Key Highlights
- MultiSYG allows shared control and not full custody with 5 different parties to control.
- Collateral uses 3 out of 5 signatures to move Bitcoin.
- Sygnum Bank and Debifi offer a regulated and a mixture of traditional and digital banking structure.
- It is mainly targeted for large companies and individuals seeking sophisticated lending options.
Imagine you own a house, but you want a loan. You can use your house as collateral, something the bank can take if you don’t pay back the loan.
In the world of Bitcoin ($BTC), people are doing the same thing: using their Bitcoin as collateral to get a cash loan.
The problem with Traditional Bitcoin Loans
Earlier when you wanted to get a loan backed by Bitcoin, you had to give your lenders the full custody of your assets.
- It is risky for the borrower: All of your control is lost. If the lending company is not managed properly, all your Bitcoin could be lost or frozen.
- The Rehypothecation Fear: Lenders often take the collateral and use it for other purposes. This is called Rehypothecation.
The Solution: Sygnum and Debifi’s “MultiSYG “
Sygnum Bank (Swiss bank) is launching a new platform to offer loans backed by Bitcoin in partnership with Debifi.
Their goal is to offer regulated and solid terms for loan without requiring the borrower to lend the whole of his asset.
The core of the MultiSYG solution is a technology called a multi-signature wallet, or multi-sig wallet. Think of it like a safety deposit box that requires multiple keys to open, but instead of physical keys, they are digital signatures.
Big Difference
Generally, when you get a loan backed by Bitcoin from a bank, you have to give the bank the full control of your Bitcoin until you pay back the loan.
Sygnum’s new platform- MultiSYG, transforms this. It is for the first time when a bank is offering loans where the borrower need not have to give up full control of their assets.
How it works
- Your Bitcoin collateral is put into a special digital wallet controlled by five different parties.
- You need at least three signatures to move Bitcoin.
- This setup prevents bank from secretly using borrowers’ Bitcoin.
Who is it for?
It is designed for large companies and individuals who want access to a secure, high quality loan from a regulated bank but also want to keep an eye on the safety of Bitcoin throughout the term of loan. It is seen as a much more sophisticated option than the other crypto lending platforms that failed in the past.
Why this matters
This represents an evolution in the digital asset market
- Bridging old and new: It successfully combines the safety and regulation of traditional banks with the transparency and self custody feature of Bitcoin technology.
- Increased trust: It increases the faith of the borrower by removing blind trust i.e. required in handing all the assets of the borrower.
- Moving beyond past failures: The loopholes of the past are taken into consideration and a new platform is created.
Essentially, Sygnum and Debifi are offering a way for wealthy individuals and large companies to get a loan based on their Bitcoin while keeping a cryptographic proof of their holdings and partial control of their Bitcoin keys. This makes it a much safer, more transparent, and more appealing financial product for serious investors in the digital asset space.
