Cryptocurrency exchange giant Binance announced a partnership with decentralized global lending platform Libra Credit that will allow BNB holders to access fiat and cryptocurrency loans to borrowers that pledge Binance BNB tokens as collateral.
Announced on July 27, 2018, the new partnership is intended to address to growing liquidity issue present within the cryptocurrency ecosystem, allowing users to collateralize their cryptocurrency holdings to establish loans when the Libra platform goes live in Q3 2018.
Libra Credit and @BinanceLabs have partnered to address the growing global demand for liquidity of #crypto! @binance @LuHua10 @dschatt You can read more details via @Medium https://t.co/Ca6qghRyQN #blockchain #fintech #LibraCredit #cryptocurrency pic.twitter.com/J3N1rek7ia
— Libra Credit (@LibraCredit) July 27, 2018
Binance and Libra Join Forces to Attack Lending Market
The first wave of complex financial products and institutional capital is beginning to hit the cryptocurrency ecosystem, drawn by the launch of Bitcoin futures in December 2017 and a spate of recent Bitcoin ETF applications.
As institutional investors enter the crypto market, the gap between the traditional market and the crypto market is narrowing — resulting in the launch of a variety of platforms aiming to address the limitations of both markets. The Libra Credit platform aims to provide a solution to the lack of liquidity in the cryptocurrency market and streamline integration into fiat financial services, making it easier to convert crypto-assets into traditional assets such as gold, stocks, bonds and real estate.
By partnering with Binance, Libra Credit will make it possible for Binance BNB token holders to collateralize their crypto in return for both fiat and crypto loans. The ability to collateralize BNB tokens makes it possible for crypto holders to hedge price volatility without exiting, or pledge altcoins for more “mainstream” cryptocurrencies that offer better liquidity, such as BTC or ETH.
Commenting on the new partnership, Binance Labs head Ella Zhang highlighted the experience held by the Libra Credit team:
“The Libra Credit founding team has a wealth of experience and resources in financial services and payment solutions. They are committed to make long lasting impacts in the industry”
Libra Credit currently operates a payday loan platform with a loan book value of over $850 million, and plans to synergize with stablecoin providers and 3rd party verification providers in order to deliver a range of applications — outside of using BNB-backed loans to hedge volatility, Libra Credit envisions use cases in which institutions with large holdings of proprietary tokens are able to borrow ETH or BTC to fund operations.
BNB-Backed Crypto Lending
The new partnership between Libra Credit and Binance is notable for the opportunity it presents to facilitate a cryptocurrency market equivalent of securities lending. Any complex, highly liquid trading ecosystem typically requires securities lending in order for both brokers and market maker to ensure the settlement of trade or provide purchase opportunities.
A trader, for example, may anticipate that the value of an asset may fall and seek to take a short position — by collateralizing BNB tokens, a trader could borrow crypto-assets to sell at the current market price, and then repurchase them at the anticipated lower future price in order to repay the loan and turn a profit. With over 300,000 individual addresses holding BNB tokens, the partnership between Binance and Libra Credit could potentially dramatically reform the lending ecosystem landscape, minimizing the impact of poor crypto liquidity.
Cover Photo by Samuel Zeller on Unsplash