Meltem Demirors: Trillion Dollar Consumer Credit Business is Branching Out Into Crypto

Meltem Demirors, the chief strategy officer at CoinShares, a leading cryptocurrency treasury management firm, recently posted an informative thread on Twitter in which she noted that consumer credit is a “massive business.”

Demirors, a mathematical economics graduate from the prestigious Rice University, pointed out that “US consumers hold $4 trillion in mortgages, student loans, auto loans, credit card debt, and more.” She added that cryptocurrency-based credit began with companies such as BTCjam, a globally accessible peer-to-peer (P2P) bitcoin lending platform, and RipioApp, another crypto-focused lender.

BlockFi, Compound Finance are Among Top Crypto Lenders

According to Demirors, there was “an explosion in crypto credit products” in 2018 as there are now firms including BlockFi, which lets users take advantage of their digital assets without having to sell them. Companies like BlockFi offer products that are similar to LendingClub, which is America’s most established “online credit marketplace”, Demirors explained. However, BlockFi’s lending services use bitcoin (BTC) as collateral instead of fiat-based assets.

Going on to mention other crypto-related lenders, Demirors noted that the Dharma Protocol has been designed to facilitate decentralized lending, meaning that “users connect without an intermediary to offer crypto (coins) as collateral for credit (a loan).” Other P2P lenders include MakerDAO and Compound Finance, both of which have been developed on Ethereum.

Acknowledging that all these services are “cool”, Demirors asked “who has enough crypto to lock it up for cash?” She argued that “most likely, investors” who’ve made substantial investments in the crypto space would be more inclined towards using digital asset lending markets “as a way to [leverage] existing coin positions to buy exposure to other coins.”

However, Demirors asked “what happens when 5%, 10%, or more of the circulating supply of a coin is locked up?” At present, at least 2% of all ETH has been locked up (most of it in the MakerDAO ecosystem) and about 10% of Augur’s REP token has also been locked in various contracts. According to Demirors, it won’t be “pretty” when users try to access the collateral that has been locked up.

Bitcoin Lending Must Become Trustless In Order To Attract Major Investors

Caitlin Long, a 22-year Wall Street veteran who is now more focused on the crypto and blockchain industry, believes bitcoin lending is not yet “trustless.” In a detailed post on Forbes (published in January 2019), Long argued that cryptoassets “need financialization to succeed.” She explained that “financialization requires the development of markets for lending”, however Bitcoin’s protocol has not been designed to allow effective crypto lending.

“Major fiduciary institutional investors” will only make substantial investments in cryptos if digital asset markets are developed in a trustless manner - which would allow businesses to “borrow money to finance investment in … enterprises," Long noted.

Those Banned From Facebook May Not Be Able to Use Its Cryptocurrency Libra

Facebook’s two days of congressional hearings on the social media giant’s cryptocurrency ambitions seemingly revealed that those who have been banned from Facebook may not have access to Libra.

During the congressional hearing Facebook had to answer some tough questions, and one of them came from Representative Sean Duffy, which asked the company’s cryptocurrency head, David Marcus, who’ll have access to Libra.

The Congressman initially asked Marcus who could use the cryptocurrency, to which Calibra’s CEO answered: “anyone that can open a Calibra account, that can go through KYC [know-your-customer checks] in countries where we can operate.”

Duffy then referenced two individuals banned from Facebook for violating its community guidelines, Louis Farrakhan and Milo Yiannopoulo, and asked whether they’ll be able to use the social media giant’s cryptocurrency.

Marcus ended up replying he doesn’t “know yet,” after seeing Duffy hold a $20 bill and ask hin who can use it. His point was that cash doesn’t discriminate, and that anyone who can hold it can use it.

While throughout the hearing Marcus tried to point out the company will follow appropriate regulations and comply with lawmakers, Duffy responded that a proper answer would be “as long as you abide by the law, you can use Libra.” The fact he didn’t get this answer, Duffy said, gave him “great pause.”

Speaking to The Daily Beast Elka Looks, a Facebook spokeswoman, clarified Marcus addressed the Congressman’s concerns later on in the hearing. She stated:

For Libra, anyone who is engaging in lawful activity will be able to transact on the network. Facebook will have no say. For Calibra, there is no policy in place yet, but we will share it when it is closer to being finalized.

The news outlet adds that Calibra, Facebook’s wallet to send, receive, and hold Libra, doesn’t yet have final terms of service or a privacy policy. All of this means that those who’ve been banned on Facebook may not have access to its cryptocurrency.

As CryptoGlobe covered, Congressman Warren Davidson implied during the hearings Facebook’s crypto is a ‘shitcoin’ as it doesn’t have some of the properties bitcoin has. The Congressman made it clear bitcoin has no central authority that can censor transactions or dilute its value, while Libra has the Libbra Association.