Are crypto-backed loans safe & legal? Crowdfund-seeking Helio Lending explains how
Private-i
Private-i
Next week Helio Lending will be the latest company to launch a capital raise via OnMarket. With the lending and crypto markets both dry at present it would seem anything but a match made in heaven.
But Helio Lending CEO John O’Shea, who spoke with Stockhead yesterday, was aware of the typical concerns the public may have about cryptocurrencies. His business lends out money which is collateralised by cryptocurrencies.
While some cryptocurrencies offered in ICOs have been nothing but pump and dump schemes, Helio only offers four of the most liquid cryptocurrencies and predominantly Bitcoin but also Ether, Ripple and Litecoin.
Another concern might be the fluctuation of cryptocurrencies but either way, the business was safe.
“In the event the market is going up the client will have the possibility of withdrawing more funds,” O’Shea said.
“In a reversing market we take a position where we will give the client communications about topping up and they can do it in crypto or cash.
“If that doesn’t happen we start selling down the position to ensure we protect the value – we won’t sell the whole [investment], just what is needed.”
Helio charges a fixed interest rate of 10 per cent while other companies in this space charge a floating rate. Furthermore it only charges at the end of the term and the collateral is returned, less interest.
Anyone who lends money will be aware of two legal requirements – know your customer and responsible lending. While the law does not specifically cover crypto-backed lending, Helio is no stranger to both.
Helio engaged with blockchain-based identity verification platform KYC Chain to help them with this. The deal was done in March and its founder Edmund Lowell called Helio, “the industry’s most exciting player”.
In regard to responsible lending, O’Shea said: “We don’t have to worry about affordability because they’ve given us the assets.”
“We’re trying to service our clients and well,” he added. “We’re not trying to be all things to all people like our competitors.”
A crowdfund is anticipated to be be launched next week via OnMarket although it is taking expressions of interest. The company already has $100 million in a line of credit for funding. So it will be used for marketing and leveraging.
“[It] will give us an opportunity to be a global player in asset-backed loans,” said O’Shea.
He was very bullish about the long term future of crypto.
“We’re very early and even though this growing we have to consider in the early days of the internet we still had dial up, taking two minutes to get the modem – that’s where we’re [cyrptocurrencies] are at.”