Crypto-backed loans are now a thing in Australia, thanks to a company called Block Earner. Block Earner allows people to borrow money in Australian dollars, and these Aussies can use Bitcoin or Ethereum as collateral for the loan. If they don’t pay back the loan, they can lose some of their crypto. So are crypto loans now a thing? Apparently, yes.
While this isn’t new in other countries, it is new in Australia.
In a statement to The Chainsaw today, Block Earner claimed that this new type of borrowing has attracted more than $9 million of loan applications so far, since they opened for business in September. And the Aussies who have applied for these loans are willing to risk more than $33 million of crypto assets to get such loans.
According to a survey commissioned by Block Earner/YouGov, more than half of Australian crypto owners (61 percent), or about 2.8 million Aussies, are thinking about using their crypto as a guarantee for loans in the next year to cover their living costs.
Almost a third (31 percent) of Aussie crypto owners say they will do it to pay for emergencies, more than any other reason.
A further 26 percent want to use crypto-backed loans for home deposits and cars, and 23 percent want to use them to pay for regular bills.
Dipping into Savings
Charlie Karaboga is the CEO of Block Earner. He says, “We built this product because there’s a glaring need for it in Australia right now. Four million crypto holders are going through a cost-of-living squeeze and are dipping into their savings or selling off their investments to free up cash. Now, however, we’re providing a way to free up cash without needing to sell their investments…”
If you use Ethereum as a guarantee, you pay 4.95 percent per year. If you use Bitcoin, you pay 6.95 percent per year. You also pay a 1 percent fee when you get the loan.
Why use crypto as collateral?
There are more than 4.6 million Australians who own crypto in 2023, according to the Block Earner statement. Some of them have seen their crypto lose value in the last year and a half as ‘crypto winter’ set in. But many of these people want to hold on to their crypto and wait for the market to go up.
At the same time, life is getting more expensive in Australia. Inflation is the highest it has been in decades.
According to Block Earner, Australians don’t have much savings. Millennials and Gen Zs have only a combined $20,000 in savings on average, and homeowners are struggling to pay their mortgages. So using crypto as collateral may be a tempting option for those who hold crypto and who are waiting for the value to rise again, so don’t want to sell while the market is down.
Crypto loans: Hold up
Crypto-backed loans might be a good idea when the market is stable. But there are still some risks and challenges that crypto owners need to be aware of.
What if you don’t pay back your loan? Then the company holding your crypto collateral has the right to sell some of your crypto and close the loan.
In addition, Block Earner has had a previous skirmish with Australian regulators.
In the end, the choice between Block Earner’s crypto-backed loans and normal bank loans depends on what you need, how much risk you can take, and if you are okay with using your crypto as a guarantee.
It can be very risky for some people to borrow both a deposit and also have a home loan. If you have a good credit history, you might find that a regular bank can give you a better deal for a loan, and you won’t be risking your crypto.
Or don’t buy that thing, and get on with your life!