How Maple Finance Became the #2 Crypto Lender Behind Tether — Sid Powell Explains

Transcript

Banks are terrified that stablecoins will cause a flight of deposits off of their platform. And currently banks, the banking business model is effectively subsidized by the FDIC, which says if you have under 250k on on a banking platform, we will guarantee that money. And so that allows banks to offer kind of a lower than market, you know, a lower than true counterparty risk-adjusted yield for keeping money in a checking account there. >> Welcome everyone to the Converge podcast at The Defiant. Today I'm honored to have a Sid Powell, founder and CEO of Maple Finance.

Sid, it's great to have you in the Converge show today. >> Thanks for having me on, Chris. Glad to be here. >> Awesome. It's It's been a really crazy month, and really exciting news coming out from the intersection between traditional finance and on-chain finance. One of the big news in the past week or so, the past month, has been the launch of the Robinhood chain and the rollout of some of the of those products that are related to to Robinhood, in particular Robinhood Earn, where traditional finance users are getting access to yield opportunities through crypto. And Maple is part of of that narrative. So, could you share more

about what what that means? Where How is Maple involved in that? And yeah, what what the reaction has been so far? >> Uh definitely. Uh so, yeah, we're very excited to be part of the Robinhood Earn program. Robinhood obviously has a tremendous brand. They've been, you know, a phenomenal company. They have 30-plus million users. They've got over 350 billion in assets. So, for them coming into uh the space and engaging with DeFi and uh and on-chain companies uh as they are is obviously a huge coup for the space.

So, how [snorts] we fit in, Maple's core business is, uh, on-chain asset management with a real particular focus on lending to institutions. And so, for Robinhood users, what they see is the the option to to use a yield product and, uh, start earning. And what happens on the back end is their funds flow into DeFi, so they go into a Morpho Vault. Morpho Vault is curated by Steakhouse, uh, who are then able to lend against, uh, Maple assets. So, in this case, it's Syrup USDG, so we launched a new product where we lend, uh, the USDG stablecoin to institutions, take Bitcoin and and other large caps as collateral. So,

borrowers can post Syrup USDG into the Morpho Vault and borrow, and then when they pay interest, uh, that interest goes to Robinhood users. This concept has been talked about for a few years, which is a DeFi wallet. So, it looks like fintech >> Mhm. >> has a very clean user experience on the front, but on the back end, you're using stablecoins, you're using on-chain lending, and and you're using DeFi protocols under the hood. So, it's a nice partnership with us and, uh, Morpho, Steakhouse, and Robinhood, but, you know, this is, uh, something we're very excited about. Robinhood chain's already at 700 million plus of TVL, and we see it growing a lot from here.

>> That's fantastic. It feels like finally all the, you know, money legos are coming together and we've seen true composability across, uh, like a decentralized finance stack and and that makes its way through like end users right? >> Yeah. And the best part is the end user doesn't have to worry about on-chain wallet approvals, they don't have to worry about seed phrases, um, and selecting protocols to use. For them, it's a nice clean experience. Enter, you know, enter to earn start earning yield on dollar deposits immediately. And on the back end, it's orchestrated by DeFi. So, this is what we've been saying for a long

time that kind of DeFi as a separate concept is dead. And you know, these products are going to increasingly start to just resemble Web 2, you know, clean, uh, easy user experiences. And that's how we bring the next, you know, million users into the space. >> I think it's worth, you know, spending a few minutes talking about how it actually works. But, before we do that, I wanted to give, you know, listeners a bit of context of, you know, like recent milestones, uh, from Maple in terms of I understand you crossed, you know, the What is it? Like $5 million in AUM? Or Can you give me some sort of like size and scope so people are get a sense of how big, how relevant Maple is today?

>> Yeah, so Maple is the we're, uh, the second largest global lender to institutions against Bitcoin and other crypto assets. Uh, so just, um, uh, with only Tether being being larger. And, uh, so we as of today we have around 4.6 billion in AUM. Uh, we have, uh, over 2 billion, little over 2 billion in deposits. And, uh, at the end of Q2 our loan book was around 1.9 billion. So, those numbers are around, uh, you know, over 80% growth year-on-year. And our typical clientele is institutions in the crypto-native space. They might run trading strategies, they might do lending of their own, they might be asset managers.

