First Founders AMA
CrescoFin Co-Founders and Managing Directors Dr. Derek Mayne and Robert Sharratt held our first Community AMA in our own Telegram. It was a chance for our Community to see the kinds of expertise Robert and Derek bring — a unique blend that allows CrescoFin to leverage matched funding, blockchain technology and insurance to create a better banking alternative.
Thanks to all who submitted questions for the AMA. It was very informative for us to see what topics were on your minds.
Derek Mayne: Rob and I had a great week and actually were in the office together. Usually I am in London and he’s in Geneva but due to the lockdown in London, I’ve stayed in Europe.
As I mentioned last week, we took a step back from the Telegram and Discord in order to get back to running the business.
We had a major milestone this week with our Chainlink integration. There will be more updates to come on this as it is much more than us just “using” Chainlink as an Oracle.
Our focus now is delivering our product and maximising our institutional depositors.
Slavian: Let’s move onto some popular questions from Social Media now. Thank you to everyone for contributing!
Q. I still don’t understand how CrescoFin will be able to create a deposit return of 1% on the Swiss Frank. The SNB gives you a negative return for years.
Derek Mayne: A. CrescoFin gains an economic advantage using technology. We also target business areas with low credit risk. The CHF product allows us to purchase invoices in Switzerland, or purchase in other currencies and allow for the currency fluctuations.
A traditional finance model in the same space might allow for a certain percentage of defaults in the portfolio. Our insurance eliminates the need for this allowance.
Slavian: Q. All products of CrescoFin are free, forever. And all amounts are insured. If all the products are free, where do the funds to cover the insurance policies come from?
Derek Mayne: A. CrescoFin pays the insurance policies out of the gross margin from the invoice purchases. The products are insured savings so there would never be a charge for this. In addition to this, our competitive advantage would allow us to increase the deposit rates should rates every increase!
Slavian: Q. How does CrescoFin pick the invoices? How’s it doing the credit risk check?
Derek Mayne: A. We perform a full credit assessment of the company this is due to pay the invoices and the company from whom we will purchase the invoices. We do not choose individual invoices, we choose the company and agree to purchase all of their business against the counterparty.
Slavian: Q. How long do you have the insurance with Lloyds in place? It’s a multi-year contract based on GBV?
Derek Mayne: A. The insurance policies are written each time we bring a new counter party into the system. They are generally written for a 1 year term with automatic renewals. We update the total amount of the insurance as needed.
Slavian: Q. I read that all KYC data is stored on your servers in Switzerland, how do you guarantee the security and protection of this data?
Derek Mayne: A. We perform regular security audits of all our systems. We also keep a back up on an air gapped system in case of a targeted attack.
Slavian: All deposits are insured through Lloyd’s insurance market in London, which is one of the best in this matter, but you also say that the platform is non-custodial, how can you keep the insurance policies if there is no custodian or third party?
Derek Mayne: A. CrescoFin pays the insurance policies but names the deposit holders as loss payees. In simple terms, the benefit of the insurance policy is the deposit holders. In the (extremely) unlikely event of something happening to CrescoFin during an insurance claim, the money would be paid directly to the deposit holders. The non-custodial aspect is that the deposit holders own the invoices.
Slavian: Q. CrescoFin claims to be fundamentally different from traditional banking. But it uses FIAT currencies within its model. What then are the main differences that make CrescoFin the best platform for investing and generating interest regardless of the type of currency of investment?
Robert Sharratt: A. We are a bridge between the real economy and crypto. We offer insured savings accounts in fiat (USD, EUR, CHF, more to come) and are developing in stablecoins. We are also building a money market on Aave. And we plan to introduce a BTC product.
We have a superior product based on our model: matched funding + blockchain + insurance = higher savings rate. 10x better than products in the traditional world. From a regulated firm, in Switzerland. We are starting with these currencies and will roll-out others over time.
Slavian: Q. CrescoFin offers insured deposit rates in EUR, USD, and CHF. Which other currencies will be added? Have you thought of currencies from developing countries, which represent a huge market in the cryptospace? Like from Southeast Asia, Africa or Latin America?
