Businesses are now able to take out loans against their own Bitcoin or Ether cryptocurrency holdings thanks to a new lending solution being launched this month in the UK.
Available through Mode, the service allows businesses to take out a loan against their cryptocurrency assets without needing to undergo credit checks.
While the service is currently available for the two most popular cryptocurrencies – Bitcoin and Ether – the company plans to widen the service to support others in the coming months.
There are also plans to launch cryptocurrency backed personal loans, as part of a wider goal by Mode to become the first fully regulated digital asset bank in the UK.
How cryptocurrency backed loans work
For companies using the service, Mode offers cryptocurrency backed loans of at least £1,000, with no maximum amount, which are typically paid out within 24 hours of applying.
The loan values are 60% of the current Bitcoin value or 50% of the current Ether value, with the cryptocurrency held safely by Mode until the loan is repaid.
The company typically offers loan terms of up to 90 days, although extensions are possible, with an APR of 12%, compounded daily. Mode also offers penalty-free early repayment.
Bitcoin lending: “The best of old and new finance”
While other cryptocurrency backed loans do exist, Mode believes there is a gap in the market for a service targeting businesses, and hopes to provide an approach that blends traditional finance with modern solutions.
“Holders of both traditional and digital assets are demanding solutions that mix the best of both old and new finance. This is where Mode enters the equation. We trust that our approach will enable us to create a reliable environment that makes lending, investing and borrowing safer for everyone,” said Alex Ryvkin, CEO of Mode.
“Today, most crypto-backed lending solutions in the market are created with retail customers in mind. This is why we chose to design a product that catered to the needs of companies in the ecosystem, ensuring they have equal access to the capital that will help them successfully grow their business and further advance the tokenised economy.”
Mode is a subsidiary of R8 Limited, a fintech group that recently appointed Twitter co-founder Biz Stone as a non-executive director.