Cryptocurrency lenders are institutions that are squeezed between consumers and the volatile, blockchain-based and often unregulated cryptocurrency area. Thus, they are in a special position when it comes to responsibility towards their customers and the assets they provide services for. Thus, lenders perform a delicate dance of responsibility when choosing a currency to secure, balancing between meeting popular demand and adding sustainable, useful and secure digital currencies.
Requirements versus consent: a matter of consent
Not surprisingly, in an emerging industry full of new investors, the integration of lending funds is often confused with approval. When companies add new assets to their service offerings, they tend to overlook the fact that cryptocurrency lending is actually a business, and any asset integration is ultimately a response to demand – a good market opportunity that benefits both businesses and customers. for good. Perhaps this is because lenders are powerful players in a room that has historically lacked institutionalization and that seeks approval from the leading companies in the industry.
In June 2021, Coinbase CEO Brian Armstrong posted a series of tweets about the exchange’s rapid integration of several assets and its intention to keep up with that pace. “No one should take Coinbase listing as evidence of this asset,” Armstrong wrote, noting the subtle discrepancy between working with an asset and getting it approved. While their transactions are different from barter transactions, the same principle applies to cryptocurrency borrowers: it is not authentication, it is just business. There are many ways to create a customer-centric and socially responsible business.
If not approval, what then?
Placing an asset on a lending platform may not be an approval, but an indicator of a certain degree of its legitimacy, stability and security. Lending cryptocurrency in a specific currency means that it is regulatory and technically wise to own, invest in and use financial services. Lenders will lose a lot of business due to unreliable cryptocurrencies, including funds, as well as the trust of their customers and the future of their business; Consequently, they maintain high standards of asset technical reliability, market-level liquidity, price stability and legality. Although these companies’ due diligence may not serve as the aforementioned stamp of approval for investors, they can be an indicator of a kind of cryptocurrency gain, which provides an overall measure of asset stability and security without being verified.
As such, lenders of cryptocurrencies are at the forefront of regulatory action, and it should be noted that this complex interdependence is two-way – immediately suspends cryptocurrency operations when new regulatory issues with a coin or token may arise. This exact scenario was realized on December 23, 2020, when several major stock exchanges and cryptocurrency lenders stopped offering XRP services in connection with the US Securities and Exchange Commission’s lawsuit against Ripple Labs. A valuable takeaway is that even the immediate reaction of these institutions to the possibility of legal problems with XRP shows a trend towards full compliance, competent legal advice and a willingness to take immediate action in response to specific circumstances. In fact, responsible crypto companies are the first reactors in the industry and can be useful for monitoring when navigating space.
Related topics: SEC vs. Ripple: An expected but undesirable development
Announcements and impact [insert company name]
While the integration of currencies on lending platforms does not mean approval, the actions of companies still have a strong side effect for cryptocurrencies. The world’s largest cryptocurrency exchanges have the so-called «Coinbase Effect» and «Binance Effect», which cause exponential growth in the value of newly traded coins. On the one hand, this is due to the fact that it suddenly became available to a wider audience of investors, but in addition, its inclusion of these giants on stock exchange gives buyers a sense of confidence.
A similar phenomenon was observed in 2020 when PayPal announced its plans to work with bitcoin (BTC): the news spread quickly and lifted the market in general. This year, the dominant example was “Tesla-” or “Elon-Effect”, which began with Tesla accepting bitcoins as payment for its cars in March 2021 and then dropping that option – and of course both. caused a wave in the crypto industry. Two months later, it can be argued that Elon Musk himself caused a nearly two-month decline in the market with one tweet.
Related topics: Expert response: How does Elon Musk affect the crypto space?