And so, they'll post, uh, Bitcoin or ETH or other large caps to us into custody. And then we lend them loans ranging anywhere from 10 million at the low end to, you know, the largest one we've done was 500 billion just before Christmas last year. So, uh, So, that's a little bit about us. So, on the other side, we then have our yield products like syrup USDC, syrup USDG which I touched on for the Robinhood program. And these are the largest you know RWA yield bearing products in the crypto space. So we have syrup USDC and syrup USDT which are both top five stablecoin yield generating assets in DeFi with over a billion dollars of TVL each.

And these pay out call it you know 4 and 1/2 to 5% in stablecoins to users where all of that yield comes from the lending activity that we do. >> It's interesting the distinction you make about you know managing assets as opposed to being you know like an on-chain DeFi lending protocol. So let me see if I can unpack the mechanics from you know like an end user perspective. Um so what what you guys do is there are crypto native firms so like trading desks, market makers, those type of things institutions who have you know the need for more liquidity and they

post collateral with you and take out a a loan right to continue doing more. So like to take leverage or or something like that. Is that >> Yeah you know things similar to that. So we you know we lend to a wide variety of crypto native businesses. So it might be an exchange who gives loans to their you know in turn to their customers. So we recently did a warehouse facility with Kraken or it could be a prime broker who trading a market maker who you know provides liquidity on exchanges >> [snorts] >> or it could be a you know a family office who has wealth from crypto and they don't want to sell their crypto and they want to buy property or other investments. And we also extend to retail lenders. So you've got you know there are some retail lenders out there

who borrow in size from us 1 to 200 million. And then they might give loans for 10, 20,000 dollars to their customers. We don't we don't touch retail. That's That's kind of not the space that we've chosen to focus on, but we like being a partner to the to retail lenders out there, and we help them lower the cost that they can borrow at and increase the number of loans that they can give to their customers. >> [snorts] >> Oh, fantastic. >> we we're kind of similar to you know, it's similar to a traditional private credit, but we're very much focused on over collateralized lending and you know, lending in stable coins.

>> So, that's where the difference between you know, loans outstanding and AUM matters, right? Because people post over collateralized Bitcoin, Ethereum, and other like volatile asset as collateral, right? >> Yeah, exactly. So, if you've got 2 billion in deposits and and a little less than that in loans cuz we we're not fully utilized, then the the the bridge to the 4 and 1/2 billion in AUM that we've got is the the collateral provided by the borrowers. >> So, essentially are you guys underwrite those borrowers, right? And And And how do you do that? Um And how is it different from what you know, like the more DeFi-native people might be aware of with you know, like Aave where

there's, you know, variable, you know, like lending rates. Um Who does the underwriting? Who decides the the rate? How that How does that work? >> It's a great question, one that we get a lot. Chris, in Maple's case, we do uh the underwriting. So, we'll uh find the borrowers, we'll negotiate the commercial terms with them, enter legal docs with them, and then if they hit a margin call, we we reach out, and if if there needs to be a liquidation, then then we perform that function. So, we're taking a little bit more of an active role. Some of the differences, we know who all of our borrowers are. We have enforceable legal contracts with them. Whereas, if you contrast that with the more DeFi-native uh lending protocols, the borrower can

be anyone on the other side. So, the loans there are non-recourse and they have a different operating model. They don't need to employ people to underwrite the borrowers because it's all managed by an algorithm. So, you put in this much BTC or in their case wrapped BTC or a CBTC or ETH into a smart contract and then you're able to take out a loan automatically. So, we find that one, we love working with those guys. We have a great relationship with Aave, we have a great relationship with Morpho and with Euler.

We see ourselves as a partner where what we try and do is we have our Serum USD assets onboarded as collateral so that our, you know, some of our borrowers and users can then post those assets as collateral and borrow from Aave. So, or Morpho. So, >> Mhm. >> it's good for Aave and Morpho, they get more utilization, they get more borrowers and uh it's good for our customers because they can increase the yield that they get on Serum USDC or Serum USDT. But, the difference is, you know, their models are more algorithmic, controlled by smart contracts. Ours is a little bit more vertically integrated. We're In a lot of ways, we are both the curator and the protocol. We build all of our own protocol infrastructure, but then we also act as a curator.

