How to Make Crypto Assets Acceptable as Collateral in Traditional Credit Systems?

Crypto collateral lending is bypassing traditional credit checks. It doesn’t consider income or credit history, only asking: how much Bitcoin do you have?

Written by: Boaz Sobrado

Compiled by: AididiaoJP, Foresight News

"We don’t look at credit scores."

On July 21, at the Toronto Blockchain Futurist Conference, APX Lending founder Andrei Polyakov made this statement, leaving traditional finance professionals in the audience exchanging glances.

His logic is simple: if you bring Bitcoin worth $100,000, I’ll lend you a maximum of $60,000. It doesn’t matter who you are, what your credit history is, or what your income proof shows. We only look at the coins, not the person.

This is the fundamental difference between crypto collateral lending and traditional banks. Banks check credit history, review cash flow, calculate debt ratios, and take a "snapshot" of the borrower’s financial situation to assess repayment willingness and ability. Polyakov completely flips this process—people do not need to be trusted; the collateral itself is sufficient.

1. Canada’s First National License: Two Years for a Compliance Ticket

"We are the first company in Canada to receive approval from the securities regulator to offer Bitcoin and Ethereum collateral loans nationwide."

On April 1, 2025, the Ontario Securities Commission granted APX Inc. an exemption relief. The conditions were: proper information disclosure, suitability review, and most importantly—third-party custody.

This process took a full two years.

Clients’ Bitcoin and Ethereum are deposited with BitGo Trust, isolated in cold storage, with personal wallets managed independently, and insurance coverage up to $250 million. The most critical point: these coins will not be reinvested, moved, or mixed between different clients.

In other words, APX does not do re-pledging. The collateral quietly sits in cold wallets, and the company is responsible for one thing—market monitoring.

Market monitoring occurs every 15 seconds. "We know exactly how much these collaterals are worth every 15 seconds," Polyakov said.

This directly addresses the most common fear in crypto lending: will the platform use my coins for speculation? If the market crashes, can I still get my collateral back? APX’s answer is: the coins do not move; we only monitor the market, with insurance backing.

Polyakov is not a novice. In 2022, he sold the exchange he founded, Coinberry, to WonderFi. In June of this year, Robinhood acquired WonderFi for CAD 250 million, marking an indirect exit.

When asked if he considered issuing a token, he replied straightforwardly: "Canadian securities regulators are not very friendly towards token issuance, so we won’t issue a token." About 20 minutes after this statement, APX announced a partnership with Netcoins—continuing down the compliance service route.

2. Digital Letters of Credit: Providing Credit Without Being a Bank

At the same conference, Maximilian Schwartz, founder of Anvil Research Labs, presented another solution.

His team is developing a protocol on Ethereum specifically for issuing "fully collateralized digital letters of credit." The core feature is that assets do not need to change hands for the protocol to enforce commitments.

"I can give you a promise, and you know I can keep it. I can’t rug pull you, nor can I withdraw that value."

Traditional banks show little interest in small letters of credit. One banker directly told him: "We basically don’t do anything below $500,000; the operational costs aren’t worth it."

The result is that many small and medium demands and crypto asset holders are excluded from formal credit. Schwartz estimates that there are about 560 million to 740 million cryptocurrency holders worldwide—this is a large group that has long been overlooked by traditional finance.

What he aims to do is to separate the default risk from the "shared by all" model. Traditional credit often spreads the default costs of high-risk borrowers across everyone’s interest rates. The fully collateralized model can theoretically allow for more precise and lower interest rates.

"They are all doing high-risk loans. I can push my competitors down. I don’t even need to be a bank to provide you with services similar to 'buy now, pay later.'"

When discussing the most suitable scenarios for blockchain, Schwartz mentioned Caroline Pham. Pham served as the acting chair of the U.S. CFTC until December 2025 and currently works at MoonPay. She has publicly stated that the best use case for blockchain technology is collateral management.

Schwartz recalled: "I almost spit out my drink because that’s exactly the term I’ve been using."

3. The Biggest Problem with Crypto: It’s Not Very 'Investable'

Colin Sinclair, Chief Business Officer of Mayflower, was asked, "What is the biggest problem with cryptocurrency right now?" His answer was just one sentence:

"It’s not very investable."

Mayflower employs a bond curve mechanism, hardcoding the minimum price directly into the token contract, allowing holders to borrow against this "floor price." "In other words, you have an interest-free credit line that won’t be liquidated."

Sinclair believes the real trouble lies in human discretion. "I can tell you something is worth a certain amount, but if no one wants to buy it from me, it’s worth nothing." Liquidity, not the model itself, is the ultimate pricing power.

He cited an example from October 10, 2025. On that day, approximately $19 billion in leveraged positions were liquidated. One of the triggers was that USDe on Binance dropped to nearly $0.65 on its own platform.

"When a margin collateral from one exchange has issues and the price plummets, the entire market gets blown apart. Even those with 1x or 2x leverage were completely liquidated."

This wave of liquidations serves as a reminder to the market: when collateral prices fluctuate violently and heavily depend on a single platform for pricing, the risk can instantly transmit throughout the entire system.

This is also why:

• APX emphasizes isolated custody and high-frequency market monitoring
• Anvil emphasizes full collateralization and enforceability
• Mayflower attempts to lock in the floor price with code

The three companies are using different methods to achieve the same goal—reducing the uncertainties brought by "human judgment" and "sudden liquidity disappearance."

Conclusion

From this conference in Toronto, a clear main line can be seen: the crypto industry is shifting the "credit" assessment from evaluating "people" to evaluating "assets."

Traditional finance relies on credit systems, income proofs, and historical behavior. Crypto collateral lending directly asks—how much crypto have you locked? How much are these coins worth now? At what point will it trigger a margin call or liquidation?

The risks have not disappeared. The collateral itself will fluctuate, and poorly designed liquidation mechanisms can still trigger chain reactions, while regulatory requirements continue to rise. But the trend is clear: more and more people want to temporarily "borrow" the value of their Bitcoin or Ethereum without selling them.

APX provides an answer with a compliant, isolated, high-frequency market monitoring loan-to-value ratio of 60%. Anvil aims to lower the threshold for small loans with on-chain digital letters of credit. Mayflower attempts to fix the minimum value with code.

Three different paths point in the same direction—making crypto assets truly acceptable as collateral in the credit system, rather than just speculative chips.

Beyond credit scores, another lending machine has begun to operate.

This content is provided for general informational purposes only and doesn't constitute financial, investment, legal, or tax advice. Any events, rewards, online promotions, or related information mentioned herein should not be considered a recommendation, solicitation, or invitation to purchase, sell, trade, or otherwise deal in any crypto assets. Crypto assets are highly volatile and may result in loss. The availability of WEEX services, products, and related events may vary by region. You are responsible for ensuring that your participation is in accordance with applicable local laws and regulations.