Brazilian Cryptocurrency Platform Mercado Bitcoin Introduces Adjustable Crypto-Backed Loan Options

Mercado Bitcoin, a prominent cryptocurrency exchange based in Brazil, has introduced a flexible loan service that enables users to obtain credit in Brazilian reais backed by crypto collateral.

The loans will be capped at 30% of the total cryptocurrency held on the exchange, and liquidations will not be carried out automatically; instead, they will be assessed individually.

Mercado Bitcoin Introduces Crypto Collateralized Loans With Flexible Liquidation Terms in Brazil

Centralized cryptocurrency exchanges in Brazil are beginning to provide crypto-related financial products. Mercado Bitcoin, one of the leading exchanges in the nation, has unveiled a crypto-collateralized loan service that will be disbursed in the local currency to its users.

This marks the company’s inaugural offering of this nature, having obtained a payment institution license from the central bank the previous year.

To mitigate the significant risks linked to liquidations, Mercado Bitcoin will restrict the loans to 30% of the cryptocurrency that users hold on the platform. This equates to a lending capacity exceeding $300 million, considering that over $900 million is currently under the exchange’s custody.

The loans will carry an interest rate of 1.39% per month, which is among the most competitive rates for collateralized loans in Brazil, and will only accept bitcoin and ether, the two largest cryptocurrencies by market cap. Additional cryptocurrencies may be incorporated in the future.

Mercado Bitcoin has indicated that it will not automatically liquidate users’ collateral. The exchange aims to negotiate the execution and may extend the client collateral up to 35% if necessary, on a case-by-case basis, as stated by its CFO, Andre Gouvinhas.

This level of flexibility sets the platform apart from its decentralized finance counterparts, which liquidate users’ assets according to smart contract protocols.

The credit can be utilized for purchasing cryptocurrency on the platform. Mercado Bitcoin also permits users to withdraw these loans in the national currency for various purposes.

Gouvinhas noted that this lending service could assist users in leveraging their crypto assets to obtain liquidity without the need to sell them. He remarked:

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.