Robert Sharratt: A. We are going to add further fiat currencies. We are also working on a BTC offering, as noted on our website. Probably we will start with G7 currencies.
I agree that there is a huge opportunity in developing countries. A lot of the team is from developing countries. Imagine living in Southeast Asia, Africa or Latin America and having the opportunity to hold your funds in USD stablecoins that pay 3% interest, completely insured, with a regulated firm based in Switzerland? That is the Cresco opportunity.
Slavian: Q. How does CrescoFin remain competitive if traditional banks increase interest rates from the current historic lows? Thinking of a scenario where central banks somehow engineer inflation and interest rates rise across the board.
Robert Sharratt: A. We have a typical tech business model: attack old, inefficient, high-margin business, take out costs, share with users. Cresco’s success isn’t based on low rates; it is based on having a lower-cost, more-efficient model (built on blockchain) than legacy banks. Of course, low rates gets people to think more about making their money work harder for them, good for us. But, we are going to disrupt banking regardless of where interest rates are, regardless of what central banks do.
Here is a little aide memoire about inflation-deflation, by the way, from one of my presentations.
Slavian: Q. Project development: the top priority is to have sufficient funds. Is your team financially able to carry out this project? Do you have sufficient funds for its development? Can you tell us how CrescoFinSA project is turning a profit?
Robert Sharratt: A. Derek and I have funded the project to date. Listing the shares, in digital form as wCRES, was to build a community of believers and to raise funds. Much of the software is already there, but there will always be further development. There is also marketing. Competing with the global banking industry will be expensive. We are working on our on-going fundraising strategy and will announce this to the community.
You can see our financial projections in the IM, from page 50. We also put our financial model online, which you can access from the link in the IM.
As we stated, the company is in an early operational phase and is using cash, as is typical. The business model is simple: deposits x margin. We make about a 3% margin, as is set out in the IM. If we realise even a small amount of the adoption that we expect, the business is very profitable, as is typical in finance. The tokens represent a shareholding in the company and token holders have a clear claim on the future profitability of the company. This isn’t a utility-type token.
Slavian: Q. How will CrescoFinSA handle your system if unexpected problems occur in the future, especially a hacking issue affecting your platform having some of your users’ personal data? Will your platform be ready for such a situation?
Robert Sharratt: A. Almost everyone gets hacked. We will likely get hacked as well. To believe that it won’t happen is naïve. We have a simple, old-fashioned strategy: all user data is stored in a secure computer here in Switzerland that is off-line, not connected to the internet.
Slavian: Q. CrescoFin Blockchain is permissioned to comply with Swiss regulations. What are the cons of working with such regulations? Why did you choose to work with the Swiss’s ones?
Robert Sharratt: A. Every financial product is subject to regulation. While some crypto financial products are not regulated, if you touch the real world it makes more sense to be regulated than to simply hope regulators won’t notice. Swiss crypto regulation is extremely clear, and supportive, unlike some other jurisdictions. Switzerland is an ideal place to build a crypto finance business, which is why we chose to go through the regulatory process. I also live in Geneva, so it was natural.
Slavian: Q. Why does CrescoFin require a 30 day notice for withdrawing funds when Aave funds can be withdrawn at any time and most traditional money market funds allow you to join and leave the fund at any time?
Robert Sharratt: A. Most savings products in the real world have a placement period; the most common is 90 days. For our basic account (no interest, but you can have a credit card, make payments, etc) there are no transfer restrictions, but also no interest. For our savings accounts, there is a minimum commitment or a 30 day notice period. It is a trade-off: you also get a 10x higher interest rate than offered by banks or money market funds.
Most money market funds that pay interest require a certain commitment period. They also charge a % to get in and a % to get out. As an example, there is a fund here in Switzerland from a bank called Pictet that delivers a negative return (which isn’t guaranteed) and charges 5% to get in and 2% to get out. The 3 months return is -0.2%. There is $3 billion in the fund. These are good candidates to use Cresco. Same for the $30.4 trillion that is invested in negative yielding debt products.
