Genesis, a cryptocurrency lender, accepts NFTs as collateral for loans

<p>The decision to use tokens to back crypto transactions highlights the boom in the digital collectibles market.</p> <p>Genesis, a digital asset trading firm, has begun accepting non-fungible tokens as collateral for loans and derivatives transactions, indicating that digital art has found its way into the thriving market for complex crypto financial products.</p> <p>Genesis is entering one of the most exciting segments of the digital finance industry by developing financial products backed by NFTs, a type of digital collectable that can be traded on blockchains.</p> <p>"NFTs come up in almost every conversation," said Joshua Lim, Genesis' head of derivatives trading.</p> <p>The market for NFTs grew to $40 billion last year, and the excitement surrounding them is expected to continue in 2022. Sport-themed digital collectibles are expected to be worth $2 billion this year, after the broader sphere of collectable digital art first became popular in 2021.</p> <p>By building products around NFTs, investors can pledge their tokens in the same way that a traditional trader would use a high-grade asset such as government bonds to back a financial transaction. NFT prices, on the other hand, can be highly volatile, adding a layer of risk to the products Genesis has introduced.</p> <p>Lim stated that the company, which is part of Barry Silbert's Digital Currency Group, uses a "very conservative approach" to valuing NFTs as a backstop for loans or trades and as security against loans or trades. He claims Genesis only accepts "blue-chip" NFTs with historical significance or a thriving secondary market.</p> <p>Genesis is the largest cryptocurrency trading desk for professional investors. The company underwrote $50 billion in loans in the last three months of 2021, bringing the year's total to $131 billion. Last year, the trading desk handled $170 billion in cash and derivatives transactions.</p> <p>According to CryptoCompare data, the digital asset derivatives market grew eightfold between June 2019 and June 2021, wi