Crypto-Backed Loans Against Selling Your Crypto

Three main arguments for using your crypto asset as collateral.

The financial value of the cryptocurrency market is estimated at $220 billion. According to Virtual Coin Squad, 55 major companies accept cryptocurrencies as a payment method, this includes Microsoft, Reddit, Shopify, Twitch etc. Another catalog useBitcoins.info represents over 5,000 businesses all over the world that can accept Bitcoins as a method of payment. Even on the assumption that the total number of crypto-friendly companies is likely to be much higher, with an estimated 138 million companies in the world 5,000 seems to be a drop in the ocean.

Despite the fact that during the last decade crypto evolved from a geeky idea into a landscape of thousands of cryptocurrencies and millions of early adopters, you still probably need to convert your digital assets to traditional money for urgent needs. There are situations where crypto newbies may run into trouble choosing an optimal withdrawing method.

Not until recently, there was only one possibility to monetize a digital asset — to sell crypto and get a good price for it in fiat. There are a number of ways to convert crypto into fiat and cryptocurrency exchanges are the most popular ones. The process is quite clear, even for inexperienced users and usually affordable, it takes a few hours to a few days in most cases. The other option to choose is a person-to-person marketplace. This way isn’t the most reliable, there is a related risk to be tricked.

Crypto-backed lending aroused in 2017 and proposed a radically different way to unlock your assets value. This is the way to get fiat money without having to liquidate cryptocurrency. Anyone can use crypto as collateral and borrow some fiat with no need to give up the holdings and will get all the cryptocurrency back as soon as the loan is repaid.

The CoinLoan Team is convinced that the loan secured by crypto is the perfect choice for those, who want to get the best out of their assets. Here are the main arguments for crypto-backed lending.

Hold Crypto & Get Cash Instantly

It is often the case that crypto holders need some fast cash to buy vehicles (of course, Lambo), real estate or just for operational needs.

Let’s use the example of a miner, who is to pay for electricity and buy hardware. The first idea that comes to mind is to liquidate a part of crypto holdings for such purposes. However, it can be a short-sighted choice especially if the current exchange rate is not in your favor. Perhaps it would be best to borrow some fiat or stablecoins against of cryptoasset and pay little interest than to lose the potential future gains.

Crypto-backed lending can be a beneficial choice for those, who need fiat to buy more crypto as well. Traders who need fiat in order not to miss a drop and buy dip would better choose to freeze some assets for short than to liquidate them or waste time taking a bank credit.

Taking a Loan is Easier Than Ever

Everyone who went through the loan process in a conventional bank will never want to get into it again. Cashing out may sound easier because you save your time and avoid dealing with bureaucracy and numerous checks.

Fortunately, there’s no need to check out the credit history and prove your payment capacity to get a crypto-collateralized loan. Given that the ownership of a blockchain-based asset is auditable and the value is transparent to the market, borrowing process becomes fast and clear.

All you need to become a borrower on the CoinLoan Platform is to verify identity, choose the appropriate loan conditions and create an application within a few minutes. Or you can accept one of the existing lending applications to borrow instantly.

Avoid Capital Gains Tax on Investments

When a person invests in crypto to make profit, that income becomes taxable. It means that in some jurisdictions you’d have to pay capital gain tax selling your cryptocurrency to get fiat. It’s a tax levied on capital gains or profits from the sale of specific types of assets. Cryptocurrency is treated as property (not as currency), so when you earn on the difference between the purchase and selling price of an asset, tax collectors want a cut of your income.

The taxation for cashing out can cost a pretty penny. It cut your bill down to 40% in the USA, 33% in Canada, 45% in Australia, 20% in the UK and 25% in Germany.

Fortunately, capital gains taxes are only triggered when an asset is realized, not while it is held by an investor. Since a borrower doesn’t make profit, a crypto-backed loan don’t create a taxable event.


Best wishes from the CoinLoan Team, thank you for reading! Don’t hesitate to contact us, we’re always glad to answer your questions!

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