The rise of crypto-backed lending in Africa

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Owning Bitcoin and Solana no longer means selling them when cash runs out. Across Africa, digital asset startups are borrowing another idea from traditional finance: lending to consumers who are crypto-rich but cash-poor.

Crypto-backed loans, a form of lending tied to cryptocurrencies, allow users to obtain credit—in fiat, stablecoins, or other digital assets—by pledging their crypto holdings to these startups. It is a form of lending that is gaining momentum in Africa’s largest crypto markets, including Nigeria and South Africa.

In January, Busha, a Nigerian fintech startup that allows users to buy and sell digital assets and pay bills, launched crypto-backed loans as an additional product to its stack. The product offers up to 50% loan-to-value (LTV), allowing users to borrow up to half the value of their Bitcoin and Solana holdings and access the loans in Naira. Busha said it charges a 2% monthly interest.

Busha is one of several African startups offering crypto-backed loans. The emerging product, which borrows some features from the traditional finance sector where lending is a profit centre, could expand core services to crypto users that are overlooked in the broader secured lending market.

It could signal a maturing crypto market, especially if the startups are actually deploying their own capital into loans, rather than simply intermediating and sourcing liquidity from other global lending protocols, such as US-based Morpho. But as some African crypto lenders target the broader mass market, they face a bigger challenge: expanding the product beyond people who already hold crypto.

John Babodor, the African lead for Blend, a US-based startup that provides infrastructure to enable businesses to offer stablecoin yield, said that since the start of the year, he has received between $2,000 and $5,000 in crypto-backed credit from global lending platforms, including Aave, Kamino Finance, Hyperlend, MarginFi, Hyperliquid, and HypurrFi.

“I use crypto-backed loans to avoid selling my volatile assets like Bitcoin, Ether, Solana, and the $HYPE token,” Babodor told TechCabal. “For example, I deposited ETH into Aave and borrowed stablecoins against it. I then used those [stablecoins] to pursue additional yield opportunities, trade, buy meme coins, and occasionally off-ramp [withdraw] funds when needed. At one point, I had more than $5,000 worth of ETH deployed in this strategy.”

Crypto-backed loans are digital products originally built for digital asset traders. But Olayinka Omoniyi, co-founder of Monierate, a currency price-tracking platform, sees a larger market beyond traders.

Unlike Babodor, who prefers borrowing stablecoins and other digital assets, Omoniyi prefers borrowing in Naira. He said he regularly uses global exchange Binance or Bitmonie—a crypto-backed lending product he co-founded—to access liquidity without selling his Bitcoin holdings.

“If most of my income is in Naira, it makes sense for me to borrow in Naira,” he said. “You don’t want FX [foreign exchange] volatility becoming another problem when you’re trying to repay.”

The contrast between the two users captures a question at the centre of Africa’s emerging crypto credit market: is crypto-backed lending primarily a trading tool, or can it become a mainstream credit product?

That question reflects a broader opportunity.

While crypto-backed lending remains nascent in Africa, Galaxy Research, a US-based crypto research firm, estimated that the global crypto-collateralised lending market stood at $67.4 billion in outstanding loans at the end of Q1 2026, after reaching a record $78.7 billion in Q3 2025 before pulling back amid market volatility.

As more Africans accumulate Bitcoin and other cryptocurrencies, startups are building lending products that let users unlock liquidity without selling their assets, filling a gap left by traditional banks, which generally do not accept digital assets as collateral.

The startups building Africa’s crypto lending market

Nigeria is beginning to emerge as a market for crypto-backed lending.

Roqqu, a cryptocurrency exchange that operates in Nigeria and Kenya, has offered crypto-backed loans since 2023. TransferXO, a Nigerian startup that launched in 2023, expanded its crypto-backed lending product to Ghana in October 2025. The startup—which, like Busha, also provides Naira loans—claims it has disbursed over $10 million and recorded a 4.2% default rate.

Global players have also begun paying attention. In May 2026, Blockchain.com launched crypto-backed loans in over 100 markets where it operates, including Africa. The new product offers users access to USDC stablecoins without requiring them to sell their crypto holdings.

