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BFD Expert Voices - Private Credit

BFD Expert Voices

A deal this week between a community bank and a DeFi organization created a unique alliance that is likely to lead to similar agreements across the space, Ryan writes. 

Driving the news: HV Bancorp, the holding company for Huntingdon Valley Bank, announced an agreement with MakerDAO that is making a $100 million loan facility available to the bank in a deal that will bring some real-world assets on-chain.

Why it matters: The deal marks the first commercial loan agreement between a U.S.-regulated financial institution and a decentralized digital currency. A first, and surely not the last.

How it works: MakerDAO has agreed to convert $100 million in DAI to U.S. dollars to be put in a Delaware trust account.

Those funds will then be available for future commercial loans originated by HVB.

Between the lines: The agreement offers HVB, a community bank in the Philadelphia suburbs, a large and flexible pool of capital it can draw on, as long as the assets it’s proposing for participation are eligible.

“We have a legal lending limit that's small relative to most of our peers, so we're constantly having to look around for partners to provide the level of capital that is needed quickly,” HVB SVP and market president Dan Krewson says. 

“The ability to have secure, accessible, straightforward access to capital was an appeal from the beginning.”

Meanwhile, MakerDAO gets an out-of-the-box yield solution in which an external party does all the origination, servicing and reporting, and “we just collect a nice little coupon at the end of the day,” says TJ Ragsdale, who manages real-world assets for MakerDAO.

According to Ragsdale, those assets are “less correlated to the crypto market than core product” and therefore provide more stable and fixed yields. 

Yes, but: There’s another, more strategic reason for MakerDAO to work with a bank like HVB.

“It signals to regulators an intent to integrate, as opposed to evade. We are injecting $100 million dollars to mom-and-pop SMEs — the engine of the US economy,” Ragsdale says.

“When it comes to how regulators will respond to crypto-native entities, I think they will tread lightly on an entity that is empowering SMEs and on a bank that has been regulated and has existed in the U.S. since the 1870s,” he adds.

MakerDAO strikes real-world asset deal with Huntingdon Valley Bank

1 big thing: A bank-DeFi alliance

Illustration of pile of money with hovering cursor

Reali, a home buying and lending platform, is shuttering operations.

Why it matters: The move shows how quickly the fates of fintechs can change, Lucinda writes. A year ago, it raised $75 million in Series B equity funding. 

Driving the news: "Due to the challenging real estate and financial market conditions and unfavorable capital-raising environment, Reali determined the best course of action is to close," a company press release stated.

Flashback: Launched in 2016, Reali attracted investors like Zeev Ventures, Akkadian Ventures and Signia Venture Partners. It has raised over $100 million in funding since its launch. 

Its business — which replaced the traditional broker's commission with flat fees — sought to make it easier for consumers to buy a home and sell their old place in one transaction.

The big picture: Amid rising interest rates and high inflation, the housing market has cooled, with northern California slowing faster than the rest of the nation (Reali is heavily focused on the state).

Shares of real estate tech startup Opendoor are down about 85% since their 2021 peak, while Redfin is over down 90%.

Of note: Reali plans to lay off most of its employees Sept. 9, and is now seeking to sell off parts of its business, including mortgage origination, title and escrow, and power buying.

Real estate fintech Reali winds down

2. The BFD: Reali winds down

Illustration of a cemetery composed of gravestones shaped like houses.

Block sued for ‘negligent’ security after breach of 8.2M users’ data (Forbes)

Two users, who are the class action suit’s main plaintiffs, argue that after the breach users were subjected to “a wide range of fraudulent activities” on their Cash App accounts.

Why crypto’s VC kingmakers are backing rival startups (The Block)

Crypto venture investors often invest in multiple competing projects, with Andreessen Horowitz perhaps being the most striking example. Crypto VCs argue generally that it makes sense as the industry is very early in its life.

How long will the lending boom last? (American Banker)

Lending remained strong through the second quarter, with U.S. banks growing their loans by 10% compared to the same period a year earlier, according to Keefe, Bruyette and Woods. The big question: How long will it last amid rising interest rates?

3. Credit score

Illustration of scoreboard with a downward line illuminated on one side and an upward line illuminated on the other.

• Capital on Tap, a London-based SME financing startup, raised a £200m funding facility from JP Morgan and Triple Point. https://axios.link/3Tcskz4

• Thirdweb, an SF-based web3 dev kit startup, raised $24m in Series A funding at a $160m valuation. Haun Ventures led, and was joined by Coinbase Ventures and Shopify. https://axios.link/3CrvXLz 

• Flyway, a London and Athens-based second home co-ownership platform, raised $10m in funding. Investors included Signal Ventures, Monday Capital, GroupRMC, Florian Hagenbuch and Alex Chatzieleftheriou. https://axios.link/3TeEyXY

• SubsBase, an Egyptian subscription and recurring revenue management startup, raised $2.4m in seed funding led by Global Ventures. https://axios.link/3Re5vt7 

• Bitcoin Depot, an Atlanta-based bitcoin ATM operator, agreed to go public at an implied $885m valuation via GSR II Meteora Acquisition Corp. (Nasdaq: GSRM). www.bitcoindepot.com 

• Siam Commercial Bank, Thailand’s oldest bank, is abandoning its $500m deal to acquire Thai crypto exchange Bitkub. https://axios.link/3AolM7I

• Alchemy, a web3 infrastructure platform, acquired ethereum developer education platform ChainShot. https://axios.link/3clckdr  

• Symbolic Capital, a crypto VC fund led by Polygon co-founder Sandeep Nailwal, has raised $50m. https://axios.link/3AKnT7g 

4. Deal flow

• Crypto VC firm Electric Capital named former SEC Chairman Jay Clayton, former Fed governor Kevin Warsh, and Meta VP and head of research Pratiti Raychoudhury as advisers. https://axios.link/3CxLVnl

• Open finance startup MX hired former PayPal exec Wes Hummel as its new CTO. https://axios.link/3R78LGp

• Worldcoin co-founder and CEO Max Novendstern has left to launch Mana, a new startup seeking to be an AI venture capitalist, per TechCrunch. https://axios.link/3R2rX8w

• Opendoor named former Pro.com COO and head of product Raji Subramanian as its new CTO. The company's former CTO, Ian Wong, will become a technical adviser to the CEO. https://axios.link/3QJ4clU

• Alameda Research co-CEO Sam Trabucco is stepping down from his day-to-day role but will stay on as an adviser. Caroline Ellison will continue as sole CEO. https://axios.link/3AJuyOZ

5. It's personnel

Situational awareness: More than $100 million worth of NFTs were reported stolen in scams over the past year, according to blockchain analytics firm Elliptic, with over 4,600 stolen in July alone.

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August 25, 2022

1 big thing: A bank-DeFi alliance