>> Right. So, in a in a way, it's a bit of a DeFi mullet on its own in the sense that you don't >> It's kind of a It's kind of a a mini miniature DeFi mullet of its own. But, we used to be infrastructure back in 2021 and 2022 and we had other people curating the lending pools on Maple. And what we found is that we didn't have enough control in when we're doing that and we found that we were able to, you know, to launch new products and kind of scale things faster when we were doing the curation ourselves. So, that prompted us to go a little bit more vertically integrated and that's the model we have today and that, you know, that model has scaled, you know, 10 to 15 X over the last 2 years. Right, because in in a way, you also want to make sure that

you're not you know, overly concentrated in like with with one one borrower one risk profile. I'm thinking about, you know, when things got sour, you know, with FTX and Three Arrows and everybody was like unfolding um in with with like strongly correlated exposures. Um so in in that sense that's part of the role that or the value that like doing that helps them would bring. >> Yeah, exactly. Part of part of the curator's role in this instance is to ensure that you're you're not overly concentrated to certain borrowers. You manage the asset liability matching so that, you know, uh people who want to withdraw from the pools can always do so in a reasonable

time frame. And gives you just more holistic control over the product. We can deliver a great user experience to people and we can do a lot of the business development work to bring new borrowers to the platform. And that's really, you know, that's enabled a lot of our growth. Um but uh you know, we do have uh a strong presence in DeFi with Syrup USDC, Syrup USDT and and Syrup USDG. And now what we're trying to do is bring that DeFi experience, so easy onboarding, access to yield straight away, and a lot of, you know, the transparency that you get on chain. We're now trying to bring that to FinTechs and neo banks.

So that's part of what, you know, the Robinhood Earn program is. And then we're going to be rolling out what we call Maple and Bed to other FinTechs and neo banks so they can deliver the same transparent, simple stablecoin yield experience to their customers. >> Yeah, and and I want to get to the like the the the lenders in in in a second, but I'm I'm thinking more about the borrower space because if if I think about the the sources of of capital that I can think of, you have everything from, you know, like potentially Tether lending out part of their balance sheet, um other CeFi uh lenders, um who who are you competing with

in terms of the borrower side of the the equation? >> Uh, we compete So, we we compete with both the the Dfi side and the the Cfi side. So, on the Cfi side as some of those names you alluded to, Presidio, Tether, Galaxy, Coinbase. Uh, one of the best sources of information on that is the you have Galaxy puts out a quarterly lending, you know, crypto lending market report. And it it has a a leaderboard of who the biggest lenders in the space are. So, Maple's number two on that.

Tether is number one. So, we would compete with them. Uh, Coinbase does lending, Galaxy does lending, there is Two Prime. Then you have the retail lenders of which Ledn is the biggest standalone retail lender. And then you have other players there like Salt Lending, Arch. Uh, so the the the Cfi side, you know, there's call it 10 odd names. We compete more with the institutional set. So, like a Coinbase, a Galaxy >> Galaxy >> Uh, FalconX, Tether. But to the extent we can, we actually often try and partner with these players. So, you know, there's always banks, you know, some of the biggest banking relationships are between banks lending to each other. And similarly, we will do that here because sometimes we have, uh, you know, non-overlapping customers. So,

by lending to one of the other lenders, they can then lend to a customer that we otherwise wouldn't have been able to reach. And so, it's a win-win for both of us. Um, but I think the I was going to say >> No, no, go go ahead. >> are is that we can also source capital from Dfi. So, we are one of the few players who can do that. We've seen Galaxy has launched their GOFR product which kind of mimics Dfi lending. Uh, so I expect to see more convergence over time, but uh, this was a big part of our growth over the last 18 months. >> And and also you already alluded to, you know, like the other side of the equation where you're able to bring DeFi money into this lending pools.