South Africa’s market is further along.

AltCoinTrader, one of South Africa’s oldest crypto firms, was one of the first exchanges to launch crypto-backed loans. In 2022, the startup introduced Easy Loans, enabling users to access crypto-backed credit at up to 7.95% annual interest.

In January 2025, VALR, one of South Africa’s largest cryptocurrency exchanges, launched a lending product for crypto traders. It doesn’t use an LTV ratio; VALR prices and issues loans based on a user’s risk profile, taking into account factors such as their collateral and trading activity.

Launched in August 2025, Geddes Capital, a South African investment and alternative finance firm, offers crypto-backed financing to small businesses and high-net-worth individuals at up to 50% LTV.

South African Bitcoin treasury firm Africa Bitcoin Corporation also plans to launch a Bitcoin-backed lending product, offering loans of up to a 50% LTV ratio at 12% annual interest, with repayment terms of up to 60 months.

NFTfi, a South African-founded startup that provides a marketplace to buy and sell digital art such as non-fungible tokens (NFTs), is the outlier. It enables users to lock their NFTs as collateral and borrow cryptocurrencies, such as Wrapped Ethereum (wETH) or stablecoins, from peer lenders.

Why crypto firms are getting into lending

For crypto companies, lending is a retention product. 

When customers need cash urgently, they can simply sell their crypto, leave the platform, and sometimes never return. Crypto-backed loans offer another option: borrow against the asset instead.

By keeping assets on the platform, lenders can earn interest on loans while encouraging customers to remain active users. 

The economics differ from conventional consumer lending. Crypto loans are typically over-collateralised, meaning lenders face less credit risk than banks and digital lenders issuing unsecured personal loans. Instead, the business depends on monitoring collateral values, maintaining sufficient liquidity, and liquidating positions quickly enough to avoid losses during periods of market volatility.

The challenge, however, is determining who the product is really for.

“Crypto-backed loans are still niche products in Africa,” Daniel Felix, co-founder and chief executive officer of NectarFi, a Nigerian startup that lets users trade digital assets and tokenised stocks, told TechCabal. “It has always been like that because of consumer choice and the way the product is structured. It is marketed as a DeFi [decentralised finance] product: you borrow when you need to buy another asset, farm a point, airdrop, or yield on a [DeFi] protocol.”

Babodor’s use case fits the original design. He deposits Ether, borrows stablecoins, and deploys the proceeds into other DeFi trading opportunities. According to him, the loan functions as trading capital.

Busha and TransferXO are pursuing a broader audience. By lending in Naira, they are targeting users who may never touch a DeFi protocol but still want liquidity without selling their holdings.

TechCabal reviewed the lending terms of African crypto lenders in June and found that the advertised LTV ratios range from 50% to 60%, depending on the collateral and the lender’s risk appetite. Interest rates range from about 1% to 2% monthly, while others charge annual rates of up to 8%, calculated daily.

For lenders, collateral quality matters as much as collateral value. Bitcoin and Ether remain the preferred assets because they are easier to liquidate during periods of market stress than smaller cryptocurrencies, allowing lenders to recover loans more quickly if prices fall sharply.

Liquidation and consumer protection risks

The biggest risk in crypto-backed lending is liquidation. When crypto prices fall and a borrower’s collateral drops below required thresholds, lenders can automatically sell part or all of the assets pledged against the loan to recover their funds. 

Babodor learned that lesson through experience.

“I’ve [been liquidated] before. It usually happens when you’re not watching your LTV ratio, which I wasn’t,” Babodor said. “I had some ETH in Aave, and I lost all of it. At first I thought I was over-collateralised, but that wasn’t it—It turned out I’d actually borrowed too much against my position. My LTV was at a very risky level, so when the price dropped sharply, I was liquidated.”

Due to crypto’s volatile nature, lenders are often exposed to collateral value swings, whether they hold the assets themselves or route loans through external protocols. Most platforms maintain collateral buffers to hedge against liquidation risk and unexpected under-collateralisation.

