NFTs Are Now Collateral for Secured Loans. Are You Legally Protected?

CoinDesk

PUBLISHED ON: July 11, 2022

Regardless of personal views, it has grown near impossible not to take notice of non-fungible tokens (NFT). Even with recent slowdowns, total NFT sales volume could top $90 billion by the end of this year (after seeing a record $40 billion in 2021). That success has brought a new type of interest from a new group of participants in the NFT ecosystem – lenders.

And with a new participant in the NFT space comes a new label for NFTs – collateral.

Whether it is an NFT-secured loan, a used car loan or a multimillion-dollar leveraged finance of an entire company, the motivations of lenders and borrowers are consistent. The lender is incentivized to give temporary funds to the borrower in exchange for an interest rate charged on top of the principal loan amount. The borrower is willing to pay the interest rate because they need an immediate source of liquid funds without selling the asset.

To read Jeff's full article and watch his CoinDesk interview, please click here.

 

Jeff D. Karas is an attorney in Anderson Kill's Corporate and Securities Group and Technology, Media and Distributed Systems Group.