The risk and reward of financing a cryptocurrency purchase

With bitcoin surging to an all-time high of $70K recently, it’s timely to take a look at how cryptocurrency’s relationship with the financial sector is changing. Here’s what you need to consider when using business loans to invest in cryptocurrency

While there’s no question cryptocurrency remains an extremely volatile asset, spikes and dips are triggered simply by billionaires tweeting, it’s important to note regulators are now taking an increased interest. The ATO recognises online currency as an asset class. And indeed recently as a few weeks ago, the Reserve Bank of Australia signaled their growing importance in any future regulatory framework changes.

“While crypto-assets and stablecoins do not currently play a significant role in the Australian payments system, it will be important that they are considered as part of any changes to the regulatory framework,” RBA told Treasury in a submission to its payments system review. “This area is developing rapidly and there may be a lack of clarity about how these arrangements fit within the broader regulatory framework.” (Via the AFR)

So, while becoming a mainstream form of currency is a long way off, if indeed it ever happens, cryptocurrency is increasingly becoming a viable and valuable asset to grow wealth. Strive financial has recently made the decision to accept investment into Cryptocurrency as a valid purpose for our business loan products. As we mentioned earlier, Cryptocurrency is a volatile asset, and does come with it’s own risks, which is why we balance our offers very carefully to make sure both the lender (us) and the borrower are covered.

 

Beware market volatility

Cryptocurrency is a speculative asset which means its value can drop sharply, and this is a real risk for borrowers who may end up paying back a loan that is worth more than the cryptocurrency they’ve purchased.

In June 2020, Cointelegraph reported a flight attendant out of the United Arab Emirates exposed themselves to jail time and massive debt after they were unable to pay back a $100,000 loan with the Emirates Islamic Bank.

 

Turning a volatile asset into a business opportunity

Our advice for anyone looking to borrow funds to purchase cryptocurrency is to ensure you do your research and obtain advice from a qualified financial advisor (of course!). And, make sure you have strong assets as security and a clear exit strategy should the market change rapidly like it’s liable to do. We believe in enabling businesses to move quickly to take advantage of opportunities, and that includes accepting a range of business use cases. Yes, there’s an inherent risk in working with cryptocurrency but balanced with a solid exit strategy it can be a worthwhile investment.

If you’d like to discuss securing a loan to purchase cryptocurrency, get in touch today.

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Posted 15 March 2021
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