Welcome to another video. Today we
will be talking about the problems with crypto lending sites. So if you are thinking
to earn interest on your bitcoin or simply lend money and deposit crypto as
collateral this video is for you. My name is Jakub from P2P Empire and here on this
channel we review individual P2P lending sites and educate you about all of the aspects of P2P
lending. If your goal is to become a more educated investor consider subscribing and hit the like
button to see more videos like this in the future.
Due to the current crypto hype there are many new emerging platforms that try
to profit from the industry. Before we dive deeper into this topic, I want you
to first understand the process of crypto lending. There are different investment products
within the crypto lending industry, however, to keep it simple we can define crypto
lending as an alternative investment from, where investors lend fiat money or cryptocurrencies
to other borrowers in exchange for interest.
The crypto lending platform is
the facilitator of the transaction between the investor and the borrower. It's
basically a middle man that sets the rules. The process for the investor
is quite straightforward. You deposit funds to the crypto lending
platform, choose one of the offered investment products and invest in loans
that are secured by crypto collateral. The borrowers repay the principal amount
with the interest back to your account. The collateral offered by the borrower is always
at least twice as high as the loan amount. We call this metric loan to value or
the better acronym for this is LTV.
As you know, the value of digital assets
like cryptocurrencies is very volatile, which is why the P2P crypto platform
sells the collateral as soon as it reaches a certain threshold
(typically the LTV of 90%). That way your investment is always protected. Not bad uh? It almost feels like
you as an investor can’t lose money. Well, wait for it, the best is yet to come. The crypto lending platforms often
offer interest between 5% and 10%. It obviously depends on the cryptocurrency you are
depositing as well as on the desired liquidity. If you want to be able to withdraw your money
anytime, you will get a lower interest rate. But still, earning 5% to 10% interest while being able to withdraw your money
anytime sounds like a dream right? Well, we have reviewed some of the
crypto lending platforms in more detail so let’s have a look at what
this fuzz is really about. The first crypto lending platform we're
gonna be talking about is Coinloan. So, the first thing you might
notice on the website is the “limited offer” – get 2% interest for 6 months. Scarcity and free money –
that’s a great way to lure investors into investing more money.
It’s also a great sales technique.
Overall, the site looks
quite legit. As you can see, Coinloan promises safe investments as they
collaborate with an insured custodian. Let’s first check who is behind the platform. So
let’s navigate to the about us page to find out. So here it says, we are Coinloan.
Upon scrolling down the page, the only info you get is that
the platform is from Estonia. There is no information about the
founders or the team behind the platform. So we dug deeper just to find out that the CEO
is Alex Faliushin and the CTO is Max Sapelov. Why is this not represented on
the platform, we don’t know. As there’s no presentation of the team on Coinloan you should pay good attention
to the terms and conditions. So first of all Coinloan doesn’t publicly
describe how your funds are stored.
Only when transferring your funds you will notice
that they are stored at Bilderings bank account. Bilderings is not a bank but an institution
with an electronic money license.
In the terms and conditions under section
5.19 you can read that CoinLoan shall not be liable for the inability to transfer
funds due to force majeure circumstances, including unforeseeable and uncontrollable
changes in the field of electronic payments or Cryptoassets turnover, or relevant
changes in the applicable legislation. You can guess what this means.
As the description is very broad, they could in theory deny your
withdrawal with any reason. Coinloan is also promoting an “interest
account” which might create the impression that your money is protected by some
kind of deposit protection scheme. Don’t kid yourself. In the terms and conditions you can read that you are not covered
by any insurance against losses. Last but not least Coinloan can also
amend the terms and conditions at its own discretion at any time prior
to sending you a notice about it.
That’s quite a red flag as this can really
affect your investments on this platform. We have not seen any platform that isn’t regulated where the change in terms and conditions
had a positive effect on the investors. In fact, last year, we even
deposited some money on Coinloan to just see how it works and it didn’t. Coinloan offers you two products, the interest
account and the option to create a loan offer. We created a loan offer even after
two weeks our money was not invested. So we decided to cash out from the platform. While the platform interface is quite developed
and modern-looking, the transparency of the platform raises significant concerns
which you should keep in mind. Another “amazing” crypto lending platform is Nexo. Nexo is funded through Credissimo,
a Bulgarian payday loan company. The CEO and Co-founder of Nexo is Antoni Trenchev
who often shares his bitcoin predictions on Bloomberg.
