The loan has been around in some form for thousands of years, dating back to ancient civilizations where farmers borrowed seeds and used crops as payment.
The advent of fiat currencies transformed the way economies were run back then. In fact, it could be argued that we are seeing such a seismic shift now that cryptocurrencies become a larger and more influential part of the global financial ecosystem.
When done right, crypto loans have the potential to level the playing field, giving consumers a kind of flexibility they might not otherwise be used to. For several years now, the rates offered by banks have been tepid to say the least. In some countries, even the most generous savings accounts will only pay less than 1% interest, even if the funds are blocked for several years.
Since inflation has risen dramatically recently, in part due to money printing done in response to the coronavirus pandemic, signing up for one of these accounts means that a saver’s money would actually have less purchasing power in the future.
Crypto loans offer three powerful advantages compared to the status quo. First, it is possible to find more competitive deals that ensure that the principal actually grows, with interest that is sometimes paid weekly or monthly. Second, many platforms offer a much-needed degree of flexibility for lenders, which means they won’t be forced to lock your money for long periods of time and can withdraw their funds at will. And third, it can act as a powerful incentive when markets are behaving quite erratically.
That’s even before we’ve discussed the fact that cryptocurrencies as collateral can be much more practical from a lender’s point of view than real estate, an asset that is quite illiquid and can take quite a while to sell.
Not only lenders benefit
Of course, this all sounds like a good deal to lenders – people who have capital to spare. But it can also be beneficial to borrowers. In today’s financial ecosystem, where a single blemish on a flawless credit history can deny a responsible consumer access to the best interest rates, crypto platforms can offer an invaluable lifeline.
Banks often have an opaque list of requirements when it comes to finding the people they are willing to extend credit to. And, in a world where increasing numbers of consumers are self-employed, creditworthy applicants may end up being shut out of the market simply because they don’t have a traditional nine-to-five job, regardless of whether they actually make more money in their current arrangement. .
The crypto world can help foster inclusion here, but there are challenges. Several lenders in this space are overseas and unregulated, which can make them less attractive to everyday consumers. This also restricts the number of partnerships that crypto platforms can establish with fintech companies.
A new approach?
A platform that aims to revolutionize the world of loans is workx, a crypto-as-a-service fintech that aims to bridge the worlds of crypto and fiat. The company enables brands to offer interest-free forms of guaranteed loans to their clients and communities, along with high savings rates for those who gamble on their digital assets. All of this is accomplished through APIs that can be quickly integrated into any DeFi app or website, exchange, or wallet.
This form of low-cost, interest-free secured loan is provided to those who bet on BXX, the utility currency associated with Baanx. Subsequently, the loans can be transferred to cryptographic wallets or physical and virtual cards. For those using Bitcoin and Ether as collateral, loan-to-value ratios of up to 50% are available, and approval can be achieved with a single click.
Baanx is on the list of crypto-asset businesses temporarily registered with the FCA and also uses a lending license. The project whitepaper states that it will “make loans against any digital asset, including crypto, stocks, bonds, and the emerging NFT asset class.”
The volumes of money that can be offered through loans will depend on the volumes of tokens that are staked within your system.
Figures provided by Baanx suggest that the platform has now sold more than 600,000 white-label cards and accounts worldwide, almost exclusively through branded corporate clients, including the Tezos Crypto Life app, DeFi protocols, exchanges and providers of wallets. It also plans to launch with a major wallet provider in the US in Q4 2021.
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