Um but also what I think is unique about Maple in this particular moment where everything seems to be going you know, back to the more traditional institutions and you know, everyone from Bank of New York, JP Morgan, you name it. Trying to get into space is unique in that it operates with a DeFi native model where you have your own token uh and you're distributing both um the the value that you're creating, your your revenue into holders of a of a token and you're capturing the DeFi side. So, if if you could talk a bit

more about the DeFi side now of the of the of the of the structure. >> Yeah, sure. With the DeFi side referring to the you know, the fact that we have a governance token rather than being an equity model. So, this was this was a decision we made early on when we started Maple back in uh you know, 2019 and then you know, uh first kind of raised and went full-time on it in 2020. Uh we like the idea of having a DAO at the center of things and uh you know, and the protocol controlling things. So, we never raised capital into an equity entity. We always had just the token.

So, we avoided I think a lot of the conflicts that you've seen more recently where you have teams that have >> Yeah. >> entity that they raise capital into and then by the way, they have a token and the tokens supporting it uh but still has some value assigned to it. Uh but who is you know, who is primary? Is it the equity holder or the token holders? And we avoided that issue by just always having only the token. So, we have the serum token which serves as the governance token for Maple. And that sits at the center of everything. So, then the IP sits in a trust of which the Cayman Foundation is the beneficiary. You have the the BVI entity that issues the tokens sitting under the foundation and uh you don't have a cap table of other investors. So,

uh the syrup token, the way that it interacts with the protocol is aside from governance, every month we take the revenues from the protocol and based on how high or low those revenues are, we do a buyback of tokens. So, if revenue is below 1 and 1/2 million, so it's on the smaller side, it's 10% so that you have more uh cash available to continue funding, you know, the operations of the uh of the ecosystem. If it's between 1 and 1/2 and 2 million, then you're doing 20% and if it's above 2 million per month, then we're doing 30%. So, it gives people some predictability so that they know, you know, roughly uh how the buybacks are going to work. Uh it's done every month, so there's no discretion around it and it gives people

a a path where they can say, "Okay, well, you know, uh if uh if revenue gets to this level, buybacks will be this much and it um the other thing it does is it ensures that there is a link between the the revenues and the growth of the protocol and the lending that it does and uh and token holders, which I think is is missing in a lot of other protocols and was something that was very important in the community feedback that we received over the course of the season. >> Right. And and do you feel that there is a viable path today uh for a you know, like a DAO-led organization or DAO-led sort of >> I think I think there's been a lot of badly done DAOs. I think you can find

examples of success. Uh you know, Hyperliquid has a token-only model and uh obviously they're in a different position to most in that they're tremendously profitable. They make, you know, $900 million of revenue with a team of 15 to 20 people. Uh so, they can they can afford to do significant buybacks. I think Dow models can work. They just take more effort and you have to be more thoughtful about how you do it. I think there are a lot of people who try to do Dow models in the past and we saw that they run into issues where you can have, you know, Dow governance can be captured by a malignant actor. So, somebody who buys or borrows a lot of tokens then votes them self access to the treasury. We've seen that with Bonk.

We've seen it with Mango. We've seen it with a number of other protocols. So, I think having key long-term aligned individuals on your, call it, the Dow council or, you know, in the Dow governance and then having the singular structure. So, I think if you have a Dow, you can't have a token and equity. You have to just pick the token. And then, uh, you know, you want to be thoughtful about conserving the runway and the balance sheet of the Dow so that you're not just, you know, I think I've seen the other mistake a lot of Dows make is that, you know, they're paying you know, they're they're paying part-time staff two, three hundred thousand dollars a year, which is just egregious and they're not really doing anything and and they're not actually growing the protocol. You know, I think, uh, a few years back Rook Dow was

probably a good example of that. Uh, but I think it can be done. I think, uh, you know, the model of Dow governance has evolved over the last few years. Hopefully, we're kind of setting a good example for others. We do, you know, IR. I think prudent management of the treasury and runway and, you know, key decisions go up uh for Dow governance votes. >> In your model, you on on the borrower's side, you would have cooperative firms for the most part. So, I guess it's never been a true issue for them to do business with a Dow but like, you like organization. As now we're thinking about embedding this type of products and services, uh, within, you know, FinTech and TradFi

