Can Bitcoin be used as collateral for loans? Financial Supervisory Commission: It will be difficult for Taiwanese banks initially, the value and stability of crypto assets still need to be verified.

The FSC approves high-net-worth customers to apply for guaranteed loans from banks with their overall financial asset portfolio, but crypto assets such as bitcoin and NFT may not be included in the scope of guarantee due to value fluctuations and stability concerns. (Summary: New regulations of the FSC: 70~80% of VASP customer assets in Taiwan must be stored in cold wallets) (Background supplement: Yongfeng Gold Securities "stock gift card" approved by the FSC and can be directly exchanged for 241 Taiwan stocks) Taiwan's Financial Regulatory Commission (FSC) recently announced an important decision to approve banks to start financing business guaranteed by high-net-worth customers' "financial asset portfolios", commonly known as "Lombard Lending". The move is seen as an important step in revitalizing the liquidity of the wealthy and integrating international private banking services. Zhuang Xuyuan, vice chairman of the FSC, pointed out that this business is mainly aimed at customers with large financial assets, allowing them to use their entire portfolio as collateral to apply for loans from banks without actually selling assets, obtain additional funds for reinvestment or meet other financial needs. Current definition of financial asset portfolio The so-called "financial asset portfolio", according to the preliminary definition of the FSC, mainly covers traditional financial products with relatively high liquidity and clear value assessment. This includes stocks of listed companies, bonds (including government bonds and corporate bonds), mutual funds, insurance policies (especially those with policy value reserves), structured financial products (such as linked bonds and portfolio commodities), etc. Chuang stressed that the scope of the final acceptable collateral still needs to be carefully assessed by the undertaking bank, and the key is that the bank must be able to "secure the creditor's right", which means that the value of the collateral needs to be relatively stable and easy to liquidate if necessary. What are the advantages? Lombard loans have long been used in private banking in Europe and the United States, and are one of the core tools for serving high net worth clients (HNWIs). For customers, the biggest incentive is to be able to obtain short-term or medium-term funds through asset pledge without affecting the long-term investment layout, and use financial leverage to amplify potential investment returns. For example, a client may hold a basket of long-term high-performing stocks or bond funds, and if they need funds temporarily, the traditional approach is to sell some of the assets, which may miss future appreciation opportunities or be subject to capital gains tax. With Lombard loans, customers can obtain loans secured by these assets, and repay them when the funds are smooth, and the original investment is retained. Referring to foreign experience, borrowing interest rates range from about 2% to 6%, depending on the risk of the collateral portfolio, the loan amount, the customer's credit profile and the market interest rate environment. Zhuang Xuyuan also mentioned that customers who prefer this type of financing are usually investors who want to earn stable interest spreads or seek more flexible capital scheduling methods, such as monetizing insurance policies to obtain funds, and then investing in other projects with higher returns. At the same time, the FSC has also set strict risk control requirements, emphasizing that banks must conduct detailed credit assessments on customers and fully inform customers of relevant risks, especially the risk that market fluctuations may lead to a decline in the value of collateral, or even require additional guarantees or be forcibly disposed of. The Cryptocurrency Dilemma: Why Are Bitcoin, NFTs Temporarily Stopped? However, cryptocurrencies such as Bitcoin, Ethereum, and non-fungible tokens (NFTs) are explicitly excluded from the initial scope of application. Zhuang admits that it is "not easy" to include bitcoin or NFTs in the scope of guarantees. She further explained that the main sticking point is that there are high challenges in "value recognition" and "price stability" of such assets. For banks, using such highly volatile assets as collateral for loans undoubtedly increases significant risk. Once the market falls sharply, the value of the collateral may quickly fall below the loan amount, making it difficult to secure bank claims. This is contrary to the core principles of bank credit business's pursuit of controllable risks and debt protection. Moreover, regulatory attitude is also a key factor. The regulatory policies of various countries around the world on crypto assets are still developing and changing, and the Taiwan Financial Regulatory Commission has been taking a relatively cautious attitude towards this. Zhuang Xuyuan specifically mentioned that "if banks want to include [crypto assets such as bitcoin], I hope to consult the FSC", which hints at the regulator's high reservations about banks' rash acceptance of crypto assets as collateral. Zhuang Xuyuan also contrasted art, antiques, high-end wine, etc. She pointed out that even abroad, although these alternative assets are occasionally included in the scope of guarantees, at home they are generally difficult for banks to accept due to the lack of professional valuation mechanisms and active secondary markets. Cryptocurrencies seem to face a similar dilemma in this regard – even though their digital form makes it seem convenient to transact, the dilemma of value determination remains a huge obstacle ahead. Therefore, at least in the early stage of policy opening, crypto assets such as bitcoin and NFT may not become qualified collateral in the Lombard loan business of banks. Crypto Asset Guarantees from a Global Perspective: Challenges and Opportunities While Taiwan's FSC has reservations about crypto assets as collateral for Lombard loans, the practice of using cryptocurrencies for financing has become very common in the Web3 space around the world. There are currently many platforms (CeFi or DeFi lending protocols) that specialize in providing crypto-asset collateral services, allowing users to stake mainstream cryptocurrencies such as Bitcoin and Ether and lend stablecoins (such as USDT, USDC). However, such services also require users to keep in mind higher risks, including platform risks (hacking, bankruptcy), smart contract risks, and more intense liquidation risks. In contrast, traditional financial institutions are extremely cautious about accepting crypto assets as collateral. Although there are sporadic reports that some private banks or specific financial institutions abroad have begun to accept customers as alternative guarantees such as bitcoin on an experimental basis, they often impose extremely stringent conditions. For example, setting a very high excess guarantee ratio may require that the mortgage value be several times more than the loan amount; Only Bitcoin, Ether and other coins with the largest market capitalization and relatively good liquidity are accepted; Higher requirements for customers' overall wealth status and risk tolerance; And it needs to be paired with crypto asset custody solutions that meet regulatory requirements. Market Impact and Future Outlook: The Boundary Between Traditional Finance and Emerging Assets The FSC's liberalization of Lombard lending is positive for Taiwan's banking sector, especially those focused on wealth management. This business will help increase the depth and breadth of services to high-net-worth clients, increase client retention and open up new sources of interest income. At present, in the eyes of the competent authorities, there is still a clear line between crypto assets and traditional financial assets. Its high-risk, volatile nature, as well as valuation and regulatory uncertainty, make it difficult to easily fit into the risk framework of the traditional financial system, and at least in the short term, Taiwan will be relatively cautious about the pace of integrating crypto assets into mainstream financial applications. Related reports Trump 4/2 reciprocal tariffs or more targeted "and effective immediately", can Taiwan escape? Taiwan also suffers? Trump reciprocal tariffs 4/2 start: will not be soft on the "dirty 15 countries", first name India Yang Jinlong: Taiwan's housing market "soft landing" has seen its initial effect, but the central bank will not relax control, do not want to repeat the Japanese bubble: . 〈Can Bitcoin be used as a mortgage? FSC: It is difficult for Taiwanese banks in the early stage, and the value and stability of cryptocurrencies are still to be verified" This article was first published in BlockTempo's "Dynamic Trend - The Most Influential Blockchain News Media".