You can read my article in Bankless about this here:
Aave works a bit differently. We put our insured collateral on Aave and then users can lock stablecoins and earn returns from us. The contract is the counterparty. For us, in fiat, we also offer the ability for a user who wishes to get their money back to be replaced with another user on our waitlist. So, this 30 day notice period is actually a worst case (conservative) scenario. In reality, where there is demand from others to earn 3% insured, there is actually daily liquidity.
Slavian: Q. With regards to the shares themselves, is the treasury address known/is it on-chain? Is there a publicly available model? Are there financial reports available (for the sake of calculating profit and P/FCF)?
Robert Sharratt: A. Yes, the treasury shares are held in the company’s wallets. These are separated, for security.
There is a publicly available financial model; you can see it from page 50 in our IM. There is a link to the model, in Google Sheets. You can download an Excel version of it. We published two different valuation models:
- Discounted Cash Flows
- Relative valuation
Keep in mind that these are estimates and many variables for early operational companies have a wide variance.
Slavian: Q. Looking back at the whole year of 2020, what is your best achievement you are most proud of? What are the key points that CrescoFin must achieve next year in 2021?
Robert Sharratt
A. We are most proud of starting to build a community of believers. Creating a bank alternative is a bold idea. It is going to be a challenge, but extremely lucrative. We are happy that you are here, as our earliest investors and supporters.
The key points for us are executing on our product roadmap. At heart, we are a tech company and what matters is shipping code. Here is the roadmap again, as a reminder:
Slavian: And for our last one in this segment:
Q. Regarding the roadmap, we can see that CrescoFin will launch shari’ah compliant product in near future, it is really good for some of us (as muslim) . How can we know that it will really obey Islamic Law? You know that Islam is prohibit lending things, liquor, etc. So will there be a third party or something that can give us guarantee and transparency that it will really obey Islamic Law?
Robert Sharratt: A. The core business of CrescoFin is already Shari’ah compliant, as it is based on trade and not interest (not riba). The invoices are purchased at a discount, then we are later paid out at face value. A simple example is the invoice is for $100, we purchase this for $95 and wait 30 days, at which time we are paid the $100. There is no lending, we are simply buying assets. We are currently discussing this with two Islamic scholars.
We will look to launch this sooner as we have had a tremendous amount of interest since we included. The company does not launch a product until we are sure it is fully compliant with regulations and this will be no exception. We started the process a while ago. There will be no purchases that would be haram. We would offer a profit rate, in an Islamic approved product.
Slavian: Very interesting questions! Thank you to everyone for contributing and feel free to revisit them later if anything is still unclear.
Let’s move on to the live questions now. I’m going to open the chat for a few minutes in slow mode so more people get a chance to ask!
Slavian: Chat is open.
Costco Executive Member: Q. Is there any plan to further incentivize token by using it as collateral for other protocols/or does it being wrapped equity prevent it from further functionality?
Robert Sharratt: A. We are going to keep the equity token pure. Its main purposes are: voting/governance and giving holders a claim on our cash flows!
However, we will be creating other tokens for our products. These will be ERC20 tokens, composable across DeFi.
Koploseus: Q. I don’t know if this question has been answered (not in the ama) but are we getting IBAN stuff? To be able to put our real money (salary or else) on it?
Derek Mayne: A. That’s definitely on this list after we stabilise with our core product!
OmegaB: Q. CrescoFin is moving to a community governance model. What is the process to do the transition to a community governed platform, and how much power is intended to be given to the community?
Robert Sharratt: A. We have already moved some powers to a voting contract.
So, the team doesn’t decide everything. I’m personally working on replacing myself with a smart contract. The problem is that it doesn’t need to be so smart ….
Our objective is to move to community governance. Stani from Aave is helping us.
Archon: Were you able to get in contact with other DeFi platform leaders like Kain from Synthetix or Andre from Yearn to talk about additional partnerships/integrations?
Robert Sharratt: A. For example, with our proposal in the Aave governance forum, we will put our insured collateral in an Aave money market, an iCRES token. This will be composable.
An issue is that when you operate in the real economy as well as crypto, it usually needs human intervention, at least to an extent …
Archon: Q. Will there be a beta testing phase of the new app for community members?
Derek Mayne: A. Yes, the first phase of testing will be the team and selected members of the community. Especially those who are good at producing road maps.
