🖼️ NFT & Web3: Nftfi

NFT lending, or NFTFi, has emerged as a high‑yield, high‑risk segment of Web3 finance. Blockworks’ deep dive explains that platforms tokenise fractional ownership of high‑value NFTs, allowing holders to use them as collateral for loans denominated in stablecoins or native tokens. The mechanism hinges on automated valuation models that convert an NFT’s market value into a loan‑to‑value (LTV) ratio, often between 30‑60 %. Liquidity is sourced from institutional and retail investors seeking yield, but the volatility of underlying NFT prices and the opacity of secondary market activity create significant risk of under‑collateralisation. Regulatory attention is mounting, with U.S. and EU authorities scrutinising how these loans fit into securities and lending frameworks; potential classification as “crypto‑asset‑based loans” could trigger stricter capital and consumer‑protection rules.