Where can you get a Bitcoin-backed loan? Platform types compared

Bitcoin-backed lending platforms are gaining traction, allowing users globally to borrow fiat currencies or stablecoins by using their Bitcoin as collateral. But, not all of these platforms are built equally.

Platforms offering these loans currently include exchanges, DeFi, custodial, and non-custodial, P2P marketplaces, OTC desks, each with unique features, benefits, and drawbacks. This guide provides a quick overview of where to get Bitcoin-backed loans. This is the broad categories of platforms covered here:

• Centralized lending platforms

• Crypto exchanges with lending services

• Decentralized finance (DeFi) platforms

• Bitcoin-native lending platforms

• Peer-to-peer (P2P) lending marketplaces

• Institutional and OTC lending desks

Here's an overview into these types:

Centralized lending platforms

Examples: Nexo, Ledn, YouHodler, Arch Lending

These platforms act as intermediaries, typically holding users’ Bitcoin collateral in custody. They offer user-friendly interfaces, fast funding, and additional services like savings accounts or trading. Centralized platforms often involve a central entity facilitating loans, which may be custodial or, in rare cases, non-custodial.

• Custodial: Yes

• KYC required: Yes

• Ease of use: Very user-friendly

• Good for: Quick access to funds, fixed interest rates, and fiat loans

Best for users who prioritize simplicity and convenience over custody. Users must trust the platform’s security and solvency, as assets are held in custody.

Crypto Exchanges with Lending Services

Examples: Coinbase, Binance

Major cryptocurrency exchanges integrate lending services, allowing users to borrow against Bitcoin within their trading ecosystems. These platforms typically hold collateral in custody and offer loans in fiat, stablecoins, or cryptocurrencies.

• Custodial: Yes

• KYC required: Yes

• Ease of use: Seamless for existing exchange users

• Good for: Integrated access to funds and trading features

Ideal for users already active on exchanges who want basic loan services. Like centralized platforms, exchanges hold collateral, introducing security and solvency risks.

Decentralized finance (DeFi) platforms

Examples: Aave (via wrapped BTC)

DeFi protocols operate on blockchain networks (e.g., Ethereum, RSK), enabling peer-to-peer lending without intermediaries. Bitcoin-backed loans often require wrapped Bitcoin (e.g., WBTC) or compatibility with Bitcoin layer-2 solutions. Users interact with smart contracts, retaining control over assets.

• Custodial: No (non-custodial)

• KYC required: No

• Asset required: wBTC or equivalent

• Good for: Tech-savvy users who want permissionless borrowing

Best for users comfortable with DeFi tools and self-custody wallets. Converting Bitcoin to wrapped forms (e.g., WBTC) introduces additional technical risks.

Bitcoin-native lending platforms

Examples: Hodl Hodl Lend, Sovryn, Debifi, Unchained Capital, Firefish

These platforms are designed specifically for Bitcoin, using native Bitcoin or BTC Layer 2s (like Rootstock or Lightning) rather than wrapped tokens. Some are custodial; others use multisig to minimize trust.

• Custodial: Varies (some like Firefish are non-custodial)

• KYC required: Varies

• Good for: Bitcoiners seeking trust-minimized borrowing

Ideal for users who want to stay true to the Bitcoin ethos.

Peer-to-peer (P2P) lending marketplaces

Examples: Firefish, Hodl Hodl

P2P platforms connect borrowers and lenders (investors) directly, often using Bitcoin collateral secured via escrow (e.g., multisig). They minimize intermediaries, facilitating bilateral loan agreements with customizable terms.

• Custodial: Typically non-custodial

• KYC required: In most instances to align with regional AML rules

• Good for: Flexible terms, a borrower-centric model

Great for users who want full control and custom loan terms. Finding suitable lenders may delay the process. To counter this, platforms like Firefish have introduced the Instant Liquidity feature.

Institutional and OTC lending desks

Examples: Genesis Trading, Unchained Capital, Anchorage Digital

These platforms cater to institutional clients or high-net-worth individuals, offering personalized Bitcoin-backed loans with higher loan amounts. They provide tailored terms and often involve direct negotiations.

• Custodial: Yes or multisig

• KYC required: Yes

• Loan sizes: High

• Good for: Institutions and large-volume borrowers

Suited for professional clients needing trusted, regulated service. Often operate under strict regulations, appealing to institutional clients. May also have high fees.

Conclusion: Which platform is best for me?

Choosing a platform depends on user priorities:

• Interest rates: Centralized platforms and exchanges may often offer competitive rates, while DeFi rates fluctuate.

• Security: Bitcoin-native and P2P platforms prioritize non-custodial models, reducing counterparty risk.

• Ease of use: Centralized platforms and exchanges are beginner-friendly, while DeFi and Bitcoin-native platforms require basic technical knowledge.

• Currency support: Platforms vary in offering fiat (e.g., USD, EUR), stablecoins (e.g., USDC).

• Accessibility: Geographic restrictions and KYC requirements impact availability.

Some platforms span multiple categories. For instance, Firefish operates as both a Bitcoin-native platform (using multisig escrow) and a P2P marketplace (connecting borrowers and lenders directly). Similarly, Unchained Capital serves as a Bitcoin-native platform and an institutional lending desk.

Disclaimer: This blog is for informational purposes only, not financial or legal advice. Bitcoin-backed loans carry risks like price volatility and loss of collateral. Do your own research before deciding.