Crypto exchange Kraken will allow its customers to use non-fungible tokens (NFTs) as collateral to take out loans.
Speaking with Bloomberg in a new interview, Kraken CEO Jesse Powell says that as part of the exchange’s new NFT marketplace, users will be able to borrow funds against their NFTs.
“If you deposit a CryptoPunk on Kraken, we want to be able to reflect the value of that in your account. And if you want to borrow funds against that,” Kraken is building a system that can determine the liquidation value of the NFT, according to the report.
Powell revealed earlier this month that the exchange was working on an NFT platform. The CEO said he thinks the space was going to “a bigger and bigger thing,” and that Kraken wanted to be at the forefront of the wave.
“We have seen a tremendous amount of activity recently around NFTs that are related to various metaverses, basically virtual worlds, so anything regarding land in a virtual world, or items that exist in a virtual world, digital clothing you can take across virtual worlds. They often present proof of membership in a virtual club.”
Powell says that NFTs have penetrated the mainstream in a way that eclipses the adoption of Bitcoin, something that he attributes to the right series of events.
“It’s kind of shocking. For the first 10 years of Bitcoin we were trying so hard to sell people on why they should be interested in Bitcoin,” said Powell, explaining that the concept for NFTs existed in the early days of crypto when developers proposed “tagging” parts of the Bitcoin blockchain with metadata. “I guess it took the right combination of events, something really popular like NBA Top Shots that really got people talking about it.”
“Phase one was speculation, phase two is buying art and supporting artists, phase three is going to be functional uses of NFTs,” said Powell. Using deposited NFTs as collateral on Kraken could be one of those uses, he said.