A sharp move in the price of Bitcoin, Solana, or Ether—major cryptocurrencies used for collateral—can trigger forced sales within hours. To cushion against losses, these platforms charge a penalty.

A liquidation penalty—imposed when a position falls below required collateral levels and is sold off—discourages strategic defaults, such as when borrowers choose not to top up collateral or repay a loan when prices fall. They get liquidated and still pay the penalty.

South Africa’s AltCoinTrader charges a 12% liquidation fee when collateral is sold off to cover a loan.

Some platforms try to reduce the damage before liquidation happens. Omoniyi said most crypto lenders he has used send alerts and allow users to top up collateral, repay part of the loan, or voluntarily close positions.

Even so, losses are not always contained. A borrower who meets all collateral requirements at the start of a loan can still end up short if prices fall too quickly. In such cases, the sale of collateral may not fully cover the debt, leaving the borrower with an unsettled balance.

That gap is where legal complexity begins. A fintech lawyer, who requested anonymity because he was not authorised to speak to the media, said borrowers can still be held liable for outstanding amounts, depending on contract terms.

“Crypto [as collateral] introduces an additional layer of complexity because of its volatility,” he said. “A borrower may satisfy the lender’s collateral requirements at the outset of the loan but still face a shortfall if the value of the crypto asset declines significantly before or during enforcement.”

Depending on the agreed terms, lenders could decide to recover the outstanding balance through the courts or directly from a customer’s other crypto holdings.

“Interest may accrue daily and may be charged, capitalised, debited from available balances, deducted from Collateral proceeds, or otherwise collected by Blockchain.com in its sole discretion,” Blockchain.com, a new entrant into the crypto lending market, said in its terms.

Crypto’s volatility pushes risk management onto borrowers, who actively self-manage their loans to avoid liquidation and additional debt, making crypto-backed lending a complex product to use.

Where the business breaks

Three structural constraints limit the crypto lending business. First is liquidity. For crypto lenders that directly lend, sourcing capital can be a hassle.

“The biggest headache in this business is sourcing liquidity,” Omoniyi said. 

He added that lenders typically rely on a mix of their own capital, investor funds, and debt to build a pool of fiat or stablecoins large enough to lend. Without sufficient liquidity, they cannot issue new loans.

Collateral management presents another challenge.

When a crypto lender is over-collateralised and holds customers’ locked assets, it is tempting to put them to work rather than leave them idle. 

That can include trading customer funds, commingling them with operating liquidity, or re-lending them to other borrowers (rehypothecation), increasing leverage across the lending system.

In May 2022, the collapse of Terra-LUNA’s algorithmic stablecoin, which offered yield up to 19.5%, triggered a crypto credit crisis. Celsius Network, a US-based crypto lender, became one of the sector’s biggest casualties. It had pooled customer deposits into risky investments, including Anchor Protocol, a lending platform on the Terra blockchain, and had re-lent assets to other borrowers. 

When Terra-LUNA collapsed, Celsius froze withdrawals and filed for bankruptcy two months later. The crisis rippled through the industry, contributing to the collapse of firms, including Singapore-based hedge fund Three Arrows Capital (3AC), which owed debts to crypto lenders Voyager, Genesis, and BlockFi.

The third biggest constraint is usage and adoption. 

The current wave of crypto-backed loans remains geared towards DeFi traders who need short-term liquidity without selling their positions. For the market to grow, however, startups must attract ordinary crypto holders. In Nigeria, only an estimated 25 million people use or have bought digital assets, shrinking the addressable market.

Omoniyi, who co-founded Bitmonie, believes crypto-backed loans could find a market beyond sophisticated traders, especially among Nigerians who hold crypto as a store of value but are reluctant to sell during periods of market volatility. 

He cited a customer who borrowed ₦300,000 ($220) against their Bitcoin rather than sell during a period of price volatility. The startup, which is still in beta, claims to issue loans at up to 60% LTV.

He added that the product’s transparency, with borrowers able to see the LTV ratio and liquidation thresholds upfront, is another advantage.

