US cryptocurrency trust bank Anchorage to provide ethereum collateral for US dollar loans
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June 4, 2021Anchorage Digital, a large American cryptocurrency, a custody company and trust bank, announced that it will provide corporate U.S. dollar loans backed by Ethereum (ETH). It is realized through cooperation with BankProv, a commercial bank listed on the NASDAQ. This was reported by Coinpost on the 4th.
BankProbe (formerly The Provident Bank) is the 10th oldest bank in the United States with more than 200 years of operation.
Companies that own Ethereum and need capital, such as cryptocurrency funds, can get a loan without selling Ethereum by using Anchorage’s service.
BankProbe CEO Dave Mansfield explained:
“We believe that the cryptocurrency market has access to and rights to traditional funding tools and should be provided the same as any other well-capitalized business.”
[Access to funds without selling Ethereum]
With this service, Anchorage will provide loans to users and BankProbe will provide insurance deposits. For users, it is said that being able to access liquidity in US dollars without incurring taxation due to the sale of cryptocurrency is also advantageous.
Diogo Monica, Co-Founder and CEO of Anchorage, said:
“I see demand from institutions that have a large amount of Ethereum, or institutions that need funds for various reasons. There are various examples, such as companies that need US dollars to operate their business, companies that want to facilitate transactions in US dollars, and companies that prefer to hold Ethereum for the long term and do not want to incur taxes by selling it.”
[High demand for Ethereum]
In addition, Monica points out that the Bitcoin (BTC) dominance (share) in the current cryptocurrency market capitalization is declining to about 42%, saying, “The demand for Ethereum is increasing.”
Institutional investors are showing interest in this loan in two aspects: a loan secured by Ethereum and a loan in US dollars backed by cryptocurrency, and the demand for it is growing much faster than the demand for a Bitcoin-backed loan.
Monica thought that it would not be strange if even non-fungible tokens (NFTs) could become collateral for loans in the future.
In addition, high price volatility of cryptocurrencies is a problem, especially for institutional investors, but Anchorage’s Ethereum collateral loan has a corresponding function.
According to Monica, Anchorage has a price monitoring system that tracks the value of the collateral, and when the price drops to a certain threshold, it informs the borrower that additional collateral is required, and automatically liquidates to protect the original. It is said that there is
[Case diagram by Fidelity, USA]
There are other financial institutions that offer loans secured by cryptocurrency.
In August 2020, it was revealed that the Russian commercial bank Expobank had offered personal loans backed by cryptocurrencies.
The cryptocurrency used as collateral was WAVES, and it was a businessman who got a loan from Russia. Although the specific loan amount was not disclosed, it is known that this is the first loan issued with cryptocurrency as collateral.
In addition, in March 21, Silvergate Bank of the United States announced a plan to partner with Fidelity Digital Assets (FDA), a cryptocurrency subsidiary of Fidelity, a conglomerate financial company, to provide a service of a Bitcoin (BTC) collateralized loan.
Silvergate Bank is known as the leading US “crypto friend” financial institution providing banking services to the cryptocurrency sector.
Under the partnership, institutional investors who have already deposited their bitcoins with the FDA will be able to get loans through Silvergate Bank’s SEN Leverage without moving their bitcoins. “Customers who want to maintain long positions can use loans more smoothly without changing their custody provider,” the bank explained in the announcement.
The custodian affiliated with Silvergate Bank is the second after Coinbase custody. By partnering with other custodians, we plan to expand the business of our Bitcoin collateralized loan service.
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Author/ Translator: Jamie Kim
Bio: Jamie Kim is a technology journalist. Raised in Hong Kong and always vocal at heart. She aims to share her expertise with the readers at blockreview.net. Kim is a Bitcoin maximalist who believes with unwavering conviction that Bitcoin is the only cryptocurrency – in fact, currency – worth caring about.
