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The crypto winter and FTX collapse has decimated the ranks of cryptocurrency lenders. Genesis, BlockFi, Voyageur Digital and Celsius Network all filed for bankruptcy in the past seven months, and the contagion may still not be over. But at least one crypto lender appears to be on the comeback trail.\u00a0<\/p>\n
SALT Lending, one of the world\u2019s first cryptocurrency lenders, announced Feb. 8 that it has closed a $64.4 million financing that will strengthen its balance sheet and replenish its capital reserves. Accredited investors will receive shares of the company\u2019s preferred stock in return for their funding. Though the Series A recapitalization effort is still subject to approval by regulatory authorities, it should allow the company to return to full operation in the first quarter.<\/p>\n
As reported<\/a>, Denver-based SALT Lending announced a \u201cpause,\u201d i.e. a freeze, on withdrawals and deposits to its lending platform in mid November, shortly after the FTX crash. Like some other crypto firms, SALT had used the Bahamas-based FTX as a source of liquidity for its lending operations. <\/p>\n \u201cCrypto faced a perfect winter storm in 2022, taking with it significant industry participants like Terraform Labs, Voyager Digital, Celsius Network, Three Arrows Capital, FTX, and BlockFi. SALT was not immune to these market forces, but we are determined to emerge stronger than ever,\u201d Shawn Owen, founder and interim CEO of SALT, said in an announcement today. <\/p>\n While SALT Lending never filed for bankruptcy, its November freeze on withdrawals set off<\/a> a mini tempest on social media. The firm also lost its California lending license, and a deal to sell the company to BnkToTheFuture was jettisoned<\/a>. <\/p>\n The California license remains suspended, though Owen told Cointelegraph in an interview that it\u2019s working with the state\u2019s regulators to get it restored. \u201cWe\u2019re staying as transparent as we can, and we’re educating them on all the details of exactly how the business model works.\u201d But Owen still can\u2019t say at this point if and when the license will be restored. \u201cYou can’t guarantee anything because they do have discretion. But we’re doing everything we can to be good actors.\u201d<\/p>\n SALT plans to seek further funding later in 2023 \u2014 an anticipated Series B financing in the $100 million size range \u2014 to further build out its capital buffer, Owen told Cointelegraph. <\/p>\n FTX\u2019s collapse clearly impacted SALT\u2019s business. \u201cWe had accounts on FTX,\u201d said Owen. He was stunned when the Bahamas-based exchange suddenly collapsed. \u201cWe felt up until 48 hours before [it crashed] that FTX was another platform that had good liquidity and a good interface and was one of ours.\u201d<\/p>\n Recent:\u00a0As Bitcoin nears $25K, questions about rally\u2019s sustainability remain<\/a><\/em><\/strong><\/p>\n Individuals and businesses can secure fiat loans using Bitcoin (BTC<\/a>) and other cryptocurrencies as collateral on SALT\u2019s platform, but sometimes borrowers want to pay off their loans and recover their collateral. <\/p>\n Thus, a lender like SALT has to be able to prove that it \u201ccan sell collateral pretty much instantaneously at a certain price,\u201d he further explained. \u201cAnd in order to do that, you have to have relationships with buyers \u2014 or you have to be the buyer.\u201d Hence the need for further capital. <\/p>\n The November freeze on withdrawals and deposits \u201cwas terrifying for our customers. As you’d imagine, some of them had already been locked up and lost money in both Celsius and Blockfi. So they were thinking, \u2018This is just another one. Everything’s going down.\u2019\u201d <\/p>\n It took a Herculean effort to calm things down, he suggested. \u201cI’ve literally been working days, nights, weekends for 60 plus days solid, speaking to people directly.\u201d He had a mission \u201cto speak to every one of our customers in person.\u201d <\/p>\n Asked about the firm\u2019s customers, Owen said they were primarily individuals and businesses holding and saving Bitcoin for the long term, as BTC is the predominant value on SALT\u2019s platform. Customers are looking to monetize their crypto \u201cwhether it\u2019s for buying real estate, paying bills or what not\u201d but they need to have confidence that they can pay off the loan and get their collateral back if they so desire.<\/p>\n Founded in 2016, SALT claims to be the first platform to launch collateralized blockchain-backed loans, though it remains a relatively small player compared with three other firms with which it is often compared, BlockFi, Celsius and Nexo.<\/p>\n But when FTX imploded, \u201cit shocked us beyond what we were prepared for\u201d and so we \u201cducked our heads and just said, \u2018We don’t know how bad this contagion is. We’d better figure out exactly where this goes.\u2019\u201d <\/p>\n That\u2019s when the firm decided to \u201cbasically pause our service\u201d to protect capital, said Owen. \u201cThat was something we’d never done before. The business was never planned to be an on off switch or to be turned on and off.\u201d<\/p>\n A lot of other people were surprised and shocked too, of course, and calls were heard almost immediately for the crypto industry to be better regulated. Is regulation something that crypto lenders are just going to have to live with in coming years?<\/p>\n \u201cIn our opinion the regulation is already here.\u201d In the U.S lenders are required to be licensed on a state by state basis. The problem wasn’t an absence of laws or rules. \u201cIt was simply that they were not following rules,\u201d Retail customers were encouraged to deposit funds on platforms that were neither banks nor registered securities firms and in return were able to earn outsize \u201cyields.\u201d \u201cThat clearly was illegal and we never did that. I don’t think that that will ever be allowed now that the public is well informed,\u201d said Owen. <\/p>\nA Series B funding round in 2023<\/h2>\n
More regulation needed?<\/h2>\n