Secured loans in the digital lending space are witnessing a lot of innovations. But thinking of cryptocurrencies as collateral forms for these loans is still a big question, one full of regulatory and practical concerns.
If there is anything that has undergone a change, thanks to digital players in the BFSI space in India, it is – everything. Just pick lending and you can see how big data, social media weight, machine learning, etc. have made KYC (Know Your Customer) and credit-checks different. Add to that the use of APIs (Application Program Interfaces) and virtual elements for fast disbursement, and one can see why speed and ease are making digital loans stand apart.
So why not use cryptocurrency instead of gold or property to cushion a secured loan? Truly ‘digitize’ a loan? News.Bitcoin.com surveyed players in the industry, and there responses can be categorized as skeptical.
Abhi Upadhyay, a professional in the mobile lending space, dismisses the hope. “Traditional financial institutions like banks are never going to come close to accept cryptocurrency as security.”
But this ‘traditional’ legacy is exactly where and why challengers have started to win. Digital lenders have compellingly questioned deep-rooted processes and red tape in the lending industry in India by experimenting a lot, such as with the use of social media instead of old-school documentation for KYC and credibility checks. So why not bitcoin?
Regulation, Regulation, Regulation
Manav Jeet, Founder and CEO of Rubique, a prominent fintech player in the digital space, says the use of cryptocurrency as a collateral in the case of secured loans is a long shot. The biggest difference is the amount of regulation India posits in comparison to other regions. “We are the best regulated markets, and even in terms of awareness only a tiny portion of Indian population is using cryptocurrency. It will take a lot of time for us to get to the stage where we can imagine this form being used in secured loans,” Manav Jeet insisted.
For Piyush Kabra, VP, Finance at Lendingkart, warns the practical problems around encashing bitcoins and registration, again thanks to regulatory reasons, would be factorsas to why cryptocurrency will not work against a loan – not yet, at least.
The use of cryptocurrency in secured loans is a possibility if you ask Saurabh Shankar, head of marketing at Paysense, another digital lending disruptor in India, with data science behind its intent of serving mall-ticket loan segments as well. But he explains how collateral works. “It is an additional security measure for us when we lend to a customer. Any other form of collateral can be used as security for sure, so why not bitcoin? But the current regulatory environment is not exactly an incentive to consider such options. This may also need additional work. Crypto-to-crypto lending may not be too tricky but crypto-to-fiat would be a whole new space to reckon.”
Crypto and Loans – Not Mixing Yet
India is a changing market, but one that is still under-served when it comes to instant, flexible, and small loans for the middle class. Estimates show how digitized customer journeys chop the cost of processing to about 33% of the original cost. Plus, servicing costs is almost 1/10th that of physical channels when we look at digital channels. That’s not impossible to achieve when a player banks on technology to break the loan chain and to disaggregate lumps of delays that weigh down a usual lending process. Using behavioral analytics, cash flows, social media signals, and peer reports instead of legacy underwriting processes or income-tax returns – this is what many smart digital lenders started doing early on.
We are staring at a global fintech software and services sector of $45 billion by 2020 (from what NASSCOM reckons). Interestingly, India has exhibited the second highest fintech adoption rate (59% while the global average is 33%) as per the EY Fintech adoption index.
Globally, players like Biterest, Coinloan and Abic have started offering such loans that are secured against bitcoin. There we can see advantages like variety, speed, automation and no limits. It matters when there is no need of liquidation of an asset to get money out of it (the reason people use fixed deposits in secured loans). Then, there is the side of significant appreciation of value over time (which can be higher than loan interest). Also, concerns around forked cryptocurrencies have been addressed by many such players. After all, fungibility, preservation potential, and liquidity are true tests when it comes to how people think of money.
Yet, talk of cryptocurrency’s use in the BFSI space is full of hesitation and confusion, even for disruptors. Responses from other players like Innoviti and Capital Float could not be elicited. But as Saurabh pins it, conceptually the idea is not bad but the practical side here revolves around regulations and actual ease.
What do you think about the idea of bitcoins for secured loans? Let us know in the comment section below.
Images courtesy of Shutterstock.
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Chris Kline, co-founder and COO at Bitcoin IRA, identifies the signs that lead him to predict Bitcoin price will reach USD $40,000 in the next few months.
