Collateral Protect: A Game-Changer for Digital Asset Lending and Borrowing

The digital asset market is known for its high volatility and complex price discovery processes. Coupled with an evolving regulatory landscape and industry standard practice still in the stage of development, these factors have historically made it challenging for institutional investors to confidently use digital assets as collateral.

As a response to this, we have designed Collateral Protect to help reduce operational risk and offer a solution that opens the door for institutional investors to lend and borrow against digital assets easily and safely using well-established traditional finance constructs.

Collateral Protect: An Adaptable Solution for an Evolving Industry

Collateral Protect addresses these challenges head-on by integrating legal and operational frameworks from the traditional financial world. This approach aims to simplify the process and enhance the security of digital asset transactions.

Collateral Protect makes it easy for our clients to collateralise any assets held in Zodia’s safe custody on demand. In combination with an overarching legal wrapper in the form of a Wallet Control Agreement, borrowers and lenders can rapidly enter into such agreements in response to market and liquidity needs. Wallet Control Agreements are similar to the Account Control Agreements commonly used in traditional finance – for the duration of a loan, the assets remain locked until the loan obligations are fulfilled.

Endless Opportunities: The Future of Digital Asset Collateral with Collateral Protect

Beyond securing regular assets as collateral, Collateral Protect also allows clients to borrow against staked assets in a streamlined and swift manner. Illiquid assets can become yield-generating as clients continue to earn rewards from their staked assets while borrowing securely against them, further enhancing the utility and value of their digital holdings.

As we look to the future, Collateral Protect shows our commitment to innovation and excellence in digital finance. Once smart contract functionality is developed further for lending and borrowing there will be even more possibilities, but the market needs to be receptive to what the technology can offer. Our new offering prioritises reducing operational risk and replicates a process that institutional clients are already comfortable with. By bridging the gap between traditional finance and the digital asset world, our aim is for Collateral Protect to be an essential tool for any institutional investor looking to navigate this new frontier with confidence.

Disclaimer: This article is provided to you for your information and discussion only. It should not be regarded as a solicitation or an offer to buy or sell any products or services in any country to any person to whom it is unlawful to make such an offer or solicitation. View full disclaimer here: zodia-custody.com/marketing-disclaimer.