Anchorage and BankProv will start offering Ethereum-backed loans and institutional clients that use Anchorage Digital for custody will be able to use their coins as collateral for USD loans as we can see more in our latest ethereum news today.
Anchorage is a crypto custodian that is expanding its product suite to provide ETH-backed loans with BankProv. Anchorage holds crypto assets like ETH on behalf of institutions and now allows those institutions to take out a line of credit. In a partnership with BankProv or known as the Provident Bank, crypto funds have investments in ETH and a need for capital so they can soon use ETH to secure US Dollar loans.
Institutional clients at Anchorage now have access to a USD line of credit backed by Ethereum through our partnership with forward-thinking commercial bank @BankProv.
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— Anchorage Digital (@Anchorage) June 3, 2021
Anchorage maintains custody so there is no need for the institutional clients to give up on their ETH or buy it back. The custodian treats it as collateral in case a new client is not able to repay the dollar loan. Clients with a sizeable amount of coins can tap into a sizeable line of credit without having to sell their digital assets. This is the latest service from Anchorage which in addition to storing crypto from the customers, helps them stake tokens to earn crypto rewards as well as to take part in on-chain governance.
For lending, Anchorage digital president Diogo Monica said that “All Anchorage clients to through comprehensive due diligence and are assessed by the Risk Committee to determine the amount of credit extended and collateralization terms.” The BankProv loans are overcollateralized which means that they require clients to put up the collateral worth more than the cost of the loan but Monica said:
“Anchorage has other types of loans, including ETH-backed loans, that may be undercollateralized if the borrower goes through risk due diligence.”
Other crypto custodians and platforms offer similar services because retail clients at Blockfi for example can get crypto-backed loans in BTC, LTC, ETH, and PAX Gold. With the current rates, a $20,000 USD loan from BlockFi will require 14,83 ETH or $40,000 and this is due to the high volatility of the crypto assets. Over the past month, ETH went to an ATH of $4357 and as low as $1853. the lenders wanted to ensure that their collateral doesn’t become worth less than the asset or that if it does, the loans will be paid off.
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