Kraken co-founder and CEO Jesse Powell recently shared in an interview with Bloomberg News that the crypto exchange will launch a nonfungible token (NFT) marketplace that will enable users to borrow funds against their NFTs.
Powell explained that the company plans to enter the NFT space in early 2022 and hopes to add the feature to determine the liquidation value of an NFT and whether it can be put up as collateral for a loan.
“If you deposit a CryptoPunk on Kraken, we want to be able to reflect the value of that in your account,” said Powell, continuing, “and if you want to borrow funds against that.”
The value of NFTs, however, is all over the spectrum, and only a small percentage of token owners hold a digital collectible valued for as much as a CryptoPunk, whose floor price is 66.9 Ether (ETH) or $273,673 at the time of publication.
According to Powell, NFT utility will explode next year:
“Phase one was speculation, phase two is buying art and supporting artists, phase three is going to be functional uses of NFTs.”
Additionally, Kraken recently acquired Staked, an infrastructure platform that allows for non-custodial crypto staking, in an effort to attract new investors. Kraken clients will now be able to earn crypto rewards and yield while retaining control over their digital assets.
Kraken was founded in 2011 and has become one of the largest crypto exchanges worldwide, ranking among the top in terms of average liquidity, volume and digital asset reserves, according to data from CoinMarketCap.
Related: Nexo partners with Three Arrows Capital to launch NFT lending & art financing service
Kraken’s announcement demonstrates how NFT-backed loans are becoming increasingly commonplace as more DeFi platforms, such as Arcade and Nexo, are offering this new loan model. As Cointelegraph recently reported, Arcade closed a $15-million funding round in December as part of a broader effort to grow its offerings and attract more investors to its collateralized NFT platform.