If you’re holding cryptocurrency but need cash for a property purchase, business venture, or other investment, you might be wondering whether you can use your digital assets as security for a loan.
The good news is yes – you can borrow against your cryptocurrency in the UK, and it’s becoming more common as the digital lending market matures.
Crypto-backed borrowing lets you access funds without selling your digital assets, meaning you won’t miss out on potential future gains or trigger an immediate tax bill.
You’ll keep ownership of your cryptocurrency while using it as collateral for a loan. It’s particularly useful if you’ve built up substantial wealth in digital currencies but find traditional lenders hesitant to consider these assets.
Whether you’re looking to put down a deposit on a property, need capital for your business, or want to seize an investment opportunity, understanding how crypto loans work could put you on the front foot.
What Is Crypto-Backed Borrowing?
Think of cryptocurrency borrowing as similar to taking out a short-term bridging loan against your house – but instead of using property as security, you’re using your crypto holdings.
The main difference from secured loans is how the security aspect works.
With a mortgage, your property stays put while securing the loan. With crypto-backed borrowing, your digital assets are transferred to a secure custody arrangement. This protects both you and the lender while the loan is active.
The UK market for cryptocurrency loans is still developing, with most options coming from specialist lenders rather than high street banks.
These include private banks, alternative finance providers, and dedicated crypto lending platforms. Each has different requirements and ways of structuring loans, but all will want to see clear proof of how you acquired your cryptocurrency.
Most lenders focus on mainstream cryptocurrencies.
Bitcoin and Ethereum are widely accepted as security, while some lenders also consider other established coins like Litecoin and Cardano.
The key factor is that the cryptocurrency needs to be easily valued and traded.
You’ll usually be able to borrow between 25-50% of your cryptocurrency’s value, giving both you and the lender some protection against market movements. The exact amount depends on which cryptocurrency you’re using as security and the lender’s risk assessment.
Why Do People Borrow Against Cryptocurrency?
Many people borrow against their cryptocurrency rather than sell it because they want to keep their position in the market while accessing some cash.
If you’ve seen your digital assets grow in value, selling them could mean missing out on future gains – plus you’ll face an immediate tax bill on any profits.
Let’s say you bought Bitcoin a few years ago and it’s now worth a substantial amount.
You need cash for a property deposit, but you believe Bitcoin’s value will continue to rise. By borrowing against your holdings instead of selling, you keep your investment while getting the funds you need.
For business owners, borrowing against Bitcoin can make sense when you need working capital but want to maintain your cryptocurrency investment. You might have significant wealth tied up in digital assets but relatively little cash flow – a common situation for many crypto investors.
Some people use these loans for tax planning.
Rather than selling and paying Capital Gains Tax, they borrow against it to fund investments or purchases. This can be more tax-efficient, though you should always seek professional tax advice first.
Others simply prefer not to sell their crypto in a dip or bear market. A securities-backed loan gives them financial flexibility while waiting for more favourable market conditions.
lombard loans
How Crypto-Backed Loans Work in the UK
Security Arrangements
When you take out a crypto-linked loan, your digital assets (coins) need to be placed in a secure arrangement that protects both you and the lender.
This usually involves transferring your cryptocurrency to a specialist custody provider – a bit like putting valuables in a secure vault at a bank.
The custody provider will hold your cryptocurrency in cold storage, meaning it’s kept offline and away from potential cyber threats.
You’ll still own the assets, but they’ll be locked under a legal agreement until you repay your loan. Most UK lenders work with established custody providers who offer institutional-grade security and insurance protection.
The transfer process is straightforward but needs careful attention to detail. You’ll send your cryptocurrency to a specific wallet address provided by the custody service.
Once received and verified, the lender will release your loan funds to your bank account.
Loan Structure
Most crypto loans run from 3 to 12 months, giving you flexibility to match the term to your needs. Unlike traditional mortgages that can run for decades, these loans are designed to be shorter-term solutions, similar to bridging finance.
The amount you can borrow relates directly to the type of cryptocurrency and its value.
Lenders offer around 25-50% of the crypto value as a loan.
This buffer helps protect against market swings – if cryptocurrency prices fall sharply, you might need to either add more crypto as security or repay part of the loan early. This is called a margin call.
You have several options for eventual repayment.
You can make regular interest payments and repay the full amount at the end of the term, or some lenders let you roll up the interest and pay everything together at the end. If cryptocurrency prices rise during your loan term, you might be able to release some of your crypto that’s no longer needed as security.
The process needs careful planning, especially around exit strategies. You’ll want to be confident about how you’ll repay the loan before taking it on – whether that’s through property sale, refinancing, or other income sources.
Let’s Talk!
Who Can Access Crypto-Backed Finance?
To qualify for cryptocurrency loans you’ll need significant cryptocurrency holdings – our lenders look for a minimum of £200,000 in mainstream coins.
This reflects both the administrative costs involved and the need for sufficient security to cover the loan.
Beyond the value of your holdings, lenders will want to see clear proof of how you acquired your cryptocurrency.
This means providing documentation showing your purchase history, trading records, and the source of funds used to buy the crypto. It’s part of standard anti-money laundering checks that all UK lenders must perform.
You’ll need to be at least 18 and either a UK resident or have a UK registered address.
Some lenders will consider international clients. If you’re borrowing through a company structure, you’ll need to show your ownership and control of both the company and the cryptocurrency assets.