offerings. Have you seen any resistance to partnering with, you know, a Dow led organization? Uh, in that context does um the the changing regulatory environment in the US have been a a catalyst in in what way can you you know like sleep better at night today? Um How has >> Actually better at night than I did in in 2021 and 2022, that's for sure. But uh I can certainly sleep a little bit better at night. Uh Look, I think uh you know, it's unlikely the clarity is going to happen this year. Uh but I think uh the cat in a lot of ways they you know, the cat is out of the bag when it comes

to uh you know, traditional institutions working with crypto-native businesses. We've seen huge strides in stablecoin issuance and tokenization, Chris. Uh you know, Apollo is working with Morpho. Robinhood is using Morpho's infrastructure for the earn program. Uh Coinbase uses Morpho. Uh you know, Kraken's integrated Aave. So you know, these are large institutions kind of working uh with crypto-native businesses or or DAO-led organizations. Uh what I would say is I think as long as you have The key things are you've got to have a legal entity that they can interact with. You know, we Last year we did a loan with uh Cantor Fitzgerald. We have a great relationship with them, but you have to have a legal entity that they can face. And so I think you know,

having a token, having a DAO doesn't preclude you from having those legal entities. A lot of DAOs have chosen to have the Cayman Foundation model, which which seems to be a workable structure that is aligned with a DAO and with token holders. I would say it's been slower. You know, you haven't seen JP Morgan doing anything with DAO-led organizations yet, but I think that will happen over time as hopefully we get another bite at the apple with clarity. And also just Lindy effect. Like I think the longer you can show that there are certain Mhm. uh you know, there are crypto-native or or DAO-led organizations that have been managed well and have shown consistent stability in their businesses, then I think more more TradFi firms will be willing to work with.

>> Right. In the same way that, you know, people are no longer asking where is the CEO of Bitcoin or Ethereum. I think they are there. >> You know, like the dealings on on the space. >> of these A lot of these DAO-led organizations still have a CEO, right? And so that that helps engender some trust. Uh but they just have to educate the organizations on you know, here's the governance structure, there's the governance token, there's the Cayman Foundation, there's independent directors, there's accounting, and um you know, financial reporting on these entities. Things that they are used to that I think, you know, in the first wave of DAO-led organizations maybe weren't in place in crypto, but we're getting better as a space.

>> Exactly. Yeah, and and you have a name, you're not a, you know, anonymous. >> Yeah, you have a name, you're not you're not an anonymous sitting behind a PFP. >> NFT, right? Yeah. Along those same lines, um other thing that regulation has um brought onto space have have been the restrictions around um stable coins uh providing yield. Um so with DINO Act and MiCA and so on, uh it feels like yield is landing on other asset types as opposed to with, you know, stable coins and so on. So I would assume that plays well with your strategy.

What what's what's your take on on on yield and stable coins and sources of yield and you know, like zero USDC has the stable coin name on it, so there's some relation there, right? >> Yeah, I understand what they're trying to do in separating the stable coin issuer from providing yield on the stable coins. Cuz effectively what they want is they don't want stable coin issuers to be taking significant risk with people's money to try and generate more yield. So they're trying to say, "Okay, one party is responsible for issuing the stable coins, Other parties have to be responsible for generating yield.

Uh I I think that, you know, perhaps the name around stable coin yield kind of engenders more than what is actually at stake. So, the Clarity Act and Genius, I think, are fine with people getting yield on stable coins provided that the yield is not coming from uh the stable coin issuer. So, if you took it on face value and said, "Nobody can get any yield on stable coins." Well, then you can't do anything with stable coins. You can't lend them. You can't trade them. You can't >> Right. >> Uh it would be silly. It'd be like saying you can have money and nobody can get any yield on on dollars. Uh so, I think it's a I think it's a prudent separation for risk purposes.

>> Mhm. >> Um you know, we don't offer stable coins themselves. We see us We see our products as being uh an application built on top of stable coins. So, we use Circle and Tether and the Global Dollar Network and, you know, perhaps in future uh Open USD and others. We build uh yield and lending products on top of them rather than being a stable coin issuer ourselves. It's just that when you label the product, you have to say, you know, "Stable coin yield product." Or um you know, >> Mhm.

