Cryptocurrency is gradually becoming more popular in the peer-to-peer lending space but is it just a flash in the pan?
Earlier this month, cryptocurrency exchange Bitfinex launched a new P2P lending tool to allow users to manage lending based on their own specifications and market conditions.
This followed the launch of Ethereum-based lending platform Aave in July – which announced itself as an ‘undercollateralized lending’ service which allows users to take out loans without having to deposit collateral. Meanwhile, over the past year P2P lender JustUs has launched the public sale of a crypto token.
It is no surprise that P2P lending platforms are taking a harder look at the crypto trading space of late. Bitcoin values have been rising since the start of the pandemic, as the concept of a global, digitised currency becomes increasingly attractive to cautious investors and savvy brokers.
Crypto lending platforms have predicted that this investor interest will only rise, as investors seek returns in a low interest rate environment, digital trading becomes more normalised.
“I think it’s difficult to say how the pandemic will effect crypto lending, however, many people are struggling more financially and looking for different ways to maximize their passive income, so the interest rates on crypto lending platforms may become even more attractive,” said Isa Kivlighan, digital marketing manager at Aave.
Sebastjan Ivanusa, chief marketing officer of Tokens.net, told Peer2Peer Finance News that the European cryptocurrency exchange has seen a rise in interest for cryptocurrency.
“We had observed a rise in the cryptocurrency industry value and a change in composition, mostly a lot of interest in DeFi products, and it is only to be expected, as people during unpredictable times search for an alternative [investment product],” Ivanusa said.
“Crypto loans are a secure alternative ensured by blockchain and a perfect fit for remote and instant approvals during stay-at-home circumstances. Cryptocurrencies proved to be a haven for many during the last major crisis.
“We can only expect an increase in the value of crypto further throughout the year.”
The growing momentum tapping into P2P and increasing interest in cryptocurrency has welcomed the attention of the City regulator.
The number of Financial Conduct Authority (FCA) investigations into cryptocurrency businesses rose from 50 in October 2018 to 87 in September last year, according to law firm Pinsent Masons.
Since 10 January, new crypto P2P lenders in the UK have had to register with the FCA under new anti-money laundering rules for the crypto-assets sector.
This followed a report from the government’s cryptoassets taskforce in 2018, which alongside the regulator said that it would look to extend anti-money laundering rules to companies dealing in cryptocurrencies and related assets.
Then in July, the Treasury proposed bringing the promotion of cryptoassets under the scope of the City regulator, saying that their proliferation and the fact they are often targeted towards retail investors has created more risks.
Both P2P and cryptocurrency are sectors driven by technological change and the ability to adapt to a changing economic environment. Its worth watching this space to discover which new opportunities emerge for the two sectors to collaborate.