Shawn Owen: Co-Founder at SALT Comments on Why Crypto Lending Platforms have Raised Interest Rates on Deposits

Crypto lending platforms, including BlockFi, Ledn, and Nexo, have recently raised their interest rates on deposits. Historically, crypto lending platforms have offered fairly steep returns.

The question is, why? They’re citing a lack of options for borrowers, given both Celsius and Voyager going bankrupt, but there’s good reason to be wary of these claims, especially when BlockFi, for instance, could now be acquired for just $15M instead of $240M.

Shawn Owen, Co-Founder & Interim CEO a regulated crypto lender SALT, thinks that this rhetoric could very well be a way of masking that these platforms are seeing more outflows of deposits than inflows. They might actually be turning to raising interest rates in an attempt to reverse this flow.

It’s also worth bearing in mind that none of these lending platforms have registered their interest products, they aren’t publicly reporting on their finances, and deposits in these interest products aren’t insured.

In an interview with CI, Shawn talked about how BlockFi and Ledn depositors that are being attracted by these increased interest rates may be replaying the sagas of Celsius and Voyager.

Our conversation with Shawn Owen is shared below.

Crowdfund Insider: Why have many crypto lending platforms recently raised their interest rates on deposits?

Shawn Owen: The impetus for these deposit interest rate increases is that these platforms are seeing more outflows of deposits than inflows. In addition, two of the largest crypto lenders exited the market, creating a supply shock for capital. While rates observed on decentralized finance platforms indicate that there is reduced demand for borrowing, as indicated by reduced utilization rates, larger institutions – such as market makers and arbitrage hedge funds – that need consistent access to debt capital have had to pay a premium due to reduced lending capital available in the market today.

Finally, lending companies that may have survived the recent market downturn or were bailed out by others may have opportunistically raised yields to capture gaps in the market. However, it’s worth noting that none of these lending platforms publicly report on their finances, so we can’t know for certain what’s going on behind the curtain.

Crowdfund Insider: Why is transparency important in crypto lending? How can lenders be more transparent?

Shawn Owen: In both secured and unsecured lending, transparency is paramount. Without a clear idea of assets and liabilities, borrowers and lenders alike can’t properly assess counterparty risk, which is a major decision driver for deploying capital into money markets. Institutions with opaque financials are more susceptible to default on their loans due to a large risk profile. In the case of crypto-backed lending, borrowers want to know their collateral assets are safe and that the lender they choose employs responsible re-lending practices.

What we saw in crypto financial services company defaults was a fallout resulting from a chain reaction of defaults among institutions that took on concentrated exposures to toxic counterparties. It’s important that lenders in the space maintain transparency with borrowers to build trust and verify that their assets are safe.

Lenders can be more transparent by documenting their policies and procedures with prospective capital providers, and ensuring sufficient controls exist to execute those operational processes. Further, adapting proper internal controls requires thorough third-party support, such as an auditor. Since SALT reports publicly through the SEC, there is an additional standard of being able to make it through a PCAOB audit, considered more rigorous than a typical private company audit. Finally, reporting results in a timely and consistent manner can provide additional comfort to capital providers.

Crowdfund Insider: How can lenders and consumers alike prevent another Celsius situation? What can we learn from this?

Shawn Owen: Aside from introducing transparency to the institutions that lack it, these firms can create stricter limits for their customers and improve their in-house risk & asset management policies. Lenders should also adhere to stricter parameters when choosing which crypto assets to accept as collateral for loans or which ones to accept for interest-bearing accounts. It’s important to evaluate factors including liquidity, demand, and most importantly the structure and risk of a given cryptocurrency.

When it comes to transparency, SALT is a leader in the crypto space and adheres to the same financial reporting requirements as any publicly traded company in the United States. Additionally, unlike Celsius, SALT never supported the extremely risky experiment that was UST. Rather, SALT accepts nine strictly evaluated cryptocurrencies as collateral with three of them being true stablecoins. This combined with the company’s financial reports and detailed loan agreements makes it easier for customers to understand SALT’s financial position and how the company structures its loans. SALT also offers 24/7 customer support, providing customers with a way to ask questions or share concerns directly with the company’s loan and support teams.

Crowdfund Insider: What are the enticing features of SALT for the average crypto connoisseur? How is regulatorily-compliant lending, paving the landscape for the future of compliant crypto money markets?

Shawn Owen: We pride ourselves on providing the most regulatory-compliant and safe crypto lending experience possible, assuring our customers that their funds are secure and that they are within the law of their local jurisdiction. In addition to providing a safe environment for customers, SALT offers competitive interest rates, and flexible loan terms, and allows borrowers to combine multiple cryptocurrencies to use as collateral for securing their loans.

SALT is in the business of helping customers preserve and grow their crypto wealth and is the only crypto lender offering Stabilization – an alternative to traditional liquidation that helps preserve the value of a borrower’s crypto portfolio in a market downturn.

Having released SALT Stabilization in 2021, we have seen the product function as intended, preserving 80+% of customer portfolios in even the worst market crashes. Prior to the launch of this product, these same customers would have lost ~80% of their portfolio value under the former traditional liquidation model. In addition to these features, SALT will continue to offer attentive customer support both online and over the phone, providing customers with the reassuring experience of speaking to a live person about their questions or concerns.

Crowdfund Insider: What are Salt’s plans for changing the future of crypto lending?

Shawn Owen: SALT’s long-term vision is to offer a secure, frictionless lending experience by blending the best parts of CeFi and DeFi platforms. Given the transparency and immutability of DeFi smart contracts, we believe the future of crypto lending will likely be native to on-chain DeFi protocols. To prevent obsolescence, SALT envisions integrating its product offerings with native DeFi protocols down the road, provided there is more regulatory clarity and that our vision of smart contracts powering most of crypto lending comes to fruition.

In the distant future, SALT plans to offer loans against a variety of traditional and crypto assets. We currently offer secured business and individual loans with an emphasis on auto loans for borrowers who want to use their crypto holdings as collateral. Eventually, we would like to expand our collateral options to include real-world assets like art and property.



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