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European originations among peer-to-peer (P2P) and marketplace lending platforms soared by 80% in 2019 to €6.6bn, up from €3.6bn the previous year. The data paints the stark difference between the U.K.'s mature lending platforms, which grew a moderate 10.7% to £6.2bn in 2019, and Europe where the market remains in high-growth territory. It also means that Europe appears on the verge of overtaking the UK's P2P and marketplace lending, possibly as soon as 2020, with the combined value of the U.K. and EU figures being worth more than £12bn last year. Unlike the UK market however, nearly half of the European lending volume is dominated by a single player, with Latvian lending marketplace Mintos originating 45% of P2P loans in 2019 worth a combined €3bn. The caveat is that Mintos operates as a kind of "P2P of P2Ps" which inflates its figures.

The Bank for International Settlements (BIS) published a paper that analyzes the effect of big tech platforms on credit markets. It finds that: "(i) platform lending serves as an instrument to price discriminate vendors with heterogenous funding needs, resulting in higher fees and below-market interest rates; (ii) platform lending can spur innovation by providing access to subsidized credit, but may be detrimental to vendors who do not borrow; and (iii) when the platform has better information it will lend only to the highest-quality vendors and at a better rate than banks, which, anticipating adverse selection effects, will not lend. The results suggest that platform lending can be socially desirable if the users would not have received funding from banks, but it has ambiguous effects otherwise."

The Tel Aviv Stock Exchange (TASE) is launching a Central Blockchain Securities Lending Platform to provide a single national market where Israeli institutions can lend securities directly to one another. This replaces a complicated and disjointed lending system and will allow the securities lending market to reach its full potential. It has been in the testing phase since March 2020 and is set to go live in November.

The Korean government drafted the Enforcement Decree of the Act on Online-linked Financing on P2P lending scheduled to take effect on August 27, 2020. It details entry requirements and regulations on business operation and investor protection. Under the draft, P2P lending businesses will be required to register with the Financial Services Commission, and different standards for minimum capital requirements are set according to P2P lenders' loan balances. For certain investment products (e.g., project financing), P2P lending business operators must disclose information to investors for a certain period prior to raising funds. Additionally, P2P lending to the same borrower will be limited to 7 percent of the P2P loan balance or KRW 7 billion.

The Bank of Canada (BoC) published a paper that develops a dynamic model of decentralized finance (DeFi) in which borrowing and lending are backed and overcollateralized by crypto-assets and contract terms are pre-specified and rigid. It identifies a price-liquidity feedback loop in which expectations of future higher lending volumes and prices lead to more lending and higher prices in the current period. This feedback loop and smart contract rigidity leads to multiple self-fulfilling equilibria where DeFi lending and asset prices move with market sentiment. This highlights difficulty of achieving stability and efficiency in a DeFi environment without a liquidity backstop.

"One of the strongest emerging narratives in crypto is the sudden rise of cryptocurrency lending platforms. Multiple new platforms have launched and the demand for their services is growing. What is crypto lending and who are the major players?"

The Thai Securities and Exchange Commission is seeking public comments on a proposal to prohibit businesses from crypto staking and lending activities. More specifically, businesses cannot accept "deposits of digital assets from the customers and lend, invest, stake or employ such digital assets." Moreover, they are prohibited from "providing support to third parties that undertake crypto saving and lending services, including marketing."

"This paper studies how introducing a central bank digital currency (CBDC) can affect the banking system. We show that CBDC need not reduce bank lending unless frictions and synergies bind deposits and lending together. We then estimate a dynamic banking model to quantify the importance of these frictions and synergies for the impact of a CBDC on the banking system. Our counterfactual analysis shows that a CBDC can replace a significant fraction of bank deposits, especially when it pays interest. However, CBDC has a much smaller impact on bank lending because banks can replace a large fraction of any lost deposits with wholesale funding. Substitution to wholesale funding makes banks' funding costs more sensitive to changes in short-term rates, increasing their exposure to interest rate risk. We also show that a CBDC amplifies the impact of monetary policy shocks on bank lending."

China's banking regulator has tightened rules governing how online lending platforms fund their loans, a move that analysts say could hit the valuation of Jack Ma's Ant Group. Under the rule changes announced over the weekend by the China Banking and Insurance Regulatory Commission, online lending platforms will have to contribute 30 per cent of the funding for loans they offer in partnership with banks. The CBIRC will also cap how much capital commercial banks can commit to online lending in co-operation with tech platforms. The new rules will come into force next year.

A Bank for International Settlements (BIS) paper explores decentralized finance (DeFi) lending platforms, concluding that their current institutional features mostly facilitate speculation in crypto-assets rather than real economy lending. Due to the anonymity of borrowers, over-collateralization is pervasive, which generates procyclicality. Reliance on collateral also limits access to credit to borrowers who are already asset-rich, negating financial inclusion benefits. The paper concludes that for DeFi lending to make inroads into the real economy, it needs to tokenize real assets and rely less on collateral by developing its ability to gather information about borrowers; as such, the system is likely to gravitate towards greater centralization.

Over the past 10 years mobile-based lending has grown in Kenya, but there are concerns about the business model. The most prominent is the debt culture that has become a byproduct of mobile-based lending: borrowers fall into the trap of living on loans and accumulating bad debt.