Kline: Bitcoin Price Might Surpass USD $40,000 by the End of 2018
Bitcoin’s (BTC) 00 sustained steady rise towards the USD $7,000 price mark is causing investors to pore over data trying to identify indicators that can confirm whether the bearish trend is now reversing course.
In a Forbes article, Chris Kline identifies these Bitcoin bullish signs and predicts that “the price may well surpass $40,000 by the end of 2018 and could continue to climb as we enter 2019.”
Kline’s predictions are in line with those of billionaire investor Marc Lasry, who also forecasts that the Bitcoin price will reach USD $40,000 in a few years as the cryptocurrency continues to show signs of becoming more mainstream and more accessible to trade.
Kline’s optimism is based on the belief that the regulatory uncertainty affecting the crypto market is being resolved, and that the SEC will approve a Bitcoin Exchange Traded Fund (ETF) soon.
Kline: Massive Increase in Institutional Adoption
Once the SEC approves Bitcoin ETFs, the pool of cryptocurrency investors will swell, releasing big money into the crypto market. According to Kline,
If the application is accepted, then I believe bitcoin will become far more accessible to a wider range of investors who wish to invest in a crypto fund rather than directly into crypto itself.
To illustrate that Wall Street and the crypto space have already begun to “intertwine,” Kline refers to the fact that Goldman Sachs reportedly plans to launch Bitcoin trading operations. And he forecasts that the rate of Bitcoin adoption among financial institutions will continue,
I believe that as more financial institutions build out crypto products and with the likely passage of bitcoin ETFs, more investors at both the individual and institutional level will get involved with bitcoin, which will reflect positively in the price.
On the other hand, several factors are buoying the sentiment that Bitcoin will become increasingly part of our ordinary life.
For example, in July 2018 the U.S. Patent and Trademark Office granted MasterCard a patent for a method that speeds up cryptocurrency transactions. The granting of this patent has invigorated crypto investors because, as Tom Lee, co-founder of Fundstrat Global Advisor, put it “It’s really validating the idea that digital money, or blockchain-based money, is a valid form of transaction.”
With this in mind, Kline says that if the new MasterCard product reaches the market,
I predict cryptocurrency will become a much more ingrained part of our daily lives, as it will be a viable option at many of the places where we conduct our day-to-day transactions.
Kline also argues that in addition to the surge in Bitcoin’s price, momentum is also building from the blockchain perspective. To substantiate this argument, he points out that the number of daily transactions surpasses at least 230,000 on-chain transactions, “the highest since the beginning of the year.”
Do you think the approval of Bitcoin ETFs will increase the rate of adoption and trigger the release of big money into the crypto market? Let us know in the comments below.
Images courtesy of Bitcoinist archives, BitcoinIra, Shutterstock.
This weekend a new organization was announced at Baltic Honey Badger bitcoin conference called the ‘B Foundation.’ At the event, Satoshi Labs co-founder Alena Vranova divulged the information of a new foundation that will have a mix of “charitable and commercial” efforts.
The B Foundation: A Charitable and Commercial Effort
This weekend cryptocurrency proponents were surprised to hear about a new association created in order to bolster bitcoin core (BTC) and lightning network (LN) adoption. The astonishment is due to the fact that many cryptocurrency enthusiasts believe foundations mix like oil and water within the ecosystem alongside the controversies tied to the original Bitcoin Foundation. Despite public opinion concerning foundations and bitcoin, a group of self-professed ‘crypto-thought leaders’ has formed a union called the ‘B Foundation.’ According to the event slides, the B Foundation members will include Jameson Lopp, Elizabeth Stark, Adam Back, Pavol Rusnak, Alena Vranova, Whale Panda, Alex Petrov, Francis Pouliot, and Giacomo Zucco.
According to the announcement transcript, the main focus of the foundation will be dedicated to BTC and LN development. The foundation will solicit donations and also be both “charitable and commercial” in order to “match donors and projects.” According to the B Foundation’s Alena Vranova, the group’s governance will be base on a council of board members.
“The B Foundation will be based in Liechtenstein because of the bitcoin support savvy government — The foundation will be mixed charitable and commercial,” explains Vranova’s transcript. “The governance will be based on a council (for legal), executive team (director, executive assistant, etc), and the board will be non-paid.”
