Bitcoin-Backed Loans: A Growing Trend
A rising trend is emerging among Bitcoin enthusiasts, particularly early adopters and wealthier individuals, who are utilizing Bitcoin-backed loans to finance real estate purchases while avoiding capital gains taxes. Instead of selling their Bitcoin holdings, which could incur taxable liabilities, these crypto investors are seeking out loans that use their cryptocurrency as collateral.
Tax Advantages and Loan Mechanics
According to Mauricio Di Bartolomeo, co-founder of Ledn, this method is particularly appealing to those who might not fit the conventional profile for mortgage qualifications.
“Acquiring a loan against Bitcoin generally does not constitute a taxable event, allowing clients to access cash while still having their asset appreciate in value,” stated Di Bartolomeo.
With loans typically secured at a 50% loan-to-value (LTV) ratio, clients can receive either fiat currency or stablecoins in return, facilitating a quick funding process. On average, loans can be processed within approximately 9.6 hours, offering the flexibility of no compulsory monthly payments, and borrowers can repay loans at any time without incurring penalties.
Global Adoption Amid Market Volatility
This innovative lending model is seeing traction not only in Latin America and the United States but also in parts of Europe, largely due to the borderless nature of Bitcoin. Nevertheless, market volatility poses challenges to borrowers, as the value of Bitcoin can fluctuate, affecting their collateralized positions. Di Bartolomeo highlighted:
If the LTV exceeds 80%, lenders have the authority to liquidate part of the collateral to clear the outstanding loan, allowing the borrower to retain their secured property.
Banking Relationships with Bitcoin
Interestingly, traditional banks tend to overlook Bitcoin when providing loans because of the regulatory challenges and risks associated with assessing creditworthiness. Ledn, however, has developed a system that forgoes extensive credit checks. With Bitcoin acting as collateral, the arrangement emphasizes the speed of liquidation whenever required. Di Bartolomeo noted:
“We regard Bitcoin as the highest quality collateral available, due to its continuous trading and high liquidity.”
Market Performance and Future Outlook
In the first quarter of 2025, Ledn reported an impressive issuance of over $300 million in loans, with projections suggesting that the figure could surpass $1 billion by the end of the year. In the previous year, their repayments found clients significantly benefiting from Bitcoin price surges, with returns outpacing interest costs by a factor of eight.
As the landscape continues to change, many high-net-worth individuals find Bitcoin loans a viable option for buying property without having to liquidate their digital assets. Di Bartolomeo mentioned:
“These investors prioritize maintaining exposure to their leading asset while also advancing their real estate endeavors.”
Conclusion: Confidence in Bitcoin
On a related note, Seamus Rocca, CEO of Xapo Bank, mentioned that an increasing number of Bitcoin holders are becoming ready to leverage their assets as confidence in the market rises. Recently, Xapo Bank unveiled a lending service that permits clients to borrow U.S. dollars against their Bitcoin holdings, offering up to $1 million without relinquishing ownership of their crypto.