The second co-founder of Nexo is Kosta
Kantchev who is also the co-founder of Credissimo. Having the face of the CEO on the
platform is certainly a positive factor. If you want to look up statistical data, you
will be disappointed as there’s none available. Last year we sent an extensive questionnaire
to Nexo with questions relevant to their business operations. Unfortunately they
never got back to us with the answers. If you scroll down to the footer of the page, you
can read that Nexo is licensed and regulated. If you wonder by who, you have to do your independent
research as this is not presented on the platform. We found out that Nexo has a financial
institution license in Estonia, which is however not a lending license.
If you want to find out Nexo’s corporate
address, you won’t find it on Nexo's website. https://support.nexo.io/hc/en-us/articles/360008237013-What-is-Nexo-s-business-corporate-mailing-address- Don’t you think it's odd that a company which
apparently has more than 1M users and manages 4B USD doesn’t even disclose the
corporate address on their website? Just comment your opinion in the comments below. According to some external sources we
found branches in Switzerland, Estonia and in the UK. There are multiple companies
connected to Nexo, including Nexo Capital Inc. which is a company registered in the Cayman
Islands from which the token sale was conducted.
If you read the terms and conditions
you won’t find much info about how your funds are stored. When
depositing money, you are transferring your funds to the InCore Bank in Switzerland
which is the custodian of your cryptocurrency. As you could expect, Nexo makes it also clear
that they are not liable for anything arising from using Nexo which basically means
that they aren’t liable for your losses. If you ever think of borrowing money on Nexo, you should certainly rethink the security of
your collateral. It has happened in the past, that when a cryptocurrency plummeted the
collateral was liquidated in a matter of minutes. This makes borrowing money with
crypto as collateral quite useless. Let’s move on to the third and last crypto lending
platform which we will have a brief look at. MyConstant is similar to the
earlier mentioned platforms. You can either invest in crypto-backed loans
or deposit crypto in order to borrow money. When browsing through the homepage, you
will see an excellent TrustPilot rating, which as you know, is not really
something you should primarily rely on.
When you browse some of the
product pages on myconstant you will likely see many
comparisons to savings accounts. For the average investor it may seem like
Constant is providing a type of savings account. You should, however, read the
footer where it clearly says that Constant isn’t a bank nor a
regulated financial institution. The comparison to savings accounts
is therefore misleading at best.
A positive comment goes certainly
towards their statistics page, which looks much better than many statistics
pages of traditional p2p lending sites. Constant must have released the statistics
page sometime within the past few months, as the platform did not have any publicly
available data back in early 2020. If you want to find out who’s behind
the platform, you will be disappointed as Constant does not share any
information about the founder or the CEO. Some external sources mention
the name Zon Chu.
Unfortunately, we haven’t been able to found his LinkedIn
profile or even a picture on Google. We reached out to Constant and brought up the
lack of transparency. Their answer was that they used to have a BIO page but apparently
it sended the wrong message to the team that some people deserve more recognition than
others, which is why they took it down. I don’t know about you, but having at least a
portrait picture of the person who runs a P2P platform that claims to manage
investments worth more than 67 M USD is the least you can do to
build trust with your audience.
But let me know in the comments below what
you think. Do you believe that a crypto lending platform should at least introduce
the founder or the CEO of the company? When it comes to the terms and conditions
of Constant, they can amend them at any time without prior notice. And of
course, by using the platform, you agree that you might lose all of your money.
So. What’s the takeaway from this video? Crypto-lending is due to the lack of transparency quite a risky segment within
the P2P lending space. Those three mentioned platforms
are just the tip of the iceberg. There are new crypto lending sites
popping up on a weekly basis.
Crypto lending platforms typically
lack proper support or at least we haven’t gotten proper answers to our questions. Don’t get me wrong. The idea of investing
into crypto-backed loans is brilliant, but due to the lack of transparency it’s quite a
risky investment for most of the retail investors. At the end of the day, you decide for
yourself what’s the best investment for you. The goal of this video is to raise some concerns
when it comes to crypto-lending platforms which of course are not being mentioned by
all of the crypto lending promoters. If you want to make money with crypto.
Trading it on a legitimate crypto exchange is much safer than sending it to some
recently launched crypto lending platform in order to earn a bit of interest.
There are many scams in the crypto
industry and the risk of not being able to withdraw your money is
often higher than you might think. But let me know your experiences with
crypto-lending platforms in the comments below. I am curious to hear your thoughts on this one. So that's it from me today, thanks for
watching and see you in the next video..