Cryptocurrency Investment Firms in China Are Increasing Their Lending Funds to Earn More Revenue
China is experiencing a bear market and cryptocurrency investment firms are attempting to overcome conditions by lending. A few of these firms include DGroup, FBG Capital, and Bixin Capital. Coindesk presented each firm’s position. According to Xi Wang of Bixin Capital,
“The demand for personal crypto loans doesn’t fluctuate that much regardless of market conditions. So, in a bearish market, making profits from lending assets is relatively a much [more] stable bet.”
Bixin Capital began its crypto lending section in November 2018, thereby allowing its customers to borrow BTC, EOS, litecoin, tether, or ether from the firm’s own reserves. As for loans, borrowers must provide a supported asset and are subject to a seven percent interest rate that is annualized. Wang noted that the firm’s outstanding loan volume is about $10 million of U.S. dollar-pegged USDT.
Vincent Zhou of FBG Capital indicated that even though his firm has been working with crypto loans, it's crypto lending unit only formally launched in mid-2018 and currently has approximately $15 million of cryptocurrencies as loan receivables.
One of the main differences, as pointed out by Coindesk, between crypto lending and conventional loans is collateral requirements and forced liquidation, which seem strict. According to Wang
“It’s a must. Conventional bank loans are based on your education, credit scors, jobs, properties, etc. We don’t evaluate any of these. That’s why our risk control must be completely collateral.” Further, even though the firms lend in crypto, they stray away from the Chinese Yuan. Zhou stated, “There are lots of issues with lending Chinese yuan. One is that when we collect debts in fiat currency, it’s difficult for us to ensure that money is clean.”
It also seems that lending operations are not just confined to China. There are other firms, such as Galaxy Digital, backed by Michael Novogratz. Another is BlockFi, backed by Galaxy Digital.