Crypto lenders are the intermediaries between consumers and the unregulated, blockchain-based world of cryptocurrencies. As a result, they are in an unusual situation when it comes to customer and asset responsibility. So, when deciding which cryptocurrencies to sponsor, lenders must balance popular demand with the need to add sustainable, worthwhile, and safe cryptocurrencies.
Demand vs. approval: Endorsement
In a new industry full of fresh investors, a lender’s asset integration considered as a recommendation. Crypto financing is a business, and any asset integration is ultimately a response to demand – a good market opportunity that benefits both parties. Maybe it’s because lenders are powerful in an industry that lacks institutional approval and searches for it in the pioneering enterprises driving it.
Coinbase CEO Brian Armstrong tweeted in June 2021 about the exchange’s quick asset integration and ambition to keep it up. It’s important to note that being listed on Coinbase is not the same as supporting an asset. Unlike an exchange, crypto lenders operate on the same principle: it’s not an endorsement. It’s just business. Also, creating client-focused, socially responsible enterprises is easy.
What if not an endorsement?
An asset’s listing on a lending platform is not an endorsement but rather a sign of its validity, stability, and security. Owning, investing in, and using financial services for a particular coin is regulated and technically sound. Lenders risk losing money, consumer trust, and the future of their organization if they partner with unreliable cryptocurrencies. While these companies’ due diligence cannot serve as a mark of approval for investors, it can act as a general indicator of an asset’s stability and safety without endorsing it.
Crypto lenders have so become regulatory watchdogs, suspending services for cryptocurrencies immediately if new regulatory issues surface. Numerous exchanges and crypto lenders stopped accepting XRP on December 23, 2020 due to the SEC’s lawsuit. Overall, these institutions’ swift responses reflect full compliance, experienced legal counsel, and preparedness to respond promptly under certain scenarios. Responsible crypto firms are the industry’s first reactors and should monitor.
Impact of listings
Nevertheless, the activities of companies have a substantial collateral influence on cryptocurrencies even if they do not embrace them. The top crypto exchanges have their own “Coinbase-effect” and “Binance-effect” that lead freshly listed coins to skyrocket in value. Inclusion by these exchange heavyweights provides purchasers a sense of credibility.
When PayPal revealed plans to use Bitcoin (BTC) in 2020, the news traveled swiftly and positively influenced the market. The “Tesla-” or “Elon-effect” originated when Tesla accepted Bitcoin as payment for its vehicles in March 2021 and then retracted this chance, causing a tremor in the crypto market. With a single tweet a few months later, Elon Musk undoubtedly precipitated an almost two-month market collapse.
These non-crypto native corporations’ influence on crypto prices is far from exhaustive and demonstrates the power of huge brands in the turbulent crypto market. They demand accountability from all blockchain enterprises, notably crypto lenders, who will soon be the new financial system’s banks. Market with many small retail investors and fresh entrants. The industry must self-regulate, recognizing and moderating the gravity of its listings.