Lenders Say Bitcoin Loans Are Financing Tuition, Working Capital and More

Bitcoin-backed lending is increasingly moving into everyday finance, with borrowers using their BTC holdings as collateral to access cash without selling the cryptocurrency.

The lending market, once closely associated with trading, is expanding into areas such as education, household expenses and business funding. Two established lenders told CoinDesk that customers are increasingly taking loans against bitcoin to cover tuition, emergencies, temporary cash-flow gaps and working capital.

Hunter Albright, chief revenue officer at SALT Lending, said the company is seeing this shift both in customer discussions and its lending data.

“What I am seeing, both in the conversations I’m having and in the data, is that more people are starting to borrow against their Bitcoin for real-world needs,” Albright told CoinDesk.

He said customers are borrowing for emergency expenses and major life decisions, including college tuition and once-in-a-lifetime trips. Others use the proceeds to supplement their cash flow.

The development marks a change in bitcoin’s role within financial services. Rather than relying on BTC solely as a speculative investment, holders can use the asset as collateral for credit while continuing to maintain their market exposure.

SALT entered the bitcoin-backed lending market in 2016. Its initial borrowers were largely bitcoin miners, which earn BTC rewards for helping validate blockchain transactions. The lender has since attracted more institutional customers, as well as Gen X and baby boomer bitcoin owners looking for help understanding the loan process.

SALT has not disclosed the total value of loans it has issued. The broader centralized lending sector, however, has reached substantial volumes.

Ledn, which launched in 2018, has funded more than $11 billion in loans. The lender expects that figure to grow to $1 trillion in the coming years as borrowers increasingly seek financing for purposes unrelated to trading.

Ledn co-founder and CEO Adam Reeds said the company’s customer base includes traditional investors, entrepreneurs seeking working capital and institutional clients.

Private wealth customers generally take larger loans to finance investments, real estate, businesses and their children’s education, Reeds told CoinDesk. Retail customers tend to borrow smaller amounts for short-term expenses, including months when their main income does not cover all their costs.

Borrowing While Holding Bitcoin

The main attraction of bitcoin-backed credit is access to liquidity without having to sell BTC.

Albright said this principle has been central to SALT since the company began offering these loans.

“We don’t believe people should have to sell their most valuable assets to get the value out of it,” he said.

Ledn customers take a similar view. Reeds said borrowers generally expect bitcoin to increase in value and want to retain ownership of their holdings.

That conviction also helps explain why customers continue renewing their loans.

“Most clients renew their loans, because the whole premise of this type of lending is not selling bitcoin and continuing to hold the position,” Reeds said.

Albright said this type of financing is making strategies once mainly available to wealthy individuals and large corporations accessible to a broader group of asset owners.

“Now, that is becoming available to a broader group of people based on the asset they own and hold,” he said.

Fixed Rates Become a Focus

As bitcoin-backed loans move toward mainstream finance, lenders are also trying to make borrowing costs more predictable.

SALT aims to develop products that function more like mortgages, with fixed rates and longer terms.

“Our ultimate goal is to have loan products behave much more like a mortgage, where someone can take out a loan, at a fixed rate over a longer term and have greater predictability around the cost of borrowing, even while Bitcoin remains volatile,” Albright said.

The sector has already taken steps in that direction. Coinbase added fixed-rate bitcoin-backed loans to its retail app on Sept. 22 through Morpho’s Midnight protocol.

The loans allow users to borrow USDC against bitcoin, with the interest rate and repayment date determined at the start. They are offered alongside Morpho’s variable-rate products, which have more than $1.4 billion outstanding against approximately $3 billion in collateral.

Coinbase’s fixed-rate loans currently have shorter durations, while SALT is targeting longer-term financing.

Gold Could Become the Next Collateral

Ledn also expects collateral-based lending to expand beyond bitcoin. The company sees gold and other hard assets as potential areas for future growth.

“The next stage is lending against hard assets more broadly,” Reeds said, describing precious metals as a natural extension of the model.

Gold is an especially large potential market. Reeds said the asset is worth about $20 trillion, while borrowing against it has historically been largely an institutional activity. Retail holders have generally had to sell their gold to access its value.

The emerging model could increasingly blur the distinction between digital and traditional alternative assets, as investors seek to keep long-term holdings while using them to obtain liquidity.

“Our clients increasingly think in terms of hard assets they want to hold for the long term, and borrow against rather than sell,” Reeds said.