Crypto as Loan Collateral

Crypto Briefing wrote a report about JP Morgan Chase ($JPM) accepting crypto as collateral. I have tried to speak with people about it; most folks have no idea what this means. This is a watershed moment in digital asset marketability.

Margin loans are loans that institutions provide to individuals who own traditional assets, such as stocks, bonds, and ETFs. The loans are collateralized by the assets and are typically used to provide liquidity in fiat without selling the underlying assets. For example, if you own $10,000 worth of stocks and need $1,000 to cover an expense, you can take a margin loan instead of selling 1/10 of your holdings. Usually, these loans are taken at very low interest rates, which makes them attractive compared to capital gains tax. Historically, crypto assets are not eligible for margin loans. There are a few specialized institutions that provide this service, but none of the traditional institutions have to date.

$JPM offering a crypto-collateralized loan service is a giant step toward institutional acceptance of crypto. This is good news for folks who use crypto as a hedge against fiat and traditional finance, and bad news for those who use crypto as an escape therefrom. Institutional reliance upon $BTC and $ETH means institution-level regulation is just around the corner. We’ll see what the future holds.