Our lives are becoming digitalized, and so are our assets. Many people are migrating away from tangible assets in favor of dealing in cryptocurrencies. With this shift to digitalizing assets, it is necessary to determine whether cryptocurrencies can be used as collateral for loans, and whether it is wise for lenders to accept such an asset as collateral.

Understanding How the Cryptocurrency is Used

When it comes to cryptocurrency as collateral, we cannot neatly fit it into any of the existing categories under Article 9 of the Uniform Commercial Code, which regulates secured transactions. This difficulty in categorizing cryptocurrency is furthered by the fact that various courts and government agencies have categorized cryptocurrencies differently. Therefore, because categorization of all collateral under Article 9 depends on how the borrower is using the collateral, and this categorization is essential to taking steps to secure an interest, we must look carefully at the cryptocurrency’s character to determine the best fit.