However, Babodor, who is a DeFi trader, is sceptical that ordinary consumers will embrace crypto-backed lending at scale.

“I could be wrong, but I don’t think crypto-backed loans will see widespread adoption among ordinary Africans,” he said. “The risks and market dynamics make them more suited to experienced crypto users than everyday consumers.”

Yet, the growing number of African startups offering crypto-backed lending suggests either that the business presents an attractive revenue opportunity or that the customer retention benefits far outweigh the risks. 

The harder question is whether the market can expand beyond traders and early adopters without exposing ordinary consumers to risks they do not fully understand.

The regulatory side of crypto-backed lending

Nigeria does not currently have a comprehensive framework dedicated specifically to crypto-backed lending.

Startups operating in the market are navigating a patchwork of existing rules that touch on securities regulation, consumer lending, anti-money laundering (AML) requirements, digital assets, and general contract law.

Part of the challenge is that crypto-backed lending is not a single product.

A borrower might take a Naira loan backed by Bitcoin. Another might borrow stablecoins against Ether. A third might borrow one cryptocurrency against another. A fourth might use decentralised protocols where smart contracts, rather than centralised intermediaries, manage the lending process. 

Each variation raises different regulatory questions around custody, disclosure, enforcement, and consumer protection.

“The real issue is that many of the protections developed for traditional lending markets may not clearly apply to every crypto-backed lending arrangement, particularly where the provider operates from outside Nigeria or structures the product in a way that falls outside existing regulatory categories,” the fintech lawyer said.

“As a result, borrowers may have fewer regulatory remedies than they would with a traditional bank or other heavily regulated financial institution. The issue is less the complete absence of legal protection and more the existence of regulatory uncertainty and potential gaps in product-specific protections.”

Nigeria’s existing consumer lending rules were built for a different world. 

The Federal Competition and Consumer Protection Commission’s (FCCPC) Digital, Electronic, Online, or Non‑Traditional Consumer Lending Regulations, which came into effect in July 2025, set binding standards on how digital lenders register, disclose terms, protect data, and recover debts.

The regulations were created with unsecured digital loans in mind; crypto‑backed products sit awkwardly in that framework, because the lender already holds collateral, the fintech lawyer noted.

Yet, borrowers are not entirely unprotected: general contract law, consumer protection rules, data protection obligations, and bans on deceptive practices still apply, but how well those safeguards work when crypto lenders, such as Aave and Kamino Finance, operate across borders remains unclear.

DeFi makes oversight complex. Some crypto-backed lenders rely on non-custodial protocols where smart contracts, rather than a central intermediary, govern how funds are issued and repaid. 

While regulators can compel licenced exchanges to produce records and comply with directives, they have far fewer tools when lending happens on autonomous blockchain protocols.

“Most of these loans are non-custodial,” Babodor said. “The ones I’ve worked with use native DeFi protocols underneath. A lot of them just plug into Morpho or Aave in the background, so whatever you’re borrowing is really coming from those places.”

Morpho, a US-based DeFi lending protocol, claims it has facilitated about $3.5 billion in loans. Some crypto lenders connect to protocols such as Morpho to access liquidity and manage collateral positions in the background. 

A layering of this sort complicates oversight. Regulators may supervise the crypto lender that interfaces with customers, but they have little direct authority over the decentralised protocols that ultimately provide liquidity or execute liquidations.

“I would expect the evolution [of crypto-backed lending] to follow an activity-based approach: regulators focusing on what a firm is actually doing (lending, custody, brokerage), rather than solely on the fact that the asset involved is crypto,” the fintech lawyer said. 

Regulators are likely to focus on disclosure of liquidation risks, collateral management, lending thresholds such as LTV ratios, consumer protection rules, and AML and counter-terrorism financing controls, the fintech lawyer noted.

Users want liquidity without selling their assets. Exchanges want recurring revenue and stronger customer retention. Regulators want to encourage innovation without exposing consumers to poorly understood risks.

Balancing those incentives could prove to be the sub-sector’s most difficult challenge.

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