Kraken has decided to let its Pro users borrow funds against their crypto holdings without having to sell their assets. On Wednesday, the exchange announced “Kraken Flexline” as a fixed rate crypto loan.
Explaining the feature Kraken said, “You can post crypto collateral on Kraken Pro and receive crypto or stablecoins, which can be used immediately for trading or withdrawn off-platform.”
It is, however, noteworthy that the interest rates on these loans range from ten percent to 25 percent. These are significantly higher than traditional mortgages that usually charge around seven percent interest.
The exchange is perhaps factoring-in the volatility of the crypto market wherein the collateralized assets could drop in prices, causing financial harm to Kraken. Additionally, Kraken is not asking for any credit score check before releasing the loan — a risk it is compensating with high interest rates.
“Kraken Flexline does not rely on smart contracts or on-chain liquidity pools. It is operated directly by Kraken, using established risk management, custody, and liquidation controls that clients already trust,” its announcement added. “Clients know who is holding their collateral, how their loan is priced, and when and why liquidation thresholds apply,”
The Wyoming, U.S.-based exchange said users will get a loan repayment window ranging from two days to two years. Users will be able to place multiple assets as collaterals for these crypto loans.
Whether this feature will reach non-Pro Kraken users remains undisclosed for now.
For now, crypto loans have not become as popular given that regulations to oversee these transactions are loose and largely undefined for now.
Australia-based crypto firm Block Earner did launch Bitcoin-backed home loans in October last year.