Opium Finance has released collateralized debt obligation products (CDOs) for Compound Finance's automated lending markets. Opium is a decentralized finance (DeFi) protocol that allows for creating, settling, and trading decentralized derivatives. Compound Finance is an algorithmic, autonomous interest rate DeFi protocol that allows for the creation of money markets on the Ethereum blockchain. Investors can put up the Compound debt token cDai - and soon Uniswap tokens - to diversify exposure to DeFi lending markets. Opium's product pays out structured returns to both a senior and junior risk tranche in exchange. The former tranche offers a 7% fixed return on DAI (a crypto-backed USD-pegged stablecoin) at maturity, while the latter pool offers a variable rate paid out after filling up the senior tranche's return.

This IMF paper focuses on marketplace lending using data for 109 countries from 2015 to 2017 to study the relationship between fintech credit to businesses and consumers and various aspects of financial development. Marketplace lending to consumers grows in countries where financial depth declines highlighting the role of fintech credit in filling the credit gap by traditional lenders. This result is particularly strong in low-income countries. In the business segment, marketplace lending expands where financial efficiency declines. The paper's findings show that low-income countries take advantage of the fintech credit opportunity in the consumer segment but face important challenges in the business segment.

Lending Club will cease offering Retail Notes as of the end of 2020, signalling a dramatic shift entirely away from the peer to peer (P2P) lending model under which the company was launched. Over the years, the online lender has utilized a marketplace model as more institutional money funded loans originated on the platform with the retail investor becoming a smaller segment of overall lending. The company said "unfortunately, under a prospective banking framework, it is not economically practical for LendingClub to continue to offer Notes." https://help.lendingclub.com/hc/en-us/articles/360050574891-Important-Updates-to-the-LendingClub-Notes-Platform

"Tether says in its terms of service that it only creates new stablecoin tokens, USDt, in acceptance for money. That is, to get $1 worth of USDt from Tether, you need to send it $1 in actual U.S. dollars. But in reality, Tether does not seem to be waiting for deposits to roll in before issuing new USDt. As the FT's Kadhim Shubber reports, it is directly lending new USDt out, much like how a bank puts new dollar IOUs into circulation by lending them out."

Genesis Global Capital, the lending arm of crypto investment bank Genesis Global Trading, is temporarily suspending redemptions and new loan originations in the wake of FTX's collapse. The unit serves an institutional client base and had $2.8 billion in total active loans as of the end of the third quarter of 2022. This decision impacts the lending business at Genesis and does not affect Genesis's trading or custody businesses.

The Bank of Canada published a paper that uses a simple stylized model of collateralized lending to analyze the value proposition and limitations of decentralized finance (DeFi). DeFi uses a decentralized ledger to run smart contracts that automatically enforce the terms of a lending contract and safeguard the collateral. DeFi can lower the costs associated with intermediated lending and improve financial inclusion. Limitations are the volatility of the crypto collateral and stablecoins used for settlement, the possible incompleteness of smart contracts and the lack of a reliable oracle. A proper infrastructure reducing such limitations could improve the value of DeFi.

Crypto lending service Celsius paused withdrawals, swaps, and transfers between accounts, citing "extreme market conditions". It did not provide a timeline for resuming normal operations. New Jersey-based Celsius, which has around $11.8 billion in assets, offers interest-bearing products to customers who deposit cryptocurrencies with its platform. It then lends out cryptocurrencies to earn a return.

The Bank of Canada published a paper that examines the optimal amount of user anonymity in a CBDC in the context of bank lending. Anonymity, defined as the lender's inability to discern an entrepreneur's actions that enable fund diversion, influences the choice of payment instrument due to its impact on a bank's lending decisions. The paper shows that moderate anonymity in CBDC leads to an inefficient pooling equilibrium. To avoid this, CBDC anonymity should be either low, reducing attractiveness, or high, discouraging bank lending. Specifically, the anonymity should be high when CBDC significantly benefits sales, and low otherwise. However, competition between deposits and CBDC may hinder the implementation of low anonymity.

The World Bank Group and the Cambridge Centre for Alternative Finance published a survey containing responses from regulators in more than 110 jurisdictions around the world on their approaches (and challenges) to the regulation of peer-to-peer lending, equity crowdfunding, and initial coin offerings.

According to the report, 90 percent of regulators "mentioned benchmarking and lessons learned from other jurisdictions as key triggers prompting changes in regulation more frequently than any other trigger." The survey also found that less than a quarter of respondents formally regulate peer-to-peer lending and initial coin offerings, while less than 40 percent of respondents have frameworks in place to regulate equity crowdfunding. Respondents also noted that new innovations and models are stretching regulatory resources. Regulatory resources dedicated to equity crowdfunding and initial coin offerings since 2017 have grown by over one-third and one-sixth for peer-to-peer lending. The survey also questioned the extent to which "light touch" regulatory frameworks are applied across those three areas. Lastly, the study finds that low-income jurisdictions are catching up to high-income jurisdictions, especially in regard to the regulation of peer-to-peer lenders. Here, low-income areas "are almost three times as likely as high-income ones to review their regulatory frameworks for peer-to-peer lending (43% vs. 16%)." However, as the study further shows, low-income jurisdictions are far less likely to have active regulatory innovation initiatives in place (innovation offices, sandboxes, RegTech/SupTech programs).