Fidelity Digital Assets, the cryptocurrency of the Asset Management Group, will allow institutional clients to pledge bitcoin (BTC) as collateral for cash loans.

As reported by Bloomberg on Wednesday, the company has entered into a partnership with the crypto lender BlockFi to disburse loans. Institutional customers of Fidelity’s depository solution will be able to withdraw cash loans from their stored bitcoins without having to transfer them, provided they have a BlockFi account.

The target clients for this function are primarily hedge funds, miners and OTC offices. Collateral lending is usually used to access liquidity without losing a long position on the collateral asset. The cash can be used to open leveraged positions and build hedging strategies or to pay business costs.

In a conversation with Cointelegraph, a spokesman for Fidelity said that the offer is part of the “demand for capital efficiency gains” among customers. “Our comprehensive services, including custody and trade, will continue to help organizations achieve capital efficiency with a priority on asset integrity and stability,” they said.

The loan to value ratio will be set at 60%, which means that for every $ 1,000 in security, you can get a maximum of $ 600 borrowed money. However, this parameter can be changed according to the customer’s specific needs. Fidelity explained that it has no role in determining the terms of the loan, which limits its contribution to the tripartite agreement for the preservation of Bitcoin.

Fidelity Digital Assets has been providing bitcoin caching services since October 2019. Later, the company has also started offering services to the Asian market.

BlockFi is a large lender of cryptocurrencies that offers interest on deposits sent to the platform. Although this is a company that focuses on retail when it comes to attracting deposits, this money is mostly lent to other institutions. The company recently issued a Bitcoin-awarded Visa debit card.

Source: CoinTelegraph