SALT Lending has issued $40 million in asset-backed loans that are aimed at investors in cryptocurrencies to give them a bit of liquidity without the need to sell off assets.
The company rolled out its first loans late in 2017 after two years spent developing the technology to make the loans work. SALT Lending relies on a multi-signature wallet that allows counter-parties in a transaction to both access the account — and a software service that marks to market the value of the cryptocurrencies held as assets.
Founded by Blake Cohen, a former real estate executive for his family’s own business, SALT Lending is Cohen’s first foray into cryptocurrency entrepreneurship.
Cohen says the idea for the service was a no-brainer. “Cryptocurrencies and blockchain assets make the ideal collateral,” says Cohen. In typical asset-backed lending the assets need to be located, seized and liquidated for lenders to be made whole. With cryptocurrencies, all of those problems go away, says Cohen.
Most of the capital that SALT is lending has come from the company’s own assets — and through SALT Blockchain Asset Management, which is a fund with several individual limited partners.
Currently the company is servicing individual borrowers, but Cohen foresees a time when exchanges, miners and large tokenized startups can gain additional liquidity through the collateralized loans.
“The current market cap [for cryptocurrencies] is $400 billion, and that is totally unleveraged. That is a gigantic inefficiency in the market,” Cohen says.
The company currently offers 36-month loans and (depending on the loan to value ratio) the company will loan up to 60 percent of the value of the cryptocurrency collateral, says Cohen. Interest rates on the loans range from 12-22 percent, Cohn says. SALT Lending is only lending against Ethereum and Bitcoin for the moment.
“Basically the money that we put in is as a proof of concept to entice the institutional capital providers to get involved with this,” Cohen says. “This point is to one, demonstrate that there’s a market for this, and two, that you can do this and make risk palatable to the lender.”