CrescoFin - Competition on the stablecoin market

TL;DR it’s a money market fund (MMF) that does invoice factoring insured by Lloyds. You get a 3% interest rate and no credit risk (well the Lloyds). Tokens are under KYC.

You can read more here:

This is exactly what CHAI is for DAI. We have to check the details, but having a 3% almost-risk free interest rate will most likely increase our cost of capital in the medium term or reduce our ability to grow/keep market share). Still super early, but something to be aware of and follow.

Already mentioned in:

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These iCRES tokens look like amazingly good collateral for Maker if Maker can get approved, or if a wrapped iCRES token appears in the wild.

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There’s also https://truefi.io/ (by trust tokens) and the Visa/USDC partnership are all moving DeFi rapidly into the direction of onboarding RWAs in different ways.

Imagine as a small business you can borrow USDC from Aave and then spend it with a Visa Credit Card. This will be interesting to watch, as you said Seb.

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I have had contact with CrescoFin on Discord about onboarding wCRES tokens to MakerDAO and also proposed whole life insurance since they are a regulated firm that sells securities on-chain. He is very much interested in collaboration in this space. @SebVentures @mrabino1 rather than looking at them as competition I think we could create a symbiotic relationship with them like YFi is doing in DeFi but MakerDAO can do so with the first Bloomberg Terminal listed securities that could facilitate onboarding of RWA. For example, they start a captive insurance agency, invest in RWA (e.g. whole life insurance), tokenize/wrap the loans, and onboard them to MakerDAO creating a positive feedback loop that benefits all parties.

From Robert Sharrat: Hi @ejbarraza this new whole life collateral proposal that you wrote for MakerDAO is interesting. You asked me how much I knew about life insurance, which I read on my phone. I answered that I knew about insurance and didn’t focus on “life” but rather our insurance, which is credit insurance. Our model is that if some major company in the real world doesn’t pay, then the insurance company pays. Our focus is credit insurance, not life. But, that is why crypto is so interesting: the opportunity to do new things. We are focused on our simple core strategy at the moment, but then interested in whatever can deliver extremely low risk, higher returns (by cutting out the center) to our user community. Do you want to have a chat with me and Simon (Head of Insurance and Risk Management) about this, sometime? Probably something that we could have a good look into after our listing (which will probably be at the end of next week; will announce soon).

We operate in the traditional space as well and want to be a bridge to crypto for traditional institutions (money managers, family offices, funds). These are looking for the development of a yield curve, so they can push out the duration of their placements, to get higher yield (e.g. lock-in for x months, get higher interest). We offer insured interest rates, so it is kind of like the risk-free rate in traditional markets. All of the assets we will bring to DeFi will be real-world assets: financing of productive use in the economy, repayment via future cashflows. I’d be happy to talk about insurance and Maker. Super passionate about the potential in DeFi for institutions and individuals. As a regulated firm, we hope to provide a way for money managers to get into the space. We are working on moving the payout mechanism on-chain by putting it in a smart contract. We may create our own insurance captive to do this. This will take some time, but investors in CrescoFin will have the benefit of this. Also, we expect our institutional investors to come into the DeFi space and, like many, they will want some very safe collateral to be part of their portfolios.

wCRES

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Perhaps MakerDAO can create a vault for whitelisted wallets that are KYC compliant. Institutional investors can then leverage their risk-free rate of return by bringing their capital to MakerDAO. Those that do not want to go through KYC can use the wCRES token similar to the NXM/wNXM token.

Is there an explanation on how they can have a non KYC equity token?

I must point that all advisors are exchanges or media that did promote the project (or a partner like Aave). It’s like giving me some wCRES to help onboarding the product.

If the community wants the RWA team to work on it no problem. Quite the opposite.

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The analogy is NXM/wNXM. The unwrapped version requires KYC and the wrapped version does not. However, the wrapped version does not give you the same features. For example, dividends, voting, convertibility to stable-coins. If for whatever reason MakerDAO does not want to circumvent regulations, then why not just make a vault of whitelisted addresses so only KYC-compliant customers deposit/borrow CRES. It would be the only token with guaranteed principal and interest which should have a collateralization ratio similar to that of USDC. This would enable institutional investors to leverage their yield farming and reduce the concentration risk of other collateral. Maybe it even becomes the defacto stable-coin of DeFi.

Picking up our other conversation here… Great for them if Lloyds gave them that deal. Do they have more information on what is specifically covered by the policy? I will likely invest myself if it’s solid.

Regarding the securities issue, and take this with a grain of salt because I am not a lawyer, but I just don’t think that’s how the law works. You can’t say “don’t do this Americans!” an absolve yourself of all liability. They are selling securities without the appropriate dealers, registration, and anti-money laundering processes. My primary concern with onboarding this asset is the potential enforcement actions this may cause and the impact it will have on their balance sheet. To be clear, I’m not very worried about the insured receivables investments, but onboarding the equity token itself.

There is a distinction between CRES and iCRES. As I understand it iCRES is the insured accounts receivables that require KYC with them so that if the principal and interest is not paid for whatever reason, the iCRES address has an insurable claim to make with Lloyds and is paid directly by them. Past performance is no guarantee of future returns, but they are very likely to continue to pay out 3% for the foreseeable future given the wide spread between borrowing and lending minus insurance costs. If insurance premiums skyrocket, then I could see that number decline.

They have a legal compliance team and are fully regulated, so you can ask them on Discord they are very approachable. According to CrescoFin’s memorandum which I hope you read in full: In accordance with Swiss law, the Tokens are freely transferrable and carry full equity rights. For a tokenholder to exercise voting rights, they must register in the Company’s shareholder registry. This involves providing your name, address and date of birth. The Company reserves the right to undertake know your client (KYC) processes on shareholders. No person who is on a Swiss government sanctions list will be registered as a shareholder. In the future, to receive dividends, it may also be necessary to register in the shareholder registry. It is the intention of the Company to pay dividends to Ethereum
addresses holding the Tokens; this is being clarified in the context of evolving Swiss law.

There is little legal guidance from the US as to what counts as investing in a security with regards to a smart contract acting as an intermediary form of collateral for a line of credit. Does swapping DAI for wCRES on Uniswap mean you are breaking the law, it is unclear.

Thanks for the advice - I’m going to check out their Discord

In regards to the SEC going after CrescoFin for selling tokens to Americans, according to Robert: “Well, we are regulated in Switzerland and report to our regulator here. It is possible that US regulators could object to any company anywhere, but we feel that we are on strong legal ground with our offer, which complies exactly with Swiss law. We are not promoting the offer to US Persons. It is perfectly legal for Americans to buy foreign securities (e.g. UK government bonds, Japanese stocks). In our case, we have said no US Persons to be extremely conservative. We really like the US and may change our policy in the future.”

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