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Crypto exchange Kraken's new NFT marketplace will now issue loans

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Starting in 2022, the exchange, according to Jesse Powell, will evolve into a marketplace for non-fungible tokens and NFT-backed loans.

Kraken co-founder and CEO Jesse Powell lately told Bloomberg News that the crypto exchange will introduce a non-fungible token (NFT) marketplace where users will be able to borrow money against their NFTs.

Powell said that the company intends to join the NFT sector in early 2022 and expects to include a feature that evaluates the liquidation value of an NFT and whether that can be used as security for a loan.

“If you deposit a CryptoPunk on Kraken, we want to be able to reflect the value of that in your account,” said Powell, continuing, “nd if you want to borrow funds against that.”

However, the value of NFTs varies significantly, and only a small proportion of token holders own a digital collectable worth as much as a CryptoPunk, which has a floor price of 66.9 Ether (ETH) or $273,673 currently.

Powell predicts that NFT utility will skyrocket next year:

“Phase one was speculation, phase two is buying art and supporting artists, phase three is going to be functional uses of NFTs.”

In addition, in an attempt to lure new investors, Kraken recently bought Staked, an infrastructure platform that enables non-custodial crypto staking. Clients of Kraken will be able to earn crypto incentives and income while maintaining ownership over their digital assets.

Kraken was formed in 2011 and has since evolved to become one of the world's largest crypto exchanges, ranking among the top in terms of average liquidity, volume, and digital asset reserves, as per data.

Kraken's statement indicates how NFT-backed loans are becoming more popular as additional DeFi platforms, such as Arcade and Nexo, provide this new loan model. Arcade recently closed a $15 million funding round as part of a wider attempt to expand its services and draw more investors to its collateralized NFT platform, as previously reported.

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