Cryptocurrency lending has been increasing at a blistering pace over the last several years. By some measures, the volume of cryptocurrency lending has surpassed the volume of lending on traditional peer-to-peer lending platforms, which are limited to fiat currency loans. U.S. holders of cryptocurrency have been eager to participate in this lending market, but recent actions by the U.S. Securities and Exchange Commission are causing unexpected, and likely unintended, changes in how these loans are made. In fact, the SEC's actions may well reduce the amount of lending done through products registered with the SEC and increase the amount of lending on platforms that are not operated by licensed U.S. companies.

Lending Lessons From 'Prosper'

While cryptocurrency lending may have surpassed traditional peer-to-peer lending in volume, there was a time when the value of peer-to-peer fiat loans was increasing so quickly that some viewed them as a threat to traditional banking. It appeared possible that peer-to-peer lending platforms could "disintermediate" banks, who were profiting from the difference between the rate of interest paid by banks to depositors and the rate of interest paid to banks by borrowers whose loans were funded with deposits.