- Client: High-net-worth individual
- Loan Amount: Circa £300,000
- Asset Backing: 7 BTC, valued at approximately £700,000
- Interest Rate: Approximately 6%, denominated in a non-GBP currency
- Security: Bitcoin held with the lender's appointed custodian
Enness was approached by a high-net-worth client looking to raise liquidity against a portfolio of digital assets. The client held seven Bitcoin, valued at approximately £700,000 at the time, and wanted to access around £300,000 without selling the underlying cryptocurrency holdings.
Using cryptocurrency as collateral can provide an alternative source of liquidity, but the volatility of digital assets means that lenders need to carefully consider the loan-to-value and the potential for changes in the value of the collateral. The client therefore needed a lender that was comfortable with Bitcoin-backed lending and able to structure the facility around the risks associated with the asset.
Enness sourced a specialist lender and negotiated a circa £300,000 facility against the client's Bitcoin holdings. The loan was arranged at an interest rate of approximately 6%, denominated in a non-GBP currency, with the lender retaining custody of the Bitcoin for the duration of the facility.
The structure also included a defined margin call threshold. If the value of the Bitcoin fell sufficiently to affect the agreed loan-to-value, the client could be required to provide additional collateral or make a partial repayment to restore the required level. This was an important feature of the facility given the potential for significant movements in cryptocurrency values.
The lender also charged a custody fee for holding and safeguarding the Bitcoin while it was being used as collateral. The agreed structure allowed the client to access liquidity while retaining exposure to their digital assets, subject to the terms and risks of the facility.
This case demonstrates how crypto-backed loans can provide liquidity for clients who hold substantial digital asset portfolios. However, the suitability of this type of borrowing depends on factors including the value and type of cryptocurrency held, the loan-to-value, custody arrangements, margin call provisions and the client's ability to meet the lender's requirements if the value of the collateral falls.
Enness specialises in crypto finance and works with specialist lenders to explore financing structures for clients holding digital assets. Each facility is subject to lender criteria, due diligence, market conditions and the specific circumstances of the borrower.
If you hold significant cryptocurrency assets and are considering using them to raise liquidity, speak to a crypto finance specialist to discuss your requirements.
Disclaimer:
This case study is for information and illustrative purposes only and does not constitute financial advice or a recommendation. Cryptocurrency is a volatile asset class and its value can fluctuate significantly. Crypto-backed borrowing may involve margin calls, additional collateral requirements and the potential loss of collateral if agreed requirements are not maintained. Enness does not give advice on Securities Backed Lending, investments or cryptocurrency investments, and lender introductions are unregulated. Clients should seek appropriate independent professional advice regarding their individual circumstances.
Information contained in our case studies is for market and illustrative purposes only. In some cases, these may be made up of multiple cases and are for illustrative purposes only.
Some case studies are made up of enquiries that have come into the business, not all business completes, and the posting of a case study does not represent a completed piece of business.
Property values can fall as well as rise, and you may not get back the amount originally invested. Property investments can be illiquid and may take time to sell. Where borrowing is used, your property may be repossessed if you do not keep up repayments on a mortgage or other loan secured against it.
