On March 18, Cred hosted its third AMA discussing, “Safety and Security During Times of Uncertainty,” in response to the volatile financial markets impacted by the COVID-19 outbreak.
We created the giant “C” logo as we believe in community first and appreciate our community coming together during this time. At Cred, we take into account our community’s ongoing feedback, which has resulted in the continuous improvement of our product.
Below are the top 15 highlights from today’s discussion. If additional questions arise, hold on to them, Dan and the Cred will be back for our next AMA on April 15, 2020. As always keep checking out the Cred Telegram Channel for updates.
TOP 15 HIGHLIGHTS
Q: Hello Dan, it’s great to hear from you during these rocky times. How’s the situation in San Francisco?
A: The situation is under control. The Cred team is keeping our heads down and staying focused. All in all, we are continuing on with business as usual. I have spoken with our corporate borrowers and they are holding up as well.
Q: Hello Dan! What is your view on the United States government’s approach to the current climate?
A: I think the United States government is taking COVID-19 seriously and will pass needed fiscal stimulus packages to help support the economy.
Q: Are there borrowers on the Cred platform, and how are people feeling about the collateral liquidations after the major drop in cryptocurrency, it must have had an impact on clients?
A: Cred has mostly lenders on its platform, in terms of borrowers, they are mostly high net worth individuals, the majority of which have topped their accounts. Of the lender accounts on the platform, only one has asked to be liquidated.
“Usually, I’ve found that amidst a terrible market, with a lot of fear, uncertainty, and doubt, there is often a silver lining — in this case, we have many more prospective partners coming to Cred, wanting to work with us. We’ll have many more announcements coming soon!” – Dan Schatt
Q: How is Cred’s business model sustainable? Wouldn’t this suggest operating at a loss?
A: At Cred, we are more fortunate with our business model — we have a strong portfolio of lending opportunities, along with top tier corporates with strong cash flow that can withstand strong headwinds.
Q: Even companies with the strongest cash flows are subject to change and it’s pretty clear that a global recession is looming. At what stage will Cred begin to restructure the business?
A: Many of us here at Cred were together in the crypto bear market of 2018 and together at PayPal when the 2008 recession hit. We are a pretty agile team, and we are always assessing what we should do for the business. The company operates without a lot of overhead and the largest asset Cred has are the people who work here — most of us have been weathering these types of storms for decades!
Q: How many employees work for Cred?
A: There are 25 employees in the US, and 15 that are based in India. We are very careful in our hiring process. Our intent is to continue keeping the company strong, with very senior competent people running our business. I would say that is what gives everyone the most confidence in a market like this.
“Thank you Mods and CRED team. These AMAs are great, especially during troubling market times.” – Cred Community Member
Q: Dan is there a plan to improve the dashboard for Uphold clients? I’m having difficulty following my stakes and following which principal is about to roll over.
A: Thank you for your feedback. Our user experience team is working hard on these dashboard updates and you will see dramatic improvements in the coming months.
Q: Is there a possibility of adding Singapore dollars? If yes, will it be in the near future?
A: Currently, we do not accept Singapore dollars, but we’ll note that down as a future request!
Q: I am new to this lending/borrowing concept. What are the chances that we lose the money that we lent out?
A: The chances of losing the money you lend out are nearly impossible. We are licensed, insured and the business is operating normally. We are also ensuring that those who need extra liquidity can get their money before auto-re-enrolling in the next program.
Q: How does Cred adjust the percentage rates for lenders in response to the market bear/bull conditions?
A: The rates for lenders are mainly a function of two things: the risk-adjusted return we expect to receive from corporate borrowers, as well as the hedging costs. While we expect the rates to go down a bit, we aren’t expecting to see anything dramatic.
“Thank you very much Dan for taking the time to answer our questions! I feel reassured” – Cred Community Member
Q: In response to this financial climate, the US government continues to print money and offer cheaper loans. Will this affect Cred’s business model?
A: Good question, a larger supply of liquidity in the current economy should, in turn, help the entire economy along with businesses and lenders, and consumers!
Q: If there is a larger supply of liquidity and interest rates get competitive, is there a reduction in what you can offer to lenders in order to stay competitive to borrowers?
A: If it is a liquid market, yes. Even though rates are low, the liquid markets make it difficult for corporations or individuals to borrow. It is also true that this can be dynamic and we always will remain competitive. The biggest reason we can maintain our rates is our operational efficiency. We don’t have branches, we are digital, and we employ blockchain rails versus the banking system. Our model already cuts the spreads that banks normally enjoy.
Q: With the federal government dropping interest rates near to zero, do you see base and premium LBA rates changing significantly in the coming cycles?
A: Premium LBA rates are very dependent on the futures pricing, but we don’t expect dramatic shifts. One thing about LBA is that we will never issue more of it, as the US government issues more dollars. Of note, as there is a flight to assets less volatile, you may want to check out gold on Uphold as Cred currently offers a 3% base rate. Additionally, you’ll see more information coming on UPUSD — the stablecoin we’ve had a big hand in shaping. It is substantiated with US Dollars in an FDIC insured account and should be available soon across all Cred platform partners worldwide, barring specific regulations.
“It’s awesome to hear you guys have things planned out.” – Cred Community Member
Q: Hi Dan, are there any updates about an automated re-investment system? Rather than switching from US dollars to BTC card every month?
A: Our team is looking at some future enhancements that would enable customers to automatically purchase digital assets using their debit/credit card. Such enhancements are farther away on our roadmap but this a request that is heard quite often, stay tuned!
Q: In terms of UPUSD and UPA, has there been any more news on additional use cases for LBA as a “Translation Utility” similar to the cannabis industry use case?
A: We’re still making progress, but the challenge right now is that merchants are shut down due to COVID-19. We are making strong progress on the legal, compliance, technology front, but rollouts will be impacted.
“Thanks for hosting the AMA and for your answers. Cheers mate and stay safe!”
“Strong answers Dan. I will hopefully be increasing my lending to Cred once the crypto market stabilizes.”