Cryptocurrency exchange/wallet provider, Coinbase, has announced that it is expanding into the lending business. People will be able to borrow fiat money from the company with their cryptocurrency as the backing and collateral required.
According to the crypto exchange company, of the 17 currencies it supports, only Bitcoin can be used as backing to obtain a loan. Bitcoin owners will be able to get loans as much as 30% of their bitcoin holdings with Coinbase.
Suggested read: Bitcoin Price Crosses $10,000 as Analysts and Traders Predict New Heights for the Cryptocurrency
The maximum credit that can be obtained by a single user is $20,000 and the interest rate is 8% for terms that are a year or less. The lending service is only available in 17 states in the United States but Coinbase says it is working to obtain licenses to expand into other states and countries.
“Customers may use bitcoin-backed loans in different ways depending on their financial needs. This includes for large expenditures like home or car repairs, financing major occasions like a wedding, or helping to manage higher-interest personal loans or credit card debt,” Max Branzburg, head of product at Coinbase said.
Bitcoin as collateral
When a customer uses a certain percentage of his bitcoin as collateral for a fiat loan, Coinbase holds the crypto and does not reinvest it somewhere else. This makes it possible for the exchange platform to keep its users bitcoin with it and prevent it from being moved elsewhere.
Previously, Bitcoin owners had the option of trading their crypto in exchange for fiat currency. This means, however, that the ownership of the bitcoin gets transferred permanently. Using the bitcoin as collateral only removes the need for filling out loan application forms and going through a credit check.
According to the company, loans will be made available to those who request it within 2 to 3 days.
The lending service is currently not available to Nigerians. This means that wallet owners from Nigeria can not buy or sell crypto using the platform. Coinbase users in Nigeria can only store, send or receive cryptocurrencies with their wallets.
Get the best of Africa’s daily tech to your inbox – first thing every morning.
Join the community now!