Cross River Bank agreed to purchase up to $250 million of Figure's crypto-backed loans under a forward-flow agreement, a sign of growing institutional confidence in digital-asset-backed lending.
Under the agreement, Figure will originate and service the crypto-backed loans while Cross River purchases the receivables and earns interest on the underlying loans. Figure receives a servicing fee for managing the portfolio.
Noah Cooper, Cross River's chief investment officer and head of capital solutions group, said the loans are attractive because they are typically one-year loans backed by digital assets that can be liquidated quickly if collateral values fall below required thresholds.
“One of the things that we really like is the real-time valuation of the collateral and the digital assets, and the ability to to monitor real time, and to be able to liquidate in the event that there's a move downward in crypto prices,” Cooper said.
The news comes as crypto-backed lending makes a comeback after the collapse of lenders Celsius, BlockFi and Genesis during the 2022 crypto market downturn. Cooper said the deal gives Cross River exposure to an emerging asset class and a potentially lower-cost borrowing option for consumers who hold digital assets.
“There's no question there is the backdrop of more tailwinds in Washington in support of digital assets and innovation, and I think there's general enthusiasm around what this asset class should be,” he said. “This is a very plain vanilla obvious use case for individuals who have digital assets to be able to borrow cash against them.”
A major part of Cross River’s due diligence on Figure was related to its ability to liquidate digital assets if certain margin requirements aren't met in a downward crypto market, “and they've done an exceptional job of that,” Cooper said.
Figure, founded in 2018 by former SoFi CEO Mike Cagney, operates a blockchain-native lending marketplace. The platform has facilitated more than $25 billion in home equity and other financing products, according to the company.
The Figure agreement marks Cross River's first transaction providing capital to support digital-asset-backed loans, though Cooper said the bank is already working on a second, similar deal that has not yet been announced.
“With crypto-backed loans, we’ve gone from a relatively new idea — to allow borrowing against a highly popular appreciated asset — and we’ve achieved rapid adoption while creating a model that others have followed,” Todd Stevens, chief capital officer of Figure, said in a statement. “Cross River’s involvement is a major proof point underscoring our success so far.”
Other financial institutions have also been dipping their toes in crypto-backed lending. Among them, Cantor Fitzgerald recently launched a bitcoin financing business, while Russia’s largest lender Sberbank announced plans to offer crypto-backed loans earlier this year.
The Figure deal is part of Cross River's broader digital asset strategy. The bank has worked with crypto companies for more than a decade, including serving as an early banking partner to Coinbase. In March, it raised $50 million from existing investors, including T. Rowe Price, to support AI, crypto and embedded finance.
The bank plans to continue backing what it views as responsible operators in the crypto sector, an approach Cooper said has often led Cross River into emerging asset classes before larger financial institutions.
"We've oftentimes seen that some of the things that we're participating in today are asset classes that are being financed by larger banks in the future," he said.