The FCA doesn’t directly regulate crypto-backed lending, but lenders still follow strict protocols around customer protection and security. You’ll need to pass standard identity checks and may need to demonstrate your understanding of cryptocurrency investments and the risks involved in using them as loan security.
Common Uses for Crypto-Backed Loans
Property Purchase and Investment
One of the most popular uses for cryptocurrency loans is property purchase. You might have built up wealth in cryptocurrency but need money for a house deposit.
A crypto backed loan lets you access the cash you need without selling your digital coins and potentially missing out on future gains.
These loans work well for bridge-to-let situations too.
Say you’ve found an investment property that needs refurbishment before it can be rented out. You could use a crypto-backed loan to buy and renovate the property, then refinance onto a standard buy-to-let mortgage once you have tenants in place.
Much like how you would use a bridging loan.
Business Finance
Many company owners use crypto business loans to fund their companies’ growth.
You might need working capital to take on a large contract, buy inventory, or hire new staff. Instead of selling your cryptocurrency investment, you can borrow against it while keeping your exposure to potential market rises.
These loans also help when you spot time-sensitive business opportunities.
Perhaps you’ve found a competitor’s assets for sale at a good price, or you want to buy out a business partner. A crypto loan can provide quick access to funds without the lengthy approval process of traditional business loans.
Asset acquisition is another common use – whether you’re buying equipment, vehicles, or even another business. The speed of arranging crypto-backed loans means you can move quickly when opportunities arise.
How a Specialist Broker Can Help
Working with a specialist broker makes real sense when seeking a crypto loan.
The best lending options aren’t available directly to borrowers – they’re only accessible through experienced brokers with established relationships in this space.
A broker who understands both traditional finance and crypto markets can make all the difference to your loan terms. They’ll know which lenders match your specific needs and how to present your case in the most compelling way.
For example, if you’re using Bitcoin as security for a property purchase, they’ll understand how to structure the deal to satisfy both the crypto lender and any future mortgage provider.
Brokers with experience in high-value lending can also help manage the risks involved.
They’ll advise on loan-to-value ratios that give you enough buffer against market movements, and help plan for scenarios like margin calls. They’ll also coordinate with your other advisers, making sure tax implications and legal requirements are properly considered.
Most importantly, a good broker will save you time and stress.
They’ll handle negotiations with lenders, manage the application process, and ensure all documentation meets requirements. With access to private banks and specialist crypto lenders, they can secure better terms than you’d find on your own.
Next Steps and Getting Started
If you’re considering borrowing against your cryptocurrency, start by gathering documentation about your holdings.
You’ll need proof of how you acquired your crypto, including purchase records and trading history.
Think carefully about your exit strategy – how will you repay the loan?
Whether it’s through property sale, business income, or refinancing, having a clear plan strengthens your application. Consider too how you’d handle a significant drop in crypto values.
Your next move should be speaking with a specialist broker such as Bridging Finance London, who can assess your situation and match you with suitable lenders. They’ll help you understand what’s possible and guide you through the application process.
Before making any decisions, have these key items ready:
- Proof of your cryptocurrency holdings
- Documentation showing how you acquired them
- Recent bank statements
- Evidence of your plans for the borrowed funds
- Details of how you’ll repay the loan
Remember, while crypto-backed loans can be arranged quickly, taking time to prepare properly will give you the best chance of securing good terms.
FAQ
Our lenders require a minimum of £200,000 in cryptocurrency value. Some specialist lenders might consider smaller amounts, but you’ll need to speak with a broker to explore these options.
Mainstream cryptocurrencies like Bitcoin and Ethereum are most widely accepted. Some lenders also consider Litecoin and Cardano. The key factor is the coin’s market capitalisation and trading volume.
Related reading: Is it possible to borrow against Bitcoin?
With proper documentation, loans can be arranged in 5-7 days. The speed depends on how quickly you can provide required information and the complexity of your borrowing needs.
Crypto loans do have a loan to value percentage. If values fall below these thresholds, you’ll receive a margin call. This means you’ll need to either add more cryptocurrency as security or repay part of the loan to maintain the agreed loan-to-value ratio.
Yes. While your crypto is held as security, you remain the owner. Some lenders allow you to withdraw excess security if values rise substantially above the required loan-to-value ratio.
Lenders use regulated custody providers with institutional-grade security. Your crypto is held in cold storage, protected by insurance and legal agreements.
We have lenders that can offer 25-50% of your cryptocurrency’s value. The exact percentage depends on the type of cryptocurrency and the lender’s risk assessment.
Loan are short-term, usually 3 to 12 months. Some lenders can offer revolving credit facilities.
Cold storage means keeping cryptocurrency offline in a highly secure environment, away from internet connections. When you take out a crypto-backed loan, your digital assets are moved to cold storage with a regulated custody provider – think of it like putting valuables in a bank vault.
A margin call happens when your cryptocurrency’s value falls below a set threshold. When this occurs, you’ll need to either add more cryptocurrency as security or repay part of your loan to maintain the agreed loan-to-value ratio. Your lender will contact you if this happens.
While crypto-backed loans and Lombard loans share some similarities, they’re not exactly the same.
Both use assets as security, but Lombard loans traditionally use more conventional assets like stocks, bonds, gold and investment funds.
Crypto-backed loans specifically use cryptocurrency, Bitcoin and Altcoins as collateral.