Bitget is taking steps to introduce a cryptocurrency lending program for users, allowing them to stake coins in return for loans in other coins. The derivatives trading platform says the program is targeting customers who are unhappy with traditional lenders.
Gracy Chen, managing director at BitGet, mentioned that the loan program provides borrowers with the opportunity to expand their investment portfolio beyond the coins they already possess.
“Bitget’s new product highlights the versatility of collateralized currency utilization, increasing capital utilization,” said Chen in a press release. “Now, users have the chance to stake less-demanded coins, thus obtaining loans in more liquid assets for investment purposes.”
The Crypto Loans program from Bitget states that borrowers will be given the opportunity to get a loan in the same amount as their staked coins, but denominated in another coin. Each loan has a predetermined interest rate, and the loanable amount is dependent on the market value of the staked collateral.
Staking is a common practice in Ethereum-based tokens that are based on verifying cryptocurrency over multiple nodes on a blockchain. Individuals validating or delegating their crypto to validators will be rewarded depending on how much they stake, which is usually preferred by more passive investors.
The Singapore-based platform is making its move when the digital lending market is flourishing. According to a report by Allied Market Research, the market’s size was $12.6 billion in 2022, with a forecast of $71.8 billion by 2032. Global Market Insights also predicted that the digital lending market will reach $60 billion in value by 2032.
Compared to traditional lending, digital lending decisions can be made much faster, usually taking days rather than weeks. However, digital lending comes with risks, such as hacking and fraud, according to a March 2023 report by the U.S. Government Accountability Office.
The digital lending industry has also seen its share of failures. For instance, Celsius filed for bankruptcy in June after facing liquidity issues and suspending customer withdrawals. FTX also imploded in November, leading to the downfall of crypto lender BlockFi. Genesis also went bankrupt in January due to securities fraud violations.
Despite these setbacks, there have been some successes in the crypto lending industry. In December 2021, Fidelity partnered with Nexo to provide institutional investors with more digital assets. Nexo also went out of its way to show how it would avoid making risky loans like the one made by its competitor.
Bitget has established that it will use the same procedures as traditional lenders. It has also added a ‘Proof of Reserves’ section to its website to give greater visibility into the assets it holds on its platform. In addition, the company announced a partnership with Space and Time (SxT) to create a decentralized data warehouse that provides a “verifiably tamperproof audit trail”.
