Mm.
More and more people are lending their bitcoins to borrowers on platforms earning interest or other rewards in return, but Bitcoin maximalists, those who strongly believe in Bitcoin, are still cautious and skeptical about this practice.
Their main concern is about staying true to Bitcoin's core values like keeping it decentralized.
Making sure it's secure and having full control over your own assets.
Well joining me to weigh in this morning is Mauricio de Bartolomeo, co-founder and CSO at Leon.
Mauricio, good morning.
Thank you so much for joining me.
So first and foremost, tell me how the Bitcoin lending market is currently expanding and why.
Definitely.
Good morning, Remy.
Um, the Bitcoin-backed loan market has exploded, has been rising exponentially over the last, I would say, 18 months, more so 2 years.
Definitely a big uptake after November where the new, when the new administration came in.
Um, the reasons why people are accessing these loans, briefly just how these loans work is they allow Bitcoin holders to put their Bitcoin or use their Bitcoin as collateral to borrow US dollars, and this could be very beneficial from a tax perspective, and it also allows you to keep the upside on the asset itself, which has been in many cases the best performing assets in most people's portfolios over the last decade.
And so what they do is when they want liquidity or they want to enhance their day to day life, they come to a company like Lein.
They use their Bitcoin as collateral to borrow the dollars they need.
In many cases they are using these proceeds of these loans to buy real estate, to renovate their homes, start business. and so what they really what they are using or what they are doing is they are translating some of that digital wealth into their real life experience by using these loans, which again can be very beneficial from both a tax perspective and allowing you to keep the upside on the asset.
Yeah, and Bitcoin maxis may be skeptical of Bitcoin lending.
So what's changing that might make retail investors trust custody despite the not your keys, not your crypto mindset?
Definitely I think what uh there, there's still a bit of, uh, I would say trauma or PTSD from the previous generation of lenders that caused quite a bit of pain.
People might remember Celsius, block hygenesis, etc. which were firms that unfortunately had pretty reckless practices and primarily.
Focused on unsecured lending to generate yield.
This is a very different activity than asset-backed loans.
There were bitcoin backed loans.
The activity of asset backed lending or bitcoin backed loans can be done quite responsibly and in a very, uh, what I would consider to be a safe manner, which is that let in.
The only types of loans we do, the Bitcoin stays in custody at all times, and it's not rehypothecated.
It's not lent out.
It's, it's basically sitting there protecting the loan.
In the cases of the previous lenders, they were rehypoing the Bitcoin.
They were issuing unsecured loans to companies like Three Arrows, etc. and these yield practices by and large were the ones that generated the losses that brought down.
A lot of these firms, companies like Lein were able to navigate that volatility without any issues, and given our 7 year track record and how we've stood by our clients for that long is the reason I think in many cases where clients are coming back as they now understand that these services can be offered responsibly and it's not to say that the same mistakes from the past are going to get like the industry has learned from the mistakes of the past and the.
Companies and the services that are being offered today are much more robust, um, giving people a lot more comfort.
They're still very diligent.
One thing that I've noticed from the previous cycle to this cycle is that clients are a lot more diligent.
They're asking the right questions. um, what are the protections?
What happens in cases of, you know, um, what happens if this happens, what happens if that happens, ensuring that they fully understand the risks, uh, and that's how they're gaining comfort and coming back into the space.
Yeah, Mauricio, while we have you here, I do want to ask you about institutional adoption, especially because we are seeing that pick up steam.
So tell us about the intersection of institutional adoption and what you are doing at Len.
Yeah, definitely.
So among the trends around institutional adoption, a big one is these Bitcoin treasury companies.
And so these are companies that are using their excess cash to invest in Bitcoin, and we at LEN are servicing a few of these publicly traded companies that have Bitcoin that are on a Bitcoin standard that want to use Bitcoin-backed financing to either expand or grow or meet, you know, meet expenses ahead of a future cash flow.
So we do work with some publicly listed.
Coin treasury companies we work with a lot of privately owned Bitcoin or companies that are on a Bitcoin standard.
So I think the institutional demand is coming a big part of it is this trend around Bitcoin as a Treasury reserve asset because of its power to shield people from the debasement of the US dollar, which is how many people used to carry their reserves.
And so in many cases, the price action of Bitcoin is outperforming even cash invested in US.
Treasuries and it's giving companies a new breath of air, um, especially around public perception in in public markets, and the people that are using these in as private companies have also seen great benefits.
A lot of these are small and medium sized companies that have been buying Bitcoin over the last 2 to 3 years, and they're seeing that really pay dividends, um, to the size of their of their net equity or their balance sheets, and they're doubling down and they're continuing to run that strategy.
So it's coming from both public and private companies.
OK, Mauricio, well we will have to leave it there, but thank you so much for joining us this morning and thank you so much for sharing all of your insights.
My pleasure.
