Crypto Lender Genesis is Accepting NFTs as Collateral for Loans
Genesis, a digital asset trading firm, has begun accepting non-fungible tokens (NFTs) as collateral for loans and derivatives trades, indicating that digital art has made its way into the burgeoning market for complex crypto financial products.
By developing financial products backed by NFTs, a form of digital collectible that can be traded on blockchains, Genesis is tapping into one of the hottest sectors of the digital finance industry.
Andrew Steinwold talked about the possibility of borrowing against non-fungible assets in his cracking blog post all the way back in August 2019. It does not sound ridiculous, does it? I mean, if you own a parcel of digital land, in a virtual world like Decentraland, which actively trades at a certain price you should be able to borrow against it, right? The cool thing is, there are companies developing this concept.
Investors can pledge their tokens in the same manner that a typical trader would use a high-grade asset like government bonds to underpin a financial contract by structuring products around NFTs. NFT prices, on the other hand, can be extremely volatile, adding a layer of risk to the Genesis products.
Joshua Lim, head of derivatives trading at Genesis, said that the company, which is part of Barry Silbert's Digital Currency Group, values NFTs as a backstop for loans or trades and uses them as collateral against loans or transactions in a "very conservative approach." Genesis only accepts "blue-chip" NFTs of historical significance or a thriving secondary market, according to him.
Genesis is the largest cryptocurrency trading desk for professional investors. The business underwrote $50 billion in loans in the first three months of 2021, bringing the year's total to $131 billion. Last year, the trading department handled $170 billion in cash and derivatives transactions.
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