>> "Yield product built on stable coins." And it And it's a bit of a mouthful. So, people just kind of default to saying, "Well, this is a a yield-bearing stable coin." Which it's not. >> Mhm. >> Uh but I think it's positive for us because if, you know, if those big issuers can't uh natively issue yield themselves, well, then folks like us will have to step in and and we provide products that that generate the yield. So, I think it's it's positive for us uh because it means we don't have to compete with them. We can focus on generating yield from the commercial lending activity that we do. And it then gives customers a place to come to to generate yield because they can't go directly to a Circle or a Tether for that yield.

>> Right. And it makes sense in in in terms of what you were saying that when you get yield through something like Maple, it's it's a deliberate decision and in terms of getting exposure to that type of risk and earning the the reward that comes from it as opposed to, you know, the the issuer potentially going under because they're over indexing yield generation over uh stability of the reserves and and so on. >> Yeah, I think of it as like a continuum. You have a spectrum of services, spectrum of banking and um lending and yield services where you know, banks over the last 20 years, you know, really a lot has accelerated

since 2008, but banks used to do all kinds of lending. And then since 2008 and Basel III, they've really been restricted to more doing pretty much just like residential mortgages. And more lending to large public companies with credit ratings. They don't do a lot of lending to like your local neighborhood business anymore. Um and so they've been put into kind of like a lower risk bucket and then you have stablecoin issuers which are now getting put into an even lower risk bucket. Just hold T-bills. Just hold T-bills and uh reverse repo securities. And then you had the business that left the banking sector, went to the shadow banking sector. So it

went to Blackstone and Apollo and Ares and KKR and Blue Owl. And those businesses now uh those lenders now bank most of the middle market you know, uh business sector. And then we our spot is kind of at the higher risk end there. It's uh you know, we lend to crypto native companies. Um we're not a bank, we don't aspire to be a bank. Uh but you know, we're similar to these alternative lenders. Uh and then we can offer people a higher yield that comes from that lending. Needs to come with full disclosure as to the risks and all of that, but this is people making a deliberate choice to get yield from lending and loans and rather than treating it like a banking product.

>> That makes total sense. And I I think it's also a good segue to discussing the distribution and end user angle uh of of the protocol. Um so for those who have been in DeFi for a long time, of course you've been familiar with Maple uh for many years uh now. Um so who are the users and how is that changing today? >> The users on the borrower side it was corporate and institutional borrowers. So it's prime brokers, asset managers, exchanges, family offices. And on the other side it was heavily kind of institutional. Now it now it's probably a little bit more blended. So you have uh crypto corporate treasuries, you have funds who are

looking to park cash short-term and get a yield, you have uh you know, synthetic dollar issuers, let's call them, who use it as part of the backing for their vaults and for their synthetic dollar products. You have on-chain yield funds who use our Terra USD products in looping to generate higher yields. And uh now the newest segment that we're seeing this year is uh FinTechs and neo-banks uh who use it as an embedded service to give yield stablecoin yield to their customers. And I think that's going to be a really fast-growing segment. So if you look uh FinTechs that you know, the stages of crypto adoption were allow your users to trade Bitcoin and ETH and and SOL and XRP and and large caps.

Then once you allow them to do crypto trading, you then had a lot of stablecoins on the platform because they would then be, you know, buying and selling crypto tokens using stablecoins. So then to keep your users' funds on the platform, you have to offer them a good earn product. And so I think that's the natural progression. And that's why we're very excited about Maple Embed because you know, we'll be able to offer a yield uh to these companies to then pass through to to their their customers. So I think FinTechs, neo banks, um uh you know, consumer finance apps will all be big adopters of this kind of DeFi mullet product that we're seeing.

And we're already seeing, you know, significant uptake on it. You know, the Robinhood earn program I think Robinhood chain is already at 700 mil plus TVL. So, that program is growing quite rapidly. And you know, we think there's going to be others who come to market in the next 6 months. >> And um And so, are you thinking primarily sort of like CeFi organizations that don't want to miss out on or sort of like are in this um competitive race in terms of making the stablecoin balances productive?

