Home Markets News & Opinions Crypto Lending Gets a Fresh Look — Can the Sector Recover From Scandals?

Crypto Lending Gets a Fresh Look — Can the Sector Recover From Scandals?

James Morales
Last Updated September 7, 2023 2:22 PM
Giuseppe Ciccomascolo
Verified by Giuseppe Ciccomascolo
Key Takeaways
  • Following  period that saw firms including Celsius, Voyager Digital and BlockFi go bust, the crypto credit market is due for a reboot.
  • Trident Digital Group, a startup founded by former Coinbase executives, recently raised $8 million to build a new crypto lending platform.
  • Meanwhile, Coinbase is launching a digital asset lending platform aimed at large institutional investors.

In 2022 and 2023, crypto lending faced severe reputational damage as major players like Celsius, BlockFi, Genesis, and Voyager Digital collapsed, raising concerns about the sector’s long-term viability.

However, recent events suggest that crypto credit may soon experience a renaissance. But can the new generation of lenders learn from the mistakes of their predecessors?

Coinbase Takes a Second Crack at Lending

A recent U.S. Securities and Exchange Commission (SEC) filing , reveals that Coinbase has sold $57 million worth of debt securities.

At first, the crypto exchange remained silent on exactly what the new fundraising initiative was all about. But on Tuesday, Coinbase announced will use the money to launch a new digital asset lending platform aimed at large institutional investors.

The decision to target to institutional lending market represents a change of course for the company, which previously attempted to launch a retail credit product known as Coinbase Lend in 2021.

However, the firm’s ambitions were dashed by the SEC before the project even got off the ground. Under the threat of an SEC lawsuit, Coinbase quietly withdrew its plans and canceled  the launch of Lend.

Trident Digital Attempts to Derisk Crypto Lending

Trident Digital is a new crypto lending startup founded by former Coinbase executives and finance industry veterans. 

In a recently closed seed funding round, Trident raised $8 million to kickstart the venture. The round was co-led by White Star Capital and New Form, with CMT Digital, Joint Effects and Permit Ventures also participating.

In a press release announcing the news, Trident CEO Anthony DeMartino said the company has sought to take on board lessons from the industry’s past failures.

“Counterparty risk, largely ignored in the last cycle, has become the key constraint preventing lenders from re-entering the market,” he stated, adding that “Trident’s solution will offer proper risk management and strike a balance between security and capital efficiency.”

Considering that a single bad loan  to 3 Arrows Capital triggered a full-blown crisis at Voyager Digital that contributed to its ultimate bankruptcy, the need for robust risk management is especially salient for crypto lenders.