Industry Reports

Banking on Bitcoin: The State of Bitcoin as Collateral

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Banking on Bitcoin.

The case for bitcoin as collateral The value of the global market for collateral is estimated to be close to $20 trillion in assets. Government bonds and cash-based securities alike are currently the most important parts of a well-functioning collateral market. However, in that, there is a growing weakness as rehypothecation creates a systemic risk in the financial system as a whole. The increasing reuse of collateral makes these assets far from risk-free and shows the potential instability of the financial markets and that it is more fragile than many would like to admit.

Bitcoin could become an important part of the solution and challenge the dominating collateral assets in the future.

Bitcoin’s unique properties make it the perfect collateral asset Bitcoin’s combination of properties is unlike those of any other asset classes: It is an asset without both counterparty risk and credit risk. It is available for trading 24/7, 365 days a year, all over the world. In addition, it is the most portable asset the world has ever seen. Bitcoin can be transferred around the world, instantly, at almost no cost, any time of the day, and any day of the year, and with full finality. No other assets can match these properties today, making bitcoin the perfect collateral asset for the future.

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