The transcript continues:
I have to say that centralized efforts are much more effective — If you have an Ethereum Foundation with a marketing department and promotions and creates beautiful sleek-looking material and produces materials, it’s much more effective in the short-term.
Ex-Bitcoin Foundation Member: ‘It’s Appalling to See Maximalists Defending a New Foundation’
Some people liked the idea of the B Foundation like the former Bitcoin Foundation director Bruce Fenton. “Congrats to The B Foundation, a new non-profit org — Some great people with solid track records in Bitcoin,” Fenton explains on Twitter. Although, across forums and social media, a few cryptocurrency community members seemed skeptical about the idea of a foundation and especially one with people who are focused on extreme BTC maximalism.
The only way is having competing projects for separate areas, like Coincenter. Giving one organization all those tasks = terrible idea.
Openbazaar’s Brian Hoffman: ‘Divisiveness Dressed up as Something Every Supporter of Bitcoin Should Support’
Openbazaar’s CEO Brian Hoffman detailed on Twitter that he is supportive of efforts to bolster cryptocurrency adoption, but believes an organization aimed at protecting the protocol is a bit contradictory.
“I’m supportive of efforts to educate and promote the use of Bitcoin or related tech, but the idea of having some kind of canonical organization that positions itself as the protector of the protocol is antithetical to the nature of Bitcoin itself — We the people protect Bitcoin,” Hoffman states.
When another bitcoin supporter told Hoffman he sees no threat with the new B Foundation, the Openbazaar founder responds by saying:
I never said it was a threat — It’s an attempt to sow more divisiveness dressed up as something every supporter of Bitcoin should support.
Of course, the cryptocurrency community will just have to wait and see to find out what this foundation plans to do with donations. The organization has already been soliciting donations and gathered $850 USD worth of BTC on September 23. According to the B Foundation Twitter page, there will be more announcements concerning this group’s actions in the near future.
What do you think about the idea of another bitcoin-based foundation? Do you like the idea of this new B Foundation or do you feel it adds more divisiveness? Let us know what you think about this subject in the comment section below.
Images via Shutterstock, the B Foundation Twitter account, Twitter, and the theb.foundation website.
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Gemini, a New York-based cryptocurrency exchange owned by the Winklevoss Twins is eyeing a move to the UK.
Winklevoss Twins Look to Set Up Shop in The UK
According to the Financial Times, inside sources revealed that Gemini is serious about a foray into the UK market. Furthermore, reports indicate that the platform has gone ahead to hire consultants charged with working out modalities for such an expansion project.
Commenting on the proposed plans, the platform said:
Gemini continues to explore potential jurisdictions around the globe to provide a best-in-class digital asset exchange and custodian which will enable growth and infrastructure to the entire digital asset community. Although we have no immediate plans, we will always evaluate opportunities that allow the global economy to buy, sell and store digital assets in a regulated, secure, and compliant manner.
For Gemini, a move to the UK would also involve some consideration of regulatory compliance. In recent time, the narrative within the UK has been one of consolidating the country’s cryptocurrency monitoring framework.
Last week, Bitcoinist reported on the call by British MPs to regulate the “wild west” cryptocurrency industry. The UK Financial Conduct Authority (FCA) does not have direct oversight responsibility for the industry. However, the body provides e-money licenses for cryptocurrency firms operating in the country.
Gemini has in the past, shown a willingness to follow best practices in an industry much-maligned for operating in the margins. In April, the platform started utilizing Nasdaq’s SMARTS trade monitoring technology to combat market manipulation.
Gemini’s UK move puts the company in direct competition with Coinbase and Bithumb, two other cryptocurrency exchange giants. Coinbase, the largest virtual currency exchange platform in the US, has already made significant inroads in the UK market, having recently launched GBP/crypto trading pairs.
Coinbase also has an e-money license from the FSA, as well as crucial banking partnerships with Barclays. For Bithumb, the South Korean behemoth plans to establish its UK office before the end of the year.
With Gemini potentially joining the mix, the UK cryptocurrency market could begin to aspire to the levels set by other countries like Japan, South Korea, and the United States.
Will the establishment of UK-based investments by the likes of Gemini, Coinbase, and Bithumb catapult the country to greater significance in the global cryptocurrency narrative? Let us know your thoughts in the comment section below.
Images courtesy of Bitcoinist archives, Shutterstock