The woes of an early bitcoin investor. Until recently, people who paid virtually nothing for the virtual currency and watched it soar had only one way to enjoy their new wealth — sell — and many were not ready.
Lenders on the fringe of the financial industry are pitching a solution: loans using a digital hoard as collateral.
While banks hang back, start-ups with names like Salt Lending Holdings Inc, Nebeus, CoinLoan and EthLend are diving into the breach. Some lend — or plan to lend — directly, while others help borrowers get financing from third parties. Terms can be onerous compared with traditional loans, but the market is potentially huge.
Bitcoin’s price hovered about US$17,000 much of this week, giving the cryptocurrency a total market value of almost US$300 billion. About 40 percent of that is held by something like 1,000 users. That is a lot of digital millionaires needing houses, yachts and US$590 shearling eye masks.
“I would be very interested in doing this with my own holdings, but I haven’t found a service to enable this yet,” said Roger Ver, widely known as “Bitcoin Jesus” for his proselytizing on behalf of the cryptocurrency, in which he is one of the largest holders.
People controlling about 10 percent of the digital currency would probably like to use it as collateral, said Aaron Brown, a former managing director at AQR Capital Management who invests in bitcoin and writes for Bloomberg Prophets.
“So I can see a lending industry in the tens of billions of dollars,” he said.
One problem is that bitcoin’s price swings violently, which can make it dangerous for lenders to hold. That means the terms can be steep.
Someone looking to tap US$100,000 in cash would probably need to put up US$200,000 of bitcoin as collateral, and pay 12 percent to 20 percent in interest a year, said David Lechner, the chief financial officer at Salt, which has arranged dozens of loans.
That is in line with interest rates for unsecured personal loans. The difference is that putting up bitcoin lets people borrow more.
The new loans should be of particular interest to miners, whose computers solve complex math problems to obtain new coins and help confirm transactions, Brown said.
They have to pay for electricity and equipment, but, like many bitcoin believers, they do not like to sell their cryptocurrency.
Bitcoin start-ups also need cash to pay employees.
London-based start-up Nebeus late last month began helping third-party lenders offer loans backed by bitcoin and ether, another cryptocurrency.
The firm arranged almost 100 such loans on the first day, its managing director Konstantin Zaripov said.
It has since done more than 1,000.
Salt offers loans and plans to eventually help banks do so too.
It is talking with financial institutions and aims to strike a deal with at least one of them “within weeks,” Lechner said.
Some companies also require a second form of collateral. Terms can include maintenance calls, requiring borrowers to post more bitcoin if the price drops.
That is similar to the margin that a dozen or so cryptocurrency exchanges already offer clients so they can ramp up their trading bets.
In a twist, some lenders are hoping to use blockchains — digital ledgers akin to those underpinning bitcoin — to facilitate lending. The idea is to stitch terms into a ledger to help automate the loan and collections.
If they take off, the model could challenge peer-to-peer lenders — such as LendingClub Corp, Prosper Marketplace Inc and Zopa Ltd — by offering debt investors more reliable repayment, Digital Asset Research senior analyst Lucas Nuzzi said.
“Although this has the potential of revolutionizing credit markets, we are still in the very early stages of development,” Nuzzi said. “No companies have been able to fully implement such a system.”
Banks are largely on the sidelines, reluctant to offer services that could leave them holding bitcoins. Some firms do not have a secure way to store cryptocurrency and there is no established model to account for it on a regulated balance sheet.
With assistance from Dakin Campbell
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) would not produce its most advanced technologies in the US next year, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. Kuo made the comment during an appearance at the legislature, hours after the chipmaker announced that it would invest an additional US$100 billion to expand its manufacturing operations in the US. Asked by Taiwan People’s Party Legislator-at-large Chang Chi-kai (張啟楷) if TSMC would allow its most advanced technologies, the yet-to-be-released 2-nanometer and 1.6-nanometer processes, to go to the US in the near term, Kuo denied it. TSMC recently opened its first US factory, which produces 4-nanometer
PROTECTION: The investigation, which takes aim at exporters such as Canada, Germany and Brazil, came days after Trump unveiled tariff hikes on steel and aluminum products US President Donald Trump on Saturday ordered a probe into potential tariffs on lumber imports — a move threatening to stoke trade tensions — while also pushing for a domestic supply boost. Trump signed an executive order instructing US Secretary of Commerce Howard Lutnick to begin an investigation “to determine the effects on the national security of imports of timber, lumber and their derivative products.” The study might result in new tariffs being imposed, which would pile on top of existing levies. The investigation takes aim at exporters like Canada, Germany and Brazil, with White House officials earlier accusing these economies of
Teleperformance SE, the largest call-center operator in the world, is rolling out an artificial intelligence (AI) system that softens English-speaking Indian workers’ accents in real time in a move the company claims would make them more understandable. The technology, called accent translation, coupled with background noise cancelation, is being deployed in call centers in India, where workers provide customer support to some of Teleperformance’s international clients. The company provides outsourced customer support and content moderation to global companies including Apple Inc, ByteDance Ltd’s (字節跳動) TikTok and Samsung Electronics Co Ltd. “When you have an Indian agent on the line, sometimes it’s hard
PROBE CONTINUES: Those accused falsely represented that the chips would not be transferred to a person other than the authorized end users, court papers said Singapore charged three men with fraud in a case local media have linked to the movement of Nvidia’s advanced chips from the city-state to Chinese artificial intelligence (AI) firm DeepSeek (深度求索). The US is investigating if DeepSeek, the Chinese company whose AI model’s performance rocked the tech world in January, has been using US chips that are not allowed to be shipped to China, Reuters reported earlier. The Singapore case is part of a broader police investigation of 22 individuals and companies suspected of false representation, amid concerns that organized AI chip smuggling to China has been tracked out of nations such
RSS