In an apparent step to increase liquidity and attract users, Japanese cryptocurrency exchange Bitbank has announced a bitcoin burrowing program.
Have 1 BTC? Loan it out
As per a report, the exchange shall allow account holders to lend a minimum of 1 bitcoin (BTC) to its Virtual Currency Lending service – in return for a fixed, predetermined rate of interest.
Initially, the service shall be available only for BTC holders and is scheduled to include popular cryptocurrencies like ripple, ether, litecoin, and bitcoin cash in the coming months.
One of Japan’s 16 full-licensed cryptocurrency exchanges, Bitbank offers eight cryptocurrency trading pairs and is ranked 31st in the world in terms of total daily traded volume.
The move comes on the bank of GMO’s cryptocurrency burrowing program, which the Japanese digital asset exchange launched in April 2018, making Bitbank the second exchange in the bitcoin-crazed country to do so.
As stated, the program shall burrow a user’s bitcoin for a minimum of 12 months, and payout interest dividends in proportion to lent capital.
Not anyone can rent out their bitcoin thou, as the exchange will oversee a month of “recruitment” for the program, conducting extensive personal and account checks upon interested users. After approval, the vetted traders would be allowed to lend their bitcoins in the subsequent month, i.e. a user who is approved in June 2018 shall be able to take part from July 2018, with a lock-in until July 2019.
Interestingly, Bitbank is seemingly stringent with its 12-month lock-in period, as the notice specifies:
“The cryptocurrency remain locked during the entire loan period. So, the cryptocurrency cannot be sold or transferred. Only when the loan period is elapsed or returned by Bitbank, the customer will be able to sell or transfer the cryptocurrency.”
The Fine Print
Bitbank shall pay a “usage fee” to lenders for usage of their funds, and they aren’t in line with cryptocurrency’s famed return rates.
For amounts up to 5 BTC, the dividend is a paltry 3 percent, with only a percent increase for users lending more than 5 BTC, and a maximum of 5 percent in usage fees for amounts exceeding 10 BTC.
At the time of writing, it isn’t known if the fees shall be processed on each month or each year.
Notably, in case a lender decides to retract his funds – for whatever strike of misfortune – he stands to lose 5 percent, inclusive of related taxes.
Interestingly, the exchange’s rival GMO offers a much better deal for users with regards to a lock-in period – offering a three-month minimum timeframe for users who lend their bitcoin, and a 150-day timeframe for other virtual currencies, such as ether, ripple, and litecoin.