How Banks Are Trying To Tap Into The Growing Crypto Market

Crypto-backed retail loans are similar to any other secured loan. Borrowers use their digital assets as collateral for a loan of representative value.

The rise of cryptocurrency has opened up a number of business opportunities for investors as well as lenders. While there are some risks associated with the crypto world, the incredible returns attract traders more intimately when compared to other investment tools. After initial hesitation, banks too have started exploring ways on how to capitalise on this craze. 

In India, banks like Kotak Mahindra have begun partnering with online exchanges to support crypto payments. In the US too, banks have started looking at ways to use Bitcoin, Ether and other crypto coins as collateral for cash loans to institutions.

Simply put, crypto-backed retail loans are similar to any other secured loan. Borrowers use their digital assets as collateral to secure a loan of representative value. It is done in the same way as a car or a house can be placed as collateral for vehicle or mortgage loans.

While major banks are unlikely to get directly involved with crypto trading in the near future, there's no stopping them from tapping the growing crypto investors.