Uphold, a digital money platform providing access to investments and payments using blockchain technology, has announced a partnership with crypto-backed lending company Salt. Together, the two plan to provide users with cash or stablecoin loans using cryptocurrencies as collateral.
Uphold’s 1.7 million users can now secure loans through Salt against their holdings in Bitcoin (BTC), Ether (ETH), Litecoin (LTC), Bitcoin Cash (BCH), Dash (DASH), and XRP. The integration of the two platforms provides enhanced access to liquidity, enabling users to unlock additional value in their crypto holdings. Robin O’Connell, Uphold’s chief revenue officer, told Cointelegraph:
“Millions of Uphold users that are holding (or hodling) cryptocurrencies might want access to those funds without having to sell their crypto assets. The partnership with Salt allows users to free up liquidity, while maintaining the potential upside of the underlying crypto asset.”
SALT has also integrated Uphold wallets into its platform, allowing its growing user base to access Uphold's products through their dashboard. The integration streamlines the lending experience for both Uphold and Salt users through collateral transfer and loan proceed payouts.
The potential of crypto-backed loans
Crypto-backed loans from Salt ultimately allow Uphold users the ability to keep their crypto and receive cash, providing an easy solution to unlock the value of their assets without having to sell them on an exchange.
It’s important to note that Salt is a centralized cryptocurrency loan platform, providing loans to users in select jurisdictions. Other crypto-backed loan providers, such as ETHLend, are decentralized and cater to users worldwide.
Unlike traditional financial institutions, Salt allows customers to use their crypto assets as collateral to secure a cash (U.S. dollar) or stablecoin loan (a cryptocurrency backed by a reserve asset) in just 24 hours. This gives users the opportunity to fund large purchases, consolidate debt, or access working capital to scale their businesses with their cryptocurrency holdings.
“When applying for a loan through SALT, Uphold users can customize their loan by choosing their preferred loan type, loan amount, duration, and Loan-to-Value (LTV) ratio. SALT currently offers Loan-to-Value ratio options of 30%, 40%, 50%, 60% and 70% for crypto-backed loans and does not require customers to undergo a credit or income check,” Rob Odell, VP of product and marketing at Salt, told Cointelegraph.
Once a customer transfers the required collateral to Salt’s platform, Salt will reportedly fund their loan in about a day. Customers can choose to receive their loan proceeds in the form of U.S. dollars directly to their bank accounts or in a stablecoin (Uphold currently supports UPUSD, UPBTC and UPEUR). As soon as a borrower pays back their loan, they will have full access to their crypto assets again.
According to SALT, for the duration of the loan, collateral assets are locked in deep cold storage with private keys that have never been exposed to a network-connected device. These keys are protected by multi-signature processes. This security measure has been audited by the CryptoCurrency Security Standard (CCSS).
This differs from decentralized loan platforms, like ETHLend, where assets are allocated within an Ethereum smart contract, which could be considered more secure as the only parties able to interact with the loans are the lender and borrower.
A real-world appeal
According to Statista, there were over 42 million blockchain wallet users at the end of September 2019. Uphold currently has 1.7 million users, a number that it expects to increase rapidly in coming years.
By providing Uphold users with liquidity from crypto-backed loans, the firm hopes to achieve a number of otherwise untenable real-world use cases.
“If an individual who holds crypto wants to adopt a child, but does not have enough cash to pay for the adoption, they can borrow against their crypto holdings to secure a U.S. dollar loan from SALT to cover adoption costs,” said Odell.
Odell also mentioned that businesses can take out crypto-backed loans to cover operational costs:
“A crypto mining company that holds a significant amount of crypto needs fiat currency to cover operational costs, including purchasing more mining equipment and paying its employees. Given the company does not want to sell its crypto holdings for cash, the company takes out a business loan with SALT and uses a portion of its crypto holdings to secure the loan.”
These use cases are especially relevant for Uphold users, as many are located in Venezuela, Argentina, Uruguay, Paraguay and Brazil, and do not have access to easy liquidity. For example, following a major market crash in August, Argentina has been struggling with a debt crisis. Uphold aims to solve this for many of its users by providing liquidity through crypto-backed loans.
“A recurring trend in Latin America are areas with clear home currency volatility and/or government issues. Many users are looking for a secure and trustworthy solution to get out of their local volatile currency. While of course borrowing is a major value-added service to all of our Uphold Members, we feel it will see significant adoption among our Latin American user base in countries like Brazil,” said O’Connell.
Dylan Love contributed reporting to this article.