Archon: Q. Will there be additional joint marketing initiatives with Chainlink beyond the recent article/tweet?
Derek Mayne: A. Yes, and we will update you when they are in place. As you know, we don’t like to make announcements about announcements!
Archon: Q. More and more people ask for CEX listings despite you being in favor of staying with DeFi = Uniswap & Dodo? Will you stick to the plan?
Derek Mayne: A. The pure equity, CRES, will likely be what is listed on a CEX. It’s nice to have the flexibility to list the two tokens.
If the community is in favour of a full CEX, we will listen.
Archon: Q. Have you been approached by (haha) banks/fintechs to integrate your product — especially in Switzerland?
Derek Mayne: A. Yes, and we’re quite happy to take their money and make it work harder as well. The community will be rewarded!
Archon: Q. Any opinion on the recent crypto bull market you want to share?
Derek Mayne: A. There’s a clear shift in institutional mindset. A year ago, major banks were still dismissing digital currencies. Just a few days ago, JPM was predicting BTC at $146k.
I read this as they have gone all in.
Elmoco Elmoco: Q. Will islamic countries play a big role in CrescoFin’s marketing strategy since you’re paying much attention to work on an shari’ah compliant project?
Robert Sharratt: A. Yes, we are considering opening an office in the Gulf. Our product is genuinely based on trade, not interest
Elmoco Elmoco: Q. And I didn’t understand the concept of purchasing invoices yet. Which invoices will be bought? Could anyone elaborate?
Robert Sharratt: A. We have a Proof of Delivery mechanism where we transform legacy contracts into smart contracts. Then, the invoices are purchased from what is written onchain.
How it works is set out in the IM. We will produce a video when we can that explains this in more detail.
Costco Executive Member: Q. Do you think with how poor yielding bonds are globally, people will look to something like CrescoFin as an alternative? i know you’re targeting deposits but the bond market seems especially prone for a potential collapse going forward giving its abyssmal rates of return.
Robert Sharratt: A.
Robert Sharratt: A. Yes, so many people will consider an insured savings product in Switzerland as a compelling alternative to current low / negative rates. They are a target audience!
Derek Mayne: A. Yes, one of the early motivations for CrescoFin was an effort I made to assemble a leveraged bond portfolio. It was full of fees and risks and didn’t pay much more than 3%.
Robert Sharratt: A. I write about it in some detail on Bankless, here: https://newsletter.banklesshq.com/p/institutional-money-managers-are
Erik: Q. Hello, I have a question. How is the team going to pay for listings on exchanges and do marketing if they haven’t had a presale? Will they have the necessary funds for this?
Derek Mayne: A. This is a common question, Rob and I funded the business ourselves to this point. The listing allows us to fast track the product and get prepared for mass adoption.
Slavian: Thank you, everyone! And now let’s move on to the final part of this AMA and arguably one of the most important. It’s time to make yourselves heard. Do you have any feedback for us? How are your expectations about our progress being met? Is there anything you’d like to discuss in more detail?
The chat is open now!
Archon: Would love to see some AMAs in prominent DeFi channels e.g. Synthetix, Aave, Bankless, etc.
Derek Mayne: We like to be selective but these sound perfect.
Robert Sharratt: Good idea. We might do that, as we have some great partnerships: Aave, Chainlink, Bankless, etc.
Archon: Would be great to have a bit more transparency on first customers and deposits, for crypto people it’s quite hard if you can’t see what’s going on.
Robert Sharratt: Yeah, so true. Unfortunately, our private family office friends here in Switzerland are, well, quite Swiss about confidentiality. It is all being tested. Now, we are focusing on getting testimonials from people. Working on it ….
Costco Executive Member: I think an ELI5 video explaining how the process works would be helpful, as a lot of people aren’t exactly familiar with invoicing and the ins and outs of tradfi. A lot of us are humble apes looking for DeFi opportunities without a very granular understanding of finance. I certainly would appreciate it!
Robert Sharratt: We are actually working on an outline of such a video
Costco Executive Member: I love the transparency of the team and how you’re going about everything. very excited to be able to be on the ground floor of something like this. so cool.
