What’s Crypto Lending, and Why Did Investors Get Burned?
— Exactly deposits, Price differences, Bank run, Securities, Blockfi announced, Com © 2022 bloomberg l, Someone else ’, Accounts first sought approvals, Betting, Lose — 1 min read
Crypto lending accounts look a lot like savings accounts offered by banks, but with cryptocurrencies instead of traditional money. An investor opens an account, deposits cryptocurrency and earns interest. Many deposits are in Bitcoin, while other investors use stablecoins -- tokens whose price is often pegged at $1. Some firms say they're able to lend customer deposits to other institutional investors at even higher rates. Regulators worry that consumers don't understand that they're taking on much more risk than they would in a bank savings account. The accounts are still tiny compared with traditional banking, but it’s been growing fast. There aren’t uniform rules for firms offering the accounts first sought approvals from US federal regulators, and that already led to a backlash. The Source