Sygnum's Chief Investment Officer Fabian Dori stated that banks offering cryptocurrency-backed loans are more inclined to choose on-chain assets as collateral rather than exchange-traded funds (ETFs), and using on-chain collateral can also benefit borrowers.
Dori pointed out that on-chain assets have higher liquidity, allowing lending institutions to execute margin calls for cryptocurrency-backed loans on demand, and providing borrowers with a higher loan-to-value (LTV) ratio due to the ability to liquidate collateral in real-time. Dori told Cointelegraph:
In the cryptocurrency space, the loan-to-value (LTV) ratio refers to the proportion between the total loan amount and the collateral backing that loan, which can include Bitcoin (BTC), Ethereum (ETH), or other tokens recognized by the lending institution.
The higher the loan-to-value (LTV) ratio, the more credit a borrower can obtain with the same amount of cryptocurrency collateral. Conversely, the lower the loan-to-value (LTV) ratio, the less loan amount is available.
Dori mentioned that cryptocurrency-backed loans are still in the early stages, but he is confident that this sector will continue to develop as cryptocurrencies gain wider adoption.
As cryptocurrency lending companies go public on U.S. exchanges and traditional financial (TradFi) institutions gradually accept cryptocurrencies as loan collateral, financial institutions are steadily advancing cryptocurrency-secured loans.
Cryptocurrency lending company Figure Technology went public on the Nasdaq exchange on Thursday.
According to data from Yahoo Finance, the company's stock price rose over 24% on its first day of trading, and its current market capitalization exceeds $6.8 billion.
Financial services company JPMorgan is also considering offering cryptocurrency-backed loans to its clients. If the plan proceeds smoothly, the related business is expected to launch in 2026.
Related: London Stock Exchange Launches Private Fund Blockchain Platform
Original: “Crypto Bank Executive Says On-Chain Collateral Could Bring Better Loan Terms”
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