@Ishan PandeyIshan Pandey
Technology Lawyer working on code and everything law. Founder : Blockchain Research
In my experience of working in the payments industry, I came to understand that decentralized finance could really change the future of financial verifications. As blockchain processes started to become more familiar and widely accepted, a light bulb went off. Decentralized finance can help to eliminate friction. We started to look toward using some of that natural on-chain verification capability to replace outdated processes, and eventually, CRED was born.
Please tell us about your story behind the Cred, how did you start, and what is your vision?
Cred really came out of a desire to free us from some of the inefficiencies in traditional banking, and to re-imagine what it’s like to use digital currencies. We like to say that we are helping people to bank on fairness because there’s that idea that the open hand flourishes, while the closed hand diminishes. So when you open up markets, when you create key
efficiencies, you drive business in a way that’s sustainable. We also wanted to introduce next-gen services and API functionality to parts of the
cryptocurrency world. The idea of defi is getting fleshed out with initiatives
like this that build on innovating banking verifications. We already had
Paypal. Stripe, etc. … we wanted to go beyond that.
Covid19 pandemic is causing considerable losses to traditional businesses, and federal interest rates are on a continuous decline. Do you see a rise of DeFi products and adoption in such a scenario?
I think you have to separate those two. First, yes, the coronavirus pandemic is disrupting business in a big way. One of the biggest
use cases of blockchain and decentralized finance in that context is developing contactless solutions. To the extent that you can build in verifications and eliminate pen and paper processes, or people sharing the same touch screen or digital kiosk, you’re helping to not have people get sick.
The interest rate thing is a specific problem, where the Federal
Reserve is trying to keep the economy afloat by cutting interest rates to near zero. This creates all kinds of unintended bad incentives, just like other aspects of the traditional banking system that reward greed, set up roadblocks for the average investor, and funnel wealth into more isolated crevasses of the economy.
As we can see with Cred, you can offer asset holders new ways of
earning more interest by building participation in decentralized finance
operations. So there’s a definite role there.
I guess you could say in both of these cases, defi solves at least
one core problem!
The blockchain industry is facing a lot of regulatory hurdles in many jurisdictions, and Cred has an excellent track record of meeting such regulatory requirements. What challenges does the company face while dealing with regulators, and do you see their outlook and behavior change in the future?
Thanks! I like to think that we’ve been fairly successful in that regard… A lot of the challenges that companies deal with involves showing in great detail how we solve the questions that regulators put to us.We also have to solve problems that regulators see in very vague and ambiguous ways; in other words, they’re not even really fully confident in their own assessments, to begin with. That creates a high degree of chaos, and then you have regulators targeting firms for all sorts of ‘sins of omission,’ and that gets people even more nervous.
I think in terms of changing outlooks, things are going to really
improve as regulators get their own houses in order. As they go about
clarifying and making their own policies and outlooks concrete, then you can build company compliance on that solid foundation. That may not be where we’re at yet, but I think we’re getting there. To the extent that regulators like the SEC can develop a clear roadmap and a consistent response to proposals, then we in the private sector can work with that and accommodate it, and you start to get the synergy that happens when a sector is fully mature.
In so many senses, we’re in uncharted waters right now, but we’re figuring it out together.
How does Cred work? Further, how does a user earn by using Cred solutions?
The essential way that asset holders earn with Cred is by putting their assets into active use on the Cred platform. Because it’s decentralized
finance, you take away a lot of the dross and inaccuracies around financial reporting, and you have clear benefit models, which involve those flat rates of interest that we talk about on the site. If you can get 10% interest in today’s market, that’s amazing, and you do that by putting your assets in a very different and unique digital context.
In a few ways, it’s very simple. Cred works by users putting their assets into the platform and getting flat rates of interest, as well as a lot of functionality, on blockchains and beyond.
We talk about our pledge-hold-earn model, which is very instructive, and you can find out more about this on the website. Essentially, it’s a major on-ramp for all sorts of crypto assets, in order to help asset holders to participate more fully in the broader global economy around digital assets.
In terms of how a person earns, they earn by pledging and holding their assets. How we generate the earning potential is by lending crypto to miners and other parties.
So, we have 29 digital assets supported right now, and counting. That last part – “and counting” – is important, so to get an up-to-date list, you want to talk to our people about practical options. We support Bitcoin (BTC) and Ripple (XRP) and a number of other major coins, as well as some altcoins and other more obscure kinds of assets.
As far as statistics, I don’t have them offhand, but you can see that crypto is a multibillion-dollar industry, and how Cred is ultimately important in helping to build that. Basically, I think the best statistic that speaks to our residents in today’s financial world is our 10% flat interest rate on both sides of the equation.
Cred Merchant Solutions is something that we’re excited about in serving our unbanked customers and others who want an easy point-of-sale solution. Basically, Cred Merchant Solutions takes crypto payments and converts them into our platform, offering the interest and everything else that we mentioned.
There are a few ways that this helps merchants in other ways that traditional systems don’t. One of these is lower transaction fees because of
the unique verification models. Another is that merchants can instantly
reinvest the value into their business because the on-ramp for pledging and holding is inherently included in that point-of-sale model.
