Decentralized finance company Maple Finance has introduced a lending pool worth up to $300 million to provide secured debt financing for Bitcoin mining companies.
Maple Finance co-founder and CEO Sidney Powell said that the recent bear markets in the crypto industry had caused lenders to hesitate in providing necessary funding. At the same time, traditional finances had yet to embrace the sector.
Today, @IcebreakerDeFi joins Maple and opens a $300M capacity pool to provide secured debt financing to blue-chip Bitcoin mining and digital asset infrastructure companies. pic.twitter.com/ZWyLV2P9hr
— Maple (@maplefinance) September 20, 2022
“Miners play an essential role in growing the crypto ecosystem and local economies, and we are proud to extend a new financing vehicle to direct capital where it is needed the most," Powell said.
Companies need to be located in North America and Australia and fulfill the standards of accounting management and power strategies of their locations to apply for funding. The loan lasts for 12 to 18 months with an interest rate of 15 to 20 percent. This interest rate is considered “high end” in the industry.
Borrowing companies can use physical and intellectual properties—including mining rigs and power transformers—as securities. This policy ensures that not all debt securities will be “adversely” affected by the volatility of BTC prices.
Maple Finance will list all loans in the lending pool on its platform. Publicly traded mining companies who receive loans from the pool are also required to disclose the loans to the investors. This rule applies to both public and private mining companies. The “transformational” transparency is expected to increase capital in the mining sector.
The DeFi venture said this was the first Maple Finance product to provide secured loans to a specific sector. In the past, its products were non-secured loans offered to various crypto companies, including market-making firms.
Based on the total loans outstanding across various DeFi lending institutions, Maple Finance manages 50 percent of the DeFi lending sector. Launched in May 2021, the liquidity pools have provided up to $1.8 billion of loans. The DeFi company said they planned to provide loans to fin-tech companies in the future.
Growing interest among investors
Maple Finance enables investors and capital allocators to participate in the lending pool. These investors must be accredited by their jurisdictions and fulfill the minimum income criteria. A U.S. investor must generate a pre-tax income of over $200,000 (or $300,000 with a legal spouse) per year to qualify or have a liquid net worth of over $1 million.
Australia-based Icebreaker Finance has been appointed to manage the lending pool. The firm offers low-teens "risk-adjusted returns" to investors. Icebreaker Finance CEO Glyn Jones said the limited funding option had motivated investors to fund BTC mining companies. He said these companies would “agree to different terms than they would have agreed nine months ago, because they don't have many choices.”
This lending pool is not the only effort carried out to help Bitcoin miners. Antalpha, a partner of Bitmain, launched a new debt instrument for miners in July. Bitcoin miners have also attempted other strategies like debt restructurings and acquisitions to keep afloat.
At the moment, investors are anticipating a Federal Reserve interest rate hike as the August inflation data have shown a higher rate of inflation than expected. It is expected that the hike will further decrease the crypto market value. Traditional stocks have earlier experienced drops ahead of the hike.