of a larger trend.
Tom Jessop, president of Fidelity Digital Assets, has stated that holding Bitcoin as collateral is a “foundational capability.” He added that the practice will likely become “a fairly important part of the ecosystem” as markets grow. His statement implies other companies could begin to offer Bitcoin-backed loans soon.
This service is mainly targeted at institutional investors. However, BlockFi also offers lending services aimed at consumers, alongside other companies such as Nexo and Celsius. These are all good options for retail investors who want a Bitcoin-backed loan.
At the time of writing this author held Bitcoin and Ethereum.