Bitget Launches ‘Dual-Coin’ Crypto Loans to Boost Investor Liquidity

Bitget is moving ahead with plans to launch a cryptocurrency lending program for users that will let them stake their own coins in exchange for loans in another. The derivatives trading platform says the program is aimed at borrowers who are dissatisfied with traditional lenders. 

Gracy Chen, managing director at BitGet, said that the loan program helps borrowers grow their investment portfolio beyond the coins they currently hold. 

“Bitget’s new product highlights the flexibility of collateralized currency usage, enhancing capital utilization,” said Chen in a press release. “Users now have the opportunity to stake less-demanded coins, enabling them to obtain loans in more liquid assets for investment purposes.”

In its Crypto Loans program, Bitget says that borrowers will have a chance to use their coins to get a loan in the same amount denominated in another coin. Each loan has a specific interest rate attached to it, and the borrowable amount is determined by the market value of the staked collateral.

Staking is a common process in Ethereum-based tokens that are based on validating cryptocurrency across different nodes on a blockchain. Individual validators—and those delegating their crypto to them—receive rewards based on how much they stake, a process often favored by more passive investors. 

The Singapore-based platform is making its move at a time when it sees tailwinds in the digital lending market. According to a report by Allied Market Research, the market’s size was $12.6 billion in 2022, and it forecast that it would grow to $71.8 billion by 2032. In a separate report by Global Market Insights cited by Bitget, the digital lending market was predicted to reach $60 billion in value by 2032.

Compared to traditional lending, digital lending decisions can arrive much faster, arriving in a matter of days compared to weeks. At the same time, digital lending has risks attached, including hacking and fraud risks, according to a March 2023 report by the U.S. Government Accountability Office.

The digital lending industry has also been marred by prolific failures. Last June, crypto lender Celsius filed for bankruptcy after running into liquidity issues that forced it to suspend customer withdrawals and left it scrambling to pay back its debts.

Several months later in November, crypto exchange FTX also imploded, precipitating the failure of crypto lender BlockFi. Crypto lender Genesis also filed for bankruptcy in January amid scrutiny from federal regulators for securities fraud violations, and the ripple effects that followed FTX’s demise.

For all these setbacks, there remain some crypto lending success stories. In December 2021, Fidelity partnered with crypto lender Nexo to provide more digital assets to institutional investors. After Celsius went bankrupt, Nexo went out of its way to demonstrate how it would avoid making massively risky loans the way its competitor did.

Bitget makes clear that they are modeling their onboarding process on existing procedures used by traditional lenders. The firm also emphasized that it has measures in place to protect borrowers’ collateral from risks, and account for its holdings.

In March, Bitget announced a partnership with Space and Time (SxT) to develop a decentralized data warehouse that it says offers a “verifiably tamperproof audit trail.” It also previously added a “proof of reserves” section to its site to allow better visibility into the assets it holds on its platform.