Archon: I am very impressed by the video and the state of the app (as far as I can judge from just pictures).
Archon: More support of all kinds stablecoins would be nice and not only USD/EUR/CHF but also Asian currencies.
Derek Mayne: This is a simple supply/demand relationship. Steady supply makes it easier for us as our model will require some conversion or collateralisation of stable coins.
We’ll be moving to a regular and transparent reporting system around Q1/Q2.
Archon: I would love to see your advisors doing more for the project or (if they do a lot) making it more transparent.
Robert Sharratt: Good point. We are trying not to shill the project and are reserving them a bit for promoting our coming retail product, which is a bridge between traditional finance and crypto.
They will be a lot more involved in the future, for sure.
Alex ✤: Q. Are you not worried having sold securities on DODO without KYC?
Robert Sharratt: A. No, our $wCRES token exactly complies with Swiss law. We discussed with DODO (and Balancer) and there are no legal issues whatsoever. You can read our detailed article on creating wrapped equity tokens here: https://medium.com/crescofin/creating-defi-equity-tokens-1ca82cbb7dba
Of course, it helps that we are a regulated firm.
I also discuss this in detail with Cami Russo on The Defiant, here: https://www.youtube.com/watch?v=JzXjMA_K6M0
Alex ✤: Q. No. I get it and you are not based in the US but if a US person buys it can the US govt come for you? just hypothetically of course.
Robert Sharratt: A. No. A US citizen can buy foreign equity. It is just like buying a share in Nestle. There are thousands of foreign shares. Of course, being a regulated company we spent a lot of time on this with our regulators and lawyers.
To be extra cautious, however, we exclude US Persons.
Alex ✤: Q. got it. can I just ask another question please. i think i read in your documents that in order to benefit from shareholder rights wCres will need to be converted into Native tokens, but will you be paying out dividends to wCres tokens in the future (assuming you get to that stage- hopefully)?
Robert Sharratt: A. That is right: you swap from wCRES to CRES. wCRES is optimised for trading (low gas usage). To participate in voting and receive dividends, you need to hold CRES (at the time of a vote or dividends). It is an easy process, set out in the detailed Medium article above and on our site (blog).
Swiss law might evolve to allow us to push dividends onchain automatically. We will see. For now, you have to hold CRES. At the moment, there is no reason to convert, as no scheduled votes and we are not paying dividends yet.
Archon: And last but not least, thank you for being so approachable as founders and being so brave to dive into this community and crypto thing with lots of green frogs and a very different mindset than in traditional finance.
Robert Sharratt: Thanks. In the early days, I didn’t quite get the green frogs. You don’t meet them in TradFi. I was a little worried that not all of the frogs were focused on replacing banking with code, like this guy.
It is interesting trying to bridge TradFi and DeFi. One of our Swiss friends here in Geneva called me to tell me that our website had been hacked. Because someone had uploaded a dog with sunglasses to our site.
Derek Mayne: We’d like to say a big thanks to the community for taking the time to understand our token offering and our project. It makes our lives much easier!
Slavian: Thanks a lot for taking part in this AMA, guys. We will be scheduling regular sessions like these on Telegram.
Stay tuned for next time!
About CrescoFin
Founded in 2019, CrescoFin SA is a Financial Services company offering insured Certificates of Deposit to institutional and private clients, by harnessing the security and transparency of blockchain technology in trade finance transactions. Deposits are held in several denominations including US Dollars, Swiss Francs, and Euros, as well as digital currency. The company is incorporated and regulated in Switzerland and its digital equity tokens (wCRES) are listed on the Uniswap and DODO exchanges.
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Bloomberg: CREFIN |USD ISIN CH0558513484 | CHF ISIN CH0558513468 | EURO ISIN CH0558513476
Advisors
- Stani Kulechov, Founder of Aave
- Diane Dai, Co-Founder of the DODO Exchange
- Damian Horner, Co-Founder, Real Vision
- The Crypto Dog, Investor
- Ryan Sean Adams, Co-Founder at Bankless
- David Hoffman, Co-Founder at Bankless
- David Gokhshtein, Founder of Gokhshtein Media
In the Media:
Real Vision
The Defiant
Bankless
