Nexo Australia gets green light to issue crypto-backed loans to Aussies

Homebuyers struggling to put together a cash deposit for a bank loan are turning to a novel way to secure a mortgage.

Aussies who jumped on the cryptocurrency and Bitcoin craze are now able to use those as leverage to secure a home deposit, with Nexo Australia officially joining a small list – NewsWire has verified three other lenders – who now have certifications to lend money to the general public with crypto as collateral.

Australia has relatively high crypto investment per capita, and borrowing against crypto is similar to securities-backed loans or margins.

University of Newcastle personal finance expert Mardy Chiah said lenders likely would not want high loan-to-value ratios because of crypto’s highly volatile nature.

“This concept of accepting crypto or Bitcoin as collateral is actually quite a new concept … it’s probably something that will gain traction given that the market understands more and more about the risk,” Professor Chiah said.

But he said Nexo’s regulatory green light for certification for crypto-backed loans did not equal endorsement from the government.

“These registrations shouldn’t be interpreted in such a way that now the government has endorsed crypto-backed lending,” Professor Chiah said.

“This Austrac registration is principally about anti-money laundering and financial crime obligations.

“I imagine the company must have considered thoroughly their risk management as well, given the volatile nature of Bitcoin.”

Accepting smaller crypto coins would be “far too risky”, Professor Chiah said.

Nexo will accept 12 different coins, the multinational’s Australian general manager Peter Stanhope said.

Borrowers collateralising Bitcoin and Ethereum can get a loan-to-value ratio up to 50 per cent, and users of the other 10 accepted coins can push up to 30 per cent; all to a principal maximum of $US2m (A$2.8m). Interest rates will range from 0.9 per cent to 21.9 per cent per annum.

“Property deposits are one of several uses we expect, based on what we’re seeing in markets where the product already exists,” Mr Stanhope said.

“Our loans have been structured to be very flexible which makes them useful for lots of other purposes.”