Is that who you're seeing primarily or are you seeing more Mhm. Yeah, go ahead. >> No, I think that's the primary use case for them. So, I've got let's say I'm uh you know, a a neo bank and I have 20 billion of customer deposits on my platform and currently it's sitting in T-bills earning 3.6%. What I can do is I can offer a new earn program to them. And I'm a little bit scared now. Now that other FinTechs are offering higher yielding products which have you know, promotional yields coming from DeFi, I'm scared that my users are going to go to those platforms. So, what do I do? I open up my own earn program and release a similar kind of product to compete and keep the users, you know, keep that

20 billion on my platform. That's the thinking that's going through the heads of a lot of these FinTechs and neo banks. The other thing you're seeing at the moment, Chris, is that banks are all talking about tokenized deposits. Banks are terrified that stablecoins will cause a flight of deposits off of their platform. And currently banks the banking business model is effectively subsidized by the FDIC which says, "If you have under 250k on the on a banking platform, we will guarantee that money. And so that allows banks to offer kind of a lower than market, you know, a lower than true counterparty risk-adjusted yield for keeping money in a checking account there. What before banks had that FDIC guarantee, you would see flight. You know, you would see people would get

scared that a bank might fold and they would, you know, take all of their deposits off and send them somewhere else. >> Yeah. >> You know, it's what the plot of It's a Wonderful Life is about. But banks are now worried what that's done is it's got banks used to having significant amounts of deposit capital which they pay, you know, 30 basis points on. So it's a bad deal for consumers. And I think what they're worried about is that those consumers will take those deposits, stick them on Robinhood or a Coinbase or one of these other platforms and and be wanting to get, you know, 5% yield on it. I think that's totally logical because uh the movement of money as we saw even going back to 2023 March with SVB was that um money and deposits are now

extremely mobile and they're only getting more mobile. So what banks are trying to do is is to offer a tokenized deposit products so that they can build in other yield products for their customers and use that as a way of retaining customers. However, there's a path where that kind of backfires against them and you take your, you know, you can take your JP Morgan tokenized deposit, swap it on Uniswap for Serum USDC, and suddenly you're earning a higher yield and um from these these stablecoin yield products. So, you know, there's a path where that backfires on banks, but I do see that that is the direction of travel where everyone will have you'll have a tokenized deposit, I'll have a tokenized Chase

uh deposit, and maybe I can swap that or port it instantly to these higher yielding products offered by private credit or other asset managers or other fund managers. But I think you'll see a plethora of these fixed-income products offered over time. And our goal is, you know, how do we stake out a niche in that market and you know, and build to a scale where we're able to compete once these trad-fi players start coming in. >> That's really interesting. So, essentially going broader in terms of the end user base or the lender user base beyond purely, you know, like institutions, treasuries, and so on into, you know, like end users who willingly participate in this type of

asset exposure in in return for for yield. And I think it's also interesting that you mentioned going beyond, you know, an exchange or another CeFi like an on-ramp or something like crypto native, but potentially going into neo bank models where, you know, if I'm a fintech behind a neo bank, I'm looking for the best source of yield that I can possibly give, so I can, you know, attract end users and compete with the banks and and sort of it's it's another tool under the belt of fintechs.

Is there Is Is there any traction at the moment from that type of segment? So, I'm thinking about Is there like a neo bank in some place that is otherwise a purely, you know, like fiat or non-crypto denominated product that is currently using on-chain yield? >> The answer is yes. You have, you know, neo banks offshore from the US were kind of earlier adopters. So, you had ones in LatAm like So, the players like Lemon.

Like Lemon, yeah. So, the offshore ones were earlier adopters because they wanted access to US dollar products and the best way to get US dollar products offshore was stablecoins. They were early adopters, and it was also It's easy and and low cost to then integrate with DeFi protocols like a Morpho or an Aave or Maple. Um if you're an offshore player. So, they were the first adopters. And then net The other ones you're seeing is is crypto exchanges kind of act like quasi neo banks these days because they are on-off ramping. A lot of them issue cards. Really they're Crypto exchanges are converging with neo banks. You have neo banks like Revolut and now allowing crypto trading.

