Brazilian Crypto Exchange Mercado Bitcoin Launches Flexible Crypto Collateralized Loans

To avoid the high risks associated with liquidations, Mercado Bitcoin will limit the loans to 30% of the cryptocy users held by users in the exchange. This translates into a credit capacity of over $300 million, given that over $900 million are under exchange custody.

The credits will have an interest rate of 1.39% per month, one of the lowest rates for collateralized loans in Brazil, and only accept bitcoin and ether, the two largest cryptocurrencies by market capitalization. Other cryptocurrencies might be added at a later date.

Mercado Bitcoin stated that it would not liquidate customers’ collateral automatically. The exchange will seek to negotiate the execution and extend the client collateral until 35% if needed on a case-by-case basis, according to its CFO, Andre Gouvinhas.

This flexibility differentiates the platform from its decentralized finance counterparts, which execute liquidate users’ funds obeying smart contract logic. The credit can be used to purchase crypto on the platform. Mercado Bitcoin also allows users to withdraw these loans in national cy for other purposes. He remarked that this lending product could help users leverage their crypto holdings to get liquidity without selling them. He stated:

“With crypto-collateralized lending, we are able to offer greater efficiency and reduced costs to clients. This product allows clients to leverage themselves to take advantage of market opportunities without having to divest their assets.”