Cryptocurrency is gaining credibility with governments worldwide. A recent case in Australia is the perfect example. An plaintiff in a court case had to put $20,000 AUD so if they lost, there would be money for the defendant's legal fees. Normally, the money would go into a bank account, but Judge Judith Gibson of the New South Wales district court said the plaintiff could use their cryptocurrency exchange account instead if it had a value of at least $20,000 AUD. The value has to be monitored constantly though.
In the U.S., many financial institutions looking for collateral are hesitant to accept Bitcoin. Companies in Switzerland and Cyprus give cash loans based on the value of cryptocurrency a person holds, but they do not accept applications from individuals in the U.S. These companies acknowledge cryptocurrency's volatility so loan applicants must put up a higher value of cryptocurrency than the cash amount they will receive.
Cryptocurrency as Collateral
People are seeing selling Bitcoin to raise cash isn't a good idea. They would rather hold on to it, hoping the value will significantly increase, rather than selling it to raise money. Cryptocurrency investors are astute; they understand Bitcoin at least is a true investment that is collateral, just like bonds or real estate.
The Future of Cryptocurrency Lending
With over $400 billion worth of cryptocurrency out there, mainstream financial institutions will take notice. They could make more loans using digital coins as collateral and make money from the interest. Startup Depository Network provides a depository for digital assets similar to what financial institutions use for traditional collateral. Lenders can transfer digital assets to a custom depository platform they create on Depository Network's platform. Lenders get the assets if the borrower defaults, otherwise the borrower gets their cryptocurrency back.
Consumer mass adoption of cryptocurrency may depend on its ability to be used as collateral.