The year is 2030, you quickly withdraw your crypto from your high-yield hodler account in order to purchase holiday gifts for your family. Luckily for you DeFi has produced numerous financial products that can increase the value of your investments on a weekly compounding basis thus replenishing what you spent on gifts for your family! Unfortunately, due to regulatory concerns and the fact that we are not time travelers the year is only 2021 and these financial services are only beginning to blossom. One such service is Hodlnaut. Hodlnaut states “our mission is to help individual investors to get the most out of their cryptocurrencies.” They are part of the new class of cryptocurrency fintech companies to offer high yield on cryptocurrency investments that are regulatory compliant and safe for investors to use.
Origins of Hodlnaut
Hodlnaut was founded in 2019 by Juntao Zu and Simon Lee. Juntao’s background includes a few years as a technical analyst at Credit Suisse and Simon’s background is in mechanical engineering and financial services. It is currently headquartered in Singapore. The two founders collided in 2019 during Antler (an accelerator program to help entrepreneurs kickstart their startups) from there Hodlnaut was born. By December of 2020 Hodlnaut had 10 employees and in January 2021 the company had 106 million AUM. Currently the company enjoys a staff of 24 people with robust teams that cover engineering, growth and compliance. As of April 2021 Hodlnaut has 234 million AUM and is working to be fully compliant with Singapore’s Monetary Authority. So far Hodlnaut has been granted an exemption from holding a license under the Payment Services Act (“PS Act”) for the specific payment services for a specified period.
Deciphering the Regulatory Landscape in Crypto/DeFi
The world of Decentralized Finance is leaving its mark on almost all Fintech or crypto based businesses. DeFi influenced the emergence of CeFi platforms like Hodlnaut and many others. Hodlnaut bridges the gap between regulatory compliance and the never ending quest for yield. Hodlnaut offers minimal but powerful financial devices for institutions or retail customers looking to add yield to their blue-chip crypto holdings. These services include a high yield interest account, VIP fixed term loans and corporate loans. These are their current rates paid on the several crypto assets they accept.
Currently their fee structure is as such:
It is important to note that they do not charge a fee to exchange tokens. “We lend out the assets we receive to established and vetted financial institutions that pay an interest rate. As for the attractive interest rates, we analyze supply and demand on our available crypto assets to set a fluctuating interest rate that adjusts as market conditions change.” Investors should also note that Hodlnaut does not accept fiat deposits at this time because of regulatory issues across the globe. One such regulatory issue has arisen that investors should be aware of.
Token Swap halt for Singapore users
As of June 3rd 2021, Hodlnaut will suspend its token swap feature for all Singapore users. “This temporary deactivation will affect all existing and new Singapore users on our platform until further notice. This decision has been made in light of the Monetary Authority of Singapore’s requirement for us to obtain its approval for any new features that we support. Given that token swap is a new feature, in order to comply with regulatory requirements, we have made the decision to suspend the feature for our Singapore users until further notice.” This may be perceived as a negative to investors but really investors should see this as how serious Hodlnaut takes regulatory compliance.
Description of Services Offered
“Hodlnaut Interest Account (HIA) allows customers to earn interest on their crypto assets. The company is able to offer high interest rates to its users because it lends out the deposited assets to vetted and established financial institutions that pay an interest rate. The assets are only lent to authorized entities after a thorough background check to ensure timely interest payment.” Recently a preferred interest payout feature was established where users can choose in which supported coin they want to get paid.
“Hodlnaut also offers a VIP fixed-term loan to its customers. Customers need to meet the following requirements in order to be eligible for the Hodlnaut VIP fixed-term loan. Lock in their cryptocurrency with Hodlnaut for either 1, 3, or 6 months to earn a higher yield. Deposit an equivalent of 100 BTC or more in a single asset class. The deposited funds need to be held till the term ends and cannot be used as collateral during the said duration. Hodlnaut also provides cryptocurrency loans to established financial institutions. The minimum borrowing amount for the same is $50,000. These loans are open for at least three months, and the loan-to-value ratio starts from 25% and goes up to 100%. Hodlnaut is the counter-party for these institutional loans.”
Security and Compliance
Hodlnaut is on the vanguard of the trend of regulatory compliance, high yields (to the moon!) and security for customers. In order to use Hodlnaut services all customers must comply with KYC (Know Your Customer) protocol provided by Jumio. Hodlnaut is very serious about keeping customer assets safe. The company partners up with the crypto custodial company Fireblocks to help store assets. “Hodlnaut users can get insurance cover for up to US $44 Million of their funds through Nexus Mutual’s Hodlnaut Custody Cover smart contract at a 2.6% premium.” Funds are not stored in hot wallets and Hodlnaut will then access the funds and either transfer them to self-custody cold wallets or on-lend the funds to borrowers. At Hodlnaut, funds are also secured by Fireblocks’ infrastructure and with optional insurance coverage up to $44 million through Nexus Mutual. You can conclude that funds are SAFU when under management from Hodlnaut.
My experience with Hodlnaut was relatively smooth. It is easy to set up an account and there is no minimum deposit for people wishing to open an account. Moving Bitcoin in and out of the account went without a hitch. Importantly Hodlnaut bridges the gap for people who wish that DeFi “felt safer” for their investments but wish to earn a respectable yield on their crypto currencies or specifically Bitcoin. An iOS app is just about to launch in a few weeks and the Hodlnaut website is mobile friendly for users browsing on their phones. One of the other benefits of using Hodlnaut are the automatically generated income statements. These statements are useful for bookkeeping as well as tax purposes depending on your jurisdiction.
For customers large and small looking to get a little more yield out of their crypto investments Hodlnaut offers a centralized and regulatory compliant white glove service that will leave users feeling safe. They are one of the few centralized crypto financial companies that give customers access to a high yield on Bitcoin and also high yields on stablecoins. The Cryptocurrency industry still has a few difficult questions to navigate in the future as the industry gains more legitimacy and draws in customers that would’ve normally participated in the “Trad-Fi” (traditional finance) ecosystem.
Hodlnaut does a great job of working transparently with regulatory agencies in Singapore and taking security of customer assets seriously. As companies like Hodlnaut continue to create more legitimacy for the crypto industry will sovereigns and larger banks play along or squash efforts through regulation? The question cannot be answered currently but in the meantime you can earn an excellent rate of interest on your investments in a safe way with Hodlnaut.
Hodlnaut Homepage: https://www.hodlnaut.com/