Compound Treasury, a noncustodial, decentralized peer-to-peer lending platform, will extend loans to users and financial institutions who present their crypto assets as security.
Reid Cuming is the Vice President of GM Compound Treasury. He said in a statement on Medium that recognized banks could carry off “USD or USDC” with fixed rates starting at 6% APR. This is while using Bitcoin, Ether, and other supported ERC-20 assets as surety.
“Borrowing offers an open-ended term and no repayment schedule, providing our clients the flexibility to draw liquidity and repay balances as they see fit – for as long as they remain overcollateralized,” Cuming said in a statement.
Reacting to the news, investors said the 6% APR of a fixed interest rate is exponentially more significant than the one offered in traditional finance.
Compound Treasury previous offerings
According to the statement, loans won’t be limited and will entirely rely on smart contracts. If an institution takes out a compound treasury loan, it will remain in control of its assets unless they default on the loans.
Compound’s latest initiative comes as most institutions are moving to use cryptocurrencies for investment or payment purposes. In addition to using cryptocurrencies for investment or payment purposes, financial institutions have also seen the development of new financial tools, including crypto lending, which is already gaining popularity.
“Compound Treasury can now address the demand for liquidity with a simple, reliable borrowing solution while continuing to provide the same trusted service we’ve delivered to clients earning interest over the past year,” said Cuming. “Introducing borrowing expands our cash management product to meet more needs of our clients,“ he added.
Demand for liquidity
With the rise of any path-breaking new industry, there exists the opportunity for consumers targeted by bad actors operating in the new space. Previously, there has been widespread adoption and use of cryptocurrencies by millions of people worldwide. In addition, new financial innovations are
being created that harness the power of these technologies, including crypto lending. Compound says it will use smart contracts to make the entire process transparent and curb any targeted criminal activity.
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