Meanwhile, Coinbase who's a crypto exchange is now allowing credit cards and you know, and and like cash back rewards and stuff that was traditionally associated with with neo banks. And you can essentially use your, you know, uh I like Coinbase, you know, I use it for stable coins. You can essentially use that as kind of like a quasi bank account type product. Particularly if you now have debit cards and credit cards that you can spend from those accounts directly with. So, the two are converging. But they are they are the segments who are offering stable coin yields and these products first.

Then traditional banks, this is why the banks hotly contested the rules in clarity and why there was a big dispute between the banks and the exchanges with clarity is the banks are concerned about deposit flight if uh stable coin issuers can offer yield uh on stable coins. So, the next step will be once there is widespread adoption of neo banks offering stable coin and stable coin yield products, then uh traditional banks will be forced to, you know, forced to enter the space. And you're already seeing that. You're already seeing, you know, JP Morgan is issuing a tokenized money market uh fund. Um other banks, you know, Fidelity is issuing a stable coin. So, the banks are are in turn issuing their own tokenized

products and stable coins to uh prevent loss of customers. >> And um so, we have this um sort of like convergence on the lender side because of all these type of programs and and end users. Do you also foresee or is it already happening that in some ways the borrower pool in crypto will run out in some ways or that you might want to expand into other types of borrowers and and credit types. >> Yeah, definitely. So you know, I have long viewed that our 10-year competition is the private credit players.

I remember you know, I reached out a few years ago to to someone at Ares and was you know, trying to introduce myself and and what we're doing in crypto lending and you know, I got told in no uncertain terms that was a lot of crap and Bitcoin's terrible collateral and you know, thanks but get lost. And but I see them as the ultimate competition, right? So uh we found a niche to lend to that was perceived to be extremely unattractive by them. So innovators dilemma, we you know, you have the the new upstart comes into a segment that's unattractive to the incumbents and they don't bother with it because it's unattractive I eat Bitcoin Bitcoin back lending.

And then what happens is the advantages that we get from dominating that sector then turns out they translate to other sectors. Like maybe FinTechs like actually receiving stable coins because I can send them stable coins to for a loan drawdown at you know, 7:00 a.m. on a Sunday if they want and my private credit competition can't wire them the money at 7:00 a.m. on a Sunday if they really needed it. And so suddenly we're starting to win customers because of speed, ease of use, convenience. And so we go up market again and now my view is that the next segment we would go up market to is FinTech asset back lending.

So it might be a card securitization, it could be consumer loan securitization or a business loan securitization or fix and flip real estate. But we are going to go to a segment where we're comfortable with the risk. So, we like securitization, asset-backed finance, warehouses, um and being in a senior position there. We don't want the first loss [clears throat] piece. >> Mhm. >> But, you know, there there are players in that market like Victory Park who offer these new uh you know, series B, C, D companies finance at 15 to 20% well, you know, we have a lower cost of capital because we we take um capital from DeFi could we offer facilities at 10, 11, 12% and suddenly

compete with them. So, I think we're going up market into fintech um ABLs as a next step because the Bitcoin back lending market is around you know, it's been around 25 to 30 billion for the last, you know, 3 years. So, it hasn't grown as much. I think it will continue to grow over time. Um however, we're growing faster than it. So, uh you know, we can only absorb so much capacity in that market. So, we then prompts us to evolve our offering and and look at these other markets. And so, I think um over time we're going to compete on more and more deals with these guys and you know, 10 years from now it might be that we're competing for an asset-backed

finance deal for, you know, um airplanes or uh you know, SpaceX rockets and uh they're happy to receive the funding in stable coins. We're collateralized by an SPV holding the assets and our competition that we you know, we had to beat out for that deal was uh was Blackstone. Um but that's you know, that's that's kind of the 10-year vision. >> Yeah, that's well, it's it's a really exciting vision and it's I think it's remarkable to see um how Maple is getting embedded into DeFi or TradFi audiences and and yield is flowing. Borrowing is getting done. Yeah.

>> Exactly. Exactly. >> So, yeah. Well, it's it's it's really been great having you on the show. Suddenly, we're we're out of time for this episode, but it will be fantastic to see how this vision plays out in the next couple of months and years and and and keep track how things are going with with Maple. So, thank you so much for for joining me today and and the convert audience as well. >> My pleasure. Thanks, Chris. Appreciate you having me on. >> Thank you so much.