This is part of an ongoing Q&A series with our originator partners.
Today I’m joined by Dustin Hull, the VP of Finance & Controller at SALT Lending. SALT is one of the newer originators on our platform, with the successful launch of their first note on Jan. 29.
Brian Guerra: Thanks for sharing some time with us Dustin. For those who haven’t heard of SALT (and maybe aren’t familiar with crypto-collateralized loans), can you briefly explain what SALT does?
Dustin: Sure, SALT is a traditional lender with a twist. We provide USD-denominated cash or stablecoin loans secured entirely by cryptoassets such as Bitcoin, Ether, and Litecoin. By accepting cryptoassets as collateral, we provide an opportunity for our customers to unlock their value without having to sell them.
BG: And how does that process work?
Dustin: When applying for a loan, customers choose their preferred loan type, loan amount, and loan duration and then transfer their chosen collateral types to our platform. We do not require credit or income checks, nor do we charge origination or prepayment fees. Our Loan-to-Value (LTV) monitoring system tracks the prices of assets 24/7/365 so customers can effectively monitor and manage their loans. In the event of a meaningful price drop, customers can choose to make a one-time payment, deposit additional collateral or opt to have their collateral sold on the open market to restore the health of their loan.
Given SALT has the ability to liquidate collateral when a loan’s LTV ratio crosses a certain threshold, we can effectively protect the lender from loss of principal and have had zero principal loss to date. Once customers pay back their loan in either cash or stablecoin, they are granted full access to their assets again.
BG: It seems that when people hear the word crypto, they have an immediate reaction. What is a misconception investors may have about this space?
A common misconception is that you can’t collateralize cryptoassets because they are volatile in nature. While this misconception is understandable, SALT exists because we have solved that very issue. We’ve built technology that enables us to track the prices of assets all day every day, along with the health of our customers’ loans. We rely on this real-time monitoring system to inform us when a customer’s collateral is declining in value, causing their Loan-to-Value ratio to rise. By custodying our customers’ assets for the duration of their loan, we retain the ability to liquidate a portion of their collateral if the customer does not take action to restore the health of their loan during a market downturn. This enables us to prevent losses of principal for the lender.
So, while managing such volatility is not common in traditional asset-backed lending, we’ve found a way to manage crypto assets as collateral, which has enabled us to bring this alternative asset class to the traditional finance space.
BG: Many people might not be aware of the regulation involved in this space. Can you elaborate on that?
Despite our focus on crypto, we’re subject to the same rules and regulations as traditional lenders. Given our categorization as a lending business, regulatory compliance is a strong priority for us and we’ve worked closely with regulators over the years to pursue lending licenses where necessary. We also work closely with auditors to ensure we are compliant – not only in terms of the financial aspects of our business but in terms of our technology and process as well.
BG: Because of the growing popularity of the industry, there are competitors popping up. What do you think sets SALT apart from others?
Our customer service, security measures, and customizable loan offerings are what set us apart from other lenders in the crypto space.
Customer Support: Not only are we able to fund loans in as little as 24 hours, but to make sure we can help our customers around the world with any questions they may have, we offer phone support during normal business hours and 24/7 online support. Given it’s not easy these days to reach a real human even in the traditional banking space without first having to go through numerous automated options, our customer support offerings make it easy for borrowers to communicate with us directly as the need arises.
Security: We are proudly CCSS (CryptoCurrency Security Standards)-certified, meaning we maintain high-security standards when it comes to managing customer assets. Once a customer transfers assets to our platform, they are held in cold storage and are protected by a multi-signature process, meaning no single individual can move funds. Unlike other crypto-backed lenders, we don’t rehypothecate customer assets or commingle them with assets owned by other customers.
Customizable Loan Options: When applying for a loan with SALT, customers can choose their loan amount, loan type, duration and starting Loan-to-Value (LTV) ratio ranging from 30% to 70%. We also grant customers access to our LTV monitoring system that tracks the prices of assets 24 hours a day, 365 days per year. If there’s a meaningful price drop, our real-time alert system notifies customers immediately via phone calls, texts and emails, so they can effectively manage their loan.
BG: What makes this space unique from an investor’s point of view?
From an investor standpoint, crypto-backed loans are an appealing investment because they are over-collateralized liquid asset-backed loans, and SALT has complete control over the collateral securing them.
Given we custody our customers’ assets for the duration of their loan, we have the ability to automatically liquidate a portion or all of the collateral necessary to restore the health of the loan, preventing any potential loss of principal. Essentially, we’re providing investors with indirect exposure to the crypto asset class with reduced risk.
BG: Can you explain the lifecycle of the capital raised through Percent?
We put capital partner money to work by funding loans as quickly as we can. We earn on the difference between the rate at which we can borrow and lend. A big part of what we do when talking to capital partners is ideating around potential new lending products that build off of our existing technology.
BG: When surveying the market for efficient sources of capital, what attracted SALT to the Percent platform?
We’re attracted to companies like [Percent] that are adding a twist to the traditional asset-backed lending space. Like us, they are pioneering a technology platform that is modernizing asset-backed lending and given their focus on alternative investments and our focus on crypto, the two businesses naturally complement each other.
Additionally, [Percent’s] short duration securitizations closely match the durations that SALT offers in our fixed term loans. We also admire their talent and efficiency and are excited to work with them for the foreseeable future.
BG: Great to have SALT on our platform, Dustin! Thank you for the insights.