Is encrypted P2P a flash in the pan?
Czech platform Bondster announced yesterday that it has started offering Bitcoin-backed loans, joining the limited ranks of peer-to-peer lenders embracing cryptoassets. But is this an emerging trend or a flash in the pan?
Both crypto lending and P2P lending come with risks and opportunities, but there is a point to be made that together they are more than the sum of their parts. Both asset classes trade in advanced financial technology and both offer the potential for high returns, albeit with some element of risk.
Investors should be aware that crypto can be volatile like stocks and stocks, with prices changing continuously. According to Morningstar data, the price of Bitcoin is £ 34,411.17 today (September 17), up from £ 38,041.47 at the start of the week, down nearly 10% in a matter of days.
However, P2P crypto-backed loans have the potential to make crypto trading and crypto-backed loans less risky.
Yesterday, the Prague-based P2P platform Bondster announced just this, that it has started offering Bitcoin-backed loans, and these are subject to a redemption guarantee, which is applied in the case. where the borrower stops repaying the loan. In this case, the originator would pay the investors the full amount they invested, including the interest received.
This seems to make Bondster’s P2P crypto loans less risky and more attractive to investors, but there is some question as to whether this model with a buyback guarantee is sustainable.
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Lee Birkett, founder and CEO of JustUs and sister company Moneybrain, which has its own cryptocurrency BiPs, said cryptocurrency-backed P2P loans bring together the best aspects of both asset classes.
“It’s a risky asset class, riskier than P2P loans,” he said.
“In many cases, there is nothing behind it, but P2P loans are asset backed. Our currency BiPs takes the best of P2P and brings it to crypto and it’s asset backed.
Lenders should always take the time to find out whether their crypto lender is regulated or not.
In July, the Financial Conduct Authority (FCA) banned one of the largest cryptocurrency exchanges, Binance, from operating in the UK, but there are still many unregulated crypto lenders.
Birkett called for the government’s online security bill to be expanded to include financial services and give the FCA more power to take action against unregulated crypto lenders, and warned lenders to invest in unregulated lenders. regulated crypto-backed.
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“If it’s not regulated, you shouldn’t be investing,” he said.
“Crypto is a speculative asset. And the P2P loan well done is one of the best asset classes in the world. “
Lenders should always be aware of the risks when investing and perhaps even more so in the exciting world of crypto.
While there are exciting opportunities on regulated platforms that offer P2P crypto-backed loans, this is an investment class that still has a lot of room to grow.