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Interested in a High Interest Bitcoin Saving’s Account? Interview with Ledn CEO, Adam Reeds
NCFA | Craig Asano | Nov 1, 2019
NCFA recently sat down with Toronto-based Ledn's CEO and Co-Founder Adam Reeds (LinkedIn) to learn more about the rise of Decentralized Finance (DeFi) and the company's tremendous growth in Latin America.
There are a number of growing DeFi use cases based around blockchain technologies and decentralized networks from the issuance of stablecoins as a means to create monetary banking type services, peer to peer or aggregate lending and borrowing products as well as tokenized platforms all of which are providing underserviced markets with alternative solutions to traditional financial services with fewer intermediaries, lower costs and arguably improved security.
Q1. What’s the story behind the launch and ultimate vision of Ledn?
Adam Reeds: Ledn was conceptualized in 2016 after we, as founders, experienced a gap in the market for accessing financing for our bitcoin assets. Bitcoin has several fundamentals that make it very attractive for financing. Bitcoin is non-jurisdictional (it is the same everywhere, globally), has
established market value and trades 24/7, has strong liquidity and is divisible. Yet despite these strong attributes, at the time of conceptualizing Ledn, as still today, there are limited options for financing bitcoin.
Listen: Bitcoin Backed Loans and 2x Credit – Putting Your Crypto to Work
From inception, we wanted to be sure that Ledn was accessible to everyone globally. To do so we knew that we had to build a platform that was simple and secure with a strong focus on compliance. We assembled an experienced team of technology, finance, legal and regulatory professionals and set out to build an online platform where individuals and businesses can access financial services for bitcoin.
Ledn’s mission is to help more people save in bitcoin, while standardizing rates and service for financial products globally.
Q2. We see that Ledn has a growing list of products, can you give us a brief run-down and talk about the markets and traction to date?
Adam Reeds: Launching from Canada, Ledn now active in 51 countries and has launched 3 products to date.
Its first product is Borrow - a bitcoin-backed loan which allows people to borrow dollars without selling their bitcoin. The second product is Save - a interest-bearing savings account that pays interest on bitcoin, in bitcoin. Its most recent product is B2X - a product that allows customers to instantly double their bitcoin holding by tying the purchase of bitcoin together with a dollar loan.
Given the need for improved financial products in the region, and the background of Ledn’s team, Ledn’s focus market (outside of Canada) has been Latin America and is seeing very strong traction of its products in the region to date. Over 51% of Ledn’s customers are now from Latin America.
Q3. Are all borrowers/loans considered equal or are there restrictions on who can borrow, use of funds, liquidity?
Adam Reeds: The great thing about dealing only in bitcoin is that we can treat all of the assets of our customers equally. Given our loans are asset-backed, we do not consider the credit quality of our borrowers in our underwriting. Our qualification in considering who we interact with is completely tied to ensuring we follow Canadian and local laws.
The great thing about dealing only in bitcoin is that we can treat all of the assets of our customers equally.
We abide by the Financial Transactions and Reports Analysis Centre of Canada (“FINTRAC”) regulations with respect to know your customer (“KYC”) and anti-money laundering procedures. We require all of our customers to complete KYC documentation regardless of the amounts we deal with, and consider strong compliance a key factor of our success to date.
See: Living on Defi: How I Survive Argentina’s 50% Inflation
Q4. A high interest bitcoin savings account is interesting given the low rate that consumers and businesses generally earn in traditional savings accounts. How does this work and has there been a lot of interest to date in the service?
Adam Reeds: The economics of the savings account relies on a market demand for borrowing bitcoin. Typically, there are three main use cases for borrowing bitcoin; (1) providing working capital for an exchange that needs to keep a float of bitcoin to facilitate buy-orders, but does want to take bitcoin price risk, (2) facilitating short positions, for proprietary trading firms to bet a price decline in bitcoin or (3) facilitating trading arbitrage opportunities such as differences that exist in the price of bitcoin on various futures markets or exchanges.
The interest rate that Ledn is able to pay on its Savings account is dependent on the demand for the various activities above.
Ledn has had strong uptake in its savings account as it is a complementary product to the loan portfolio - providing a way for users to earn more bitcoin with their bitcoin.
Q5. What kind of Canadian regulations govern the Ledn platform and services?
Adam Reeds: Canada’s FINTRAC rules related to AML and KYC were recently updated to include dealers in virtual currency. However, FINTRAC has not yet opened up registration for this activity, as the requirement to register as a Money Service Business (“MSB”) will not come in place until June 1, 2020. Despite the registration not yet being available, we have taken a proactive approach and have built KYC requirements into our technology platform from day one. All of our customers are required to complete KYC documentation to access any of our products.
We also follow and abide by regulations related to consumer protection and private lending activities both in Canada, as well as the local laws for which its customers are resident. On top of it all, we abide by a simple concept - there’s what you have to do, and what you should do - we do what we should do and have enforced strong compliance in all of our technology and processes. We treat our customers fairly, and focus on keeping our products simple and transparent.
Q6. Tell us what inspires you the most these days?
Adam Reeds: Most of the world does not have the savings tools that Canadians benefit from. In Canada, we have the luxury of stable real estate and capital markets, and have many options for investing and storing our wealth. For those that lack these savings tools, bitcoin is proving to be an incredible alternative. Ledn is excited by the potential to work with an asset that can unify standards for financial products, and deliver a better experience to people around the globe.
Most of the world does not have the savings tools that Canadians benefit from.
Q7. Do you have any insights or lessons that you’d like to offer the community on founding a fintech startup in Canada?
Adam Reeds: The most important thing in a start-up is to start. Great ideas are 10%, execution is 90%. Surround yourself with people that bring diverse skill sets and motivate each other. Each person you add to the team at the beginning of the company will make or break your success. Choose wisely, and for those that agree to join you on the journey, treat them well and align them with what you want to build - as a team.
See: Lock BTC, Get DAI: Lending Firm Bridges Bitcoin-DeFi Divide in Latin America
Along the way, make sure tasks are solved in this order.
- What do we want to do
- Why are we doing it
- How do we do it
Most people forget about the why - it is the most important part.
Canada’s diversity is definitely its strength. Albeit all Canadian citizens, Ledn’s team consists of only one born and raised Canadian, with the rest of our full team originally from Venezuela, Panama, Cuba, Croatia, Egypt and Hong Kong. We are proud to have built Ledn in Canada and to bring our company to the world stage.
Thanks Adam - wishing you and the entire Ledn team all the success at scaling Ledn's model globally!
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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