“We’ve never had a loss of principal,” Prince said. “It’s a low-risk type of lending, assuming you are able to manage that liquidity and track the volatility.” The company’s interest rates start at 7.9 percent.
Lenders aren’t entirely immune to the turmoil so common in the crypto world. The Securities and Exchange Commission has been scrutinizing Salt’s initial coin offering -- a fundraising in which startups sell virtual coins to investors -- and whether the sale amounted to an unregistered securities offering, the Wall Street Journal reported in November, citing unidentified people familiar with the matter. The company declined to comment.
‘Magic’ in Bust
But most lending businesses -- including Salt -- say they are prospering and planning to expand their product offerings.
“From a consumer perspective, we will start to look like a diversified fintech company - that started with loans,” Prince said. “Similar to a company like SoFi, who started as just a student lender and expanded to mortgages, wealth management, and now deposit accounts.”
BlockFi is, in fact, planning to offer more credit products, including a Bitcoin interest-bearing savings account and a loyalty card earning crypto. ETHLend is working to provide its technology to other lenders in Switzerland and Australia, so they can also accept crypto collateral.
“Everything flies in the bull market, but true magic happens when it does well in a bear market,” Aave CEO Stani Kulechov said in a phone interview. “The crypto-backed lending model is one of the rarest.”
This article was provided by Bloomberg News.