BitcoinAlchemist on Nostr: It would be really cool to see bitcoin denominated loans to facilitate trade finance, ...
It would be really cool to see bitcoin denominated loans to facilitate trade finance, for example, replacing the standard letter of credit. Using Bitcoin to facilitate world trade would be awesome since there is already tons of lending activity. However, a problem with that is most smaller traders don’t meet such high collateral requirements.
If you're an upstart import/export business with less than 1M USD in reserves, you can still go to a supply chain finance company and get a loan to buy some goods and ship them somewhere. From what I know, traders usually use the goods themselves as collateral for a loan, presenting a receipt of ownership from like a storage facility for example.
What would be required from the lender would be some kind of guarantee that the borrower could provide (maybe similar documentation for example), and then the lender could earn bitcoin-denominated interest for providing that loan.
A combination of collateral (BTC + warehouse receipts + letter from buyer agreeing to pay for goods if they arrive, for example) could make for some interesting combos. Then it's not just giving up your BTC as collateral to get less BTC and pay interest, but then it would actually a loan that de-risks business operations for the borrower, and can provide risk-adjusted bitcoin-native yield to the lender. It's not failsafe, unlike an over-collateralized loan, and there's risk, which are some downsides. But I suppose if there wasn't any risk in providing these loans then the yield would not be justified.
If you're an upstart import/export business with less than 1M USD in reserves, you can still go to a supply chain finance company and get a loan to buy some goods and ship them somewhere. From what I know, traders usually use the goods themselves as collateral for a loan, presenting a receipt of ownership from like a storage facility for example.
What would be required from the lender would be some kind of guarantee that the borrower could provide (maybe similar documentation for example), and then the lender could earn bitcoin-denominated interest for providing that loan.
A combination of collateral (BTC + warehouse receipts + letter from buyer agreeing to pay for goods if they arrive, for example) could make for some interesting combos. Then it's not just giving up your BTC as collateral to get less BTC and pay interest, but then it would actually a loan that de-risks business operations for the borrower, and can provide risk-adjusted bitcoin-native yield to the lender. It's not failsafe, unlike an over-collateralized loan, and there's risk, which are some downsides. But I suppose if there wasn't any risk in providing these loans then the yield would not be justified.