Fidelity Set to Accept Bitcoin for Cash Loans

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In Brief
  • Fidelity said it will accept pledges of Bitcoin as collateral for cash.

  • This will be done in partnership with BlockFi for instiutional customers only.

  • This is another example of an upsurge in institutional interest in crypto.

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Fidelity Digital Assets had decided to accept Bitcoin as a form of collateral against cash loans.

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Fidelity Investments has demonstrated its faith in Bitcoin (BTC) and will begin giving institutional customers the option to put up Bitcoin as collateral against loans.

The Boston-based company’s Digital Assets wing will be handling these transactions through a partnership with a crypto lender and on-ramp BlockFi. Fidelity is an investor in BlockFi and has been scouting large clients with a need for crypto exposure for months. Last year, Fidelity began a Bitcoin custodial service.

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Fidelity Digital chief Tom Jessop told Bloomberg in an interview that institutional investors are looking to turn their crypto hauls into cash. Such customers would include crypto miners and hedge funds, he said.

While all this is going on, Bitcoin is seeing more and more institutional support. That’s in addition to the massive rise in BTC price, which has grown more than 400% since its March lows.

All things considered, Bitcoin is gaining the attention of large investors. A survey by Fidelity found that 36% of investors said they held crypto and even more expressed interest. Jessop said that Bitcoin-backed loans were a “foundational capability.” He believes that as crypto grows, so too will these loans.

This capability to put up crypto for cash collateral is already available through many decentralized finance (DeFi) platforms. Often without know your customer (KYC) information, anyone can get a loan of stablecoins by putting up Bitcoin or Ethereum.

The regulated asset manager does say it envisions this service as part of a longer term trend. In order to get a Bitcoin-backed loan, users will need to have a BlockFi account. The website has been looking to play nice with institutional investors and even released plans for a crypto-rewards credit card.

BlockFi CEO Zac Prince said that the online lender will offer cash worth 60% of loan collateral, and already offers such a service with its retail customers. With large firms, Prince said, there will be more room for “customization.”

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Harry Leeds is a writer, editor, and journalist who spent much time in the former USSR covering food, cryptocurrencies, and healthcare. He also translates poetry and edits the literary magazine mumbermag.me.

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