So, for example, in our high-profile events around the cannabis industry, we showed how merchants could be among those who benefit the most
from being able to take incoming crypto assets and put them somewhere that they can be uniquely useful.
In terms of what Cred does that is unique from its competitors. It’s basically everything we just discussed, and a lot more.
Essentially, we are allowing for that broader entrance into a crypto world where you know why you’re investing, and it makes sense to you and everyone else.
Early adopters often got a barrage of questions from other people –
why would you want to own bitcoin? Why would you want to own a crypto coin? Together, we’re helping to make these questions obsolete. If you can show how blockchains and decentralized finance work and demonstrate key ways to innovate in banking and finance, people aren’t going to ask those questions anymore.
Then there’s the merchant functionality that we talked about – before these kinds of systems, merchants just didn’t have these types of options. They built up cash and carried it away from their point of sale locations in armored trucks. That system is thoroughly outdated and really archaic, and it needs to change!
In less than one year Cred has signed up customers across 190 countries and 29 US States, what makes your venture stand apart from other players? Further, what’s the strategy behind expanding so aggressively?
Yes, we are expanding pretty quickly. The old saying: “strike while the iron is hot” has relevance here. In looking at how our crypto community handles Bitcoin and Ethereum and Ripple, etc., we feel that now is the time to move assertively forward with next-generation platforms and systems. We’re happy to have gotten in on this game early, and created something that really works for our customers. Now, we’re fine-tuning the Know Your Customer stuff and other functional aspects like API design, and we are on the frontier of this digital industry.
You have partnered with leading exchanges, wallets alliances, and foundations across the blockchain ecosystem, tell us about the future roadmap and purpose behind these partnerships?
In a very basic sense, entrepreneurs who are into blockchain and cryptocurrencies know that that fundamental networking is essential
and a core part of what we do. So being in the game with various exchanges and wallets puts you in that network more securely. You don’t want to be out there on your own orbit, operating in isolation. That’s not what decentralized finance or cryptocurrency services are about. Think of it this way – your asset holder wants to be inherently connected to Binance and Coinbase and Kraken and all of these things. So our goal is to help. You can point to very many ways in which this industry is a collaborative effort, and our partnerships are built to address that.
Do you believe that we are in a global recession due to coronavirus pandemic? If yes, where do you see DeFi products fit and act as a catalyst to bring the worldwide economy out of this recession?
As smarter people than I have pointed out, the terms “recession” and “depression” are not completely relevant to the situation that we’re in. The coronavirus is putting the economy into an induced coma where it’s very hard to measure natural outcomes. We’re definitely going to see high
unemployment. We’re definitely going to see an enormous contraction of the economy to the extent that, in some ways, we’ve never seen before.
The question is how we come out of it, as you point out. Now how defi
is going to help involves, again, changing the model to accommodate what people need right now. In a way, virtual, contactless verification is exactly the solution. But it has to be combined with other elements, for example, safe ways to shop for groceries and other goods and services in the unique context of the pandemic. Eventually, we will come out of the pandemic situation and rebuild national economies, and some of the biggest ways that defi can help involve making new things possible in new ways. That’s about as specific as I could be on that.
To a newcomer in the blockchain industry, would you suggest Crypto lending as a recession-resistant personal finance strategy?
I would definitely describe it as recession-resistant, with the caveat that nothing is totally recession-proof. There’s a pretty straightforward value proposition for that. When you hear people talking about Bitcoin or any other digital asset as a “safe haven” for investors fleeing equities, you immediately understand that a recession is going to hit fiat currencies much more strongly than it will impact crypto markets. You’re going to have a devaluing dollar or stagflation, or something like that.
People who put their assets into cryptocurrencies or similar digital assets that don’t track with the market are going to be protected from massive downswings and equity market contractions that have to do with
problems on Wall Street and Main Street. That’s the difference between any prior depression and recession, and what we face now. Experts don’t call our current situation a depression or recession because the economy is different. Cryptocurrency options are one of the fundamental ways in which the economy is different now. Imagine if an investor in the last century’s Great Depression had a magical golden parachute where he or she could diversify into assets that didn’t track with any national market. Would they bite?
What major trends and challenges do you see for the cryptocurrency industry in 2020? Further, do you have any advice for young entrepreneurs who want to build in this industry?
The answer is simple – regulation, regulation, and regulation.
Is that the only challenge that these systems face? No. Is it the major one? Probably, depending on whom you talk to. As I said, when we bring ourselves close to the regulators and work on a collaborative basis, we are making cryptocurrency and blockchain systems practical.
When we’re not, we aren’t. In addition to challenges with on-ramps and logistics, regulation is an enormous concern all over this industry. The fundamental challenge faced by anyone from Libra to those heroic parties trying to get Bitcoin ETFs greenlighted is to show and tell regulators how digital asset systems are safe and secure from various kinds of fraud. It’s very much a risk-benefit analysis in banking, on the street, with legislators and beyond. People just simply want to know that there’s more to gain from new defi or digital asset systems than there is to lose. That is our mission and one that I think we are accomplishing handily.