In brief

  • Bitfinex Borrow lets verified users borrow dollars or Tether tokens against their Bitcoin and Ethereum holdings.
  • Loans will have variable or fixed annual interest rates between 5.5% and 18.5%.
  • Bitfinex is adding features despite an ongoing New York state investigation into its relationship with dollar-pegged stablecoin issuer Tether.

Crypto exchange Bitfinex is introducing crypto-backed borrowing services to its platform, offering a new way for cryptocurrency holders to get a loan and avoid selling their digital assets.

Not allowing a New York state investigation to get in the way of offering new products, Bitfinex announced today the launch of Bitfinex Borrow, a peer-to-peer lending platform allowing users to borrow either US dollars or dollar-pegged Tether stablecoins against the value of their Bitcoin and Ethereum holdings on the Bitfinex exchange. 

Bitfinex Borrow will compete with a growing number of centralized and decentralized crypto lending services, including Nexo, MakerDAO, and Aave in a digital asset credit market that seems to be growing by the day.

Bitfinex says that only verified users who have completed Know Your Customer (KYC) checks will be allowed to withdraw from the Bitfinex Borrow platform, where they can choose a fixed or variable annual interest rate ranging from approximately 5.5% to 18.25%. Hong Kong-based Bitfinex has offered short-term loans for margin trading since launching in 2012, but Bitfinex Borrow will for the first time allow users to withdraw currencies to be used elsewhere.

Bitfinex is the subject of an ongoing New York state investigation into allegations that Tether, a dollar-pegged stablecoin issuer, provided Tether tokens to Bitfinex without being compensated with an equal amount of actual US dollars. Tether, which shares a number of executives and shareholders with Bitfinex, claims all dollar-pegged Tether tokens are backed 1:1 by real fiat currency reserves. Tether has issued billions of stablecoins so far in 2020, rising from a total supply of 12 billion in August to more than 17 billion in November.

Loans based on crypto-collateral have become increasingly common over the last few years. Centralized lending service Nexo launched crypto-backed loans in May 2018, and decentralized applications like MakerDAO and Aave (formerly Ethlend) have offered loan services since 2017.

Despite legal challenges, Bitfinex has continued to add partnerships and features to its platform. In September, Bitfinex added improved support for Bitcoin Lightning network transactions, which are used to speed up lengthy Bitcoin transaction confirmation times, and interest rewards for holding Bitcoin and Ether on the Bitfinex exchange in partnership with crypto wallet and loan provider Celsius.