Technology

Crypto Lending: Unregulated crypto-backed loans get popular, but not without risks

While it is already known that cryptocurrency is becoming even more popular as an investment, it is evidently gaining traction globally as a mode of payment too – albeit not without factoring in related risks. Crypto lending refers to a type of ‘DeFi’, or decentralized finance, which allows investors to lend their cryptocurrencies to different borrowers, getting interest payments in exchange as ‘crypto dividends’. (Decentralised finance commonly refers to unregulated cryptocurrency platforms that allow lenders and borrowers to transact without the traditional gatekeepers of loans: banks.) Many platforms that specialize in lending crypto also accept stablecoins, on top of cryptocurrencies. (Stablecoins are cryptocurrencies that aim to offer price stability and are backed by a reserve asset.) Several critics warn of DeFi still being in an experimental stage in the field of finance. They’re not necessarily legally compliant, but that doesn’t mean that they can’t be at some point in the future.

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