Varys Capital is pleased to announce an investment in Credefi. Credefi’s mission is to connect digital asset lenders with small and medium enterprise (SME) borrowers from the fiat economy, driving solutions to respond to inefficiencies of the traditional banking system.
As decentralized finance (DeFi) markets have matured, their growth has revealed several pressing concerns: yields can be fragile and inconsistent, and the borrowing market is insufficient to satisfy supply. In addition, SMEs are often passed over by traditional financing institutions and tend to be stuck with higher than desired interest rates compared to larger businesses. Credefi bridges this gap by bringing reliable lending sources to SMEs and reliable, creditworthy borrowers to DeFi, with a focus on “banking the unbanked.”
The Credefi platform operates on the CREDI token, which lends stablecoins to portfolios of various risk appetites. The platform will provide risk assessment and credit score data to lenders, so they can make informed decisions. Portfolios could achieve APYs of 10%, depending on the risk appetite of the user. Credefi will use the best aspects of DeFi to cross borders and connect willing parties worldwide, drastically streamlining the lending process by using blockchain to bypass cumbersome traditional currency transfers.
Credefi also has a focus on security and can utilize real-world collateral backed by a regulated European Union financial institution to give lenders peace of mind, which has the right to make claims in international courts if need be. In addition, the platform has a three-layer security protocol that combines in-house credit scoring, asset collateral, and a proprietary security module to guard bad actors. Credit risk analyses are conducted on all applications and interest rates are driven by real-world data, which allows lenders and borrowers to find their best fit for their situations. Users can also continue to hold the CREDI token that the platform operates on, which can be drawn upon by the platform to compensate lenders if a loan goes into default if liquidating the collateral is insufficient to cover the loan principal. Although supporting the security of the system like this bears a risk for those that choose to undertake it, it also provides financial benefits and the option to participate in the platform governance.
Once a loan request is submitted to the Credefi platform, it will provide a risk assessment and review of the relevant legal framework, which will measure its legal compliance, sustainability and probability of default, and recommend a suitable interest rate. Investments will be legally protected through an agreement designed and supported by an accredited financial institution registered in the European Union. One unique advantage of the platform is that individuals in an agreement can evaluate and customize the parameters to suit them, which means a lender could ignore all odds and decide to finance a project if he believes it – something that traditional lending systems do not allow for.
One concern that has been raised is that DeFi struggles to guarantee gains during bear markets; however, Credefi solves this through a unique hybrid approach that guarantees a minimum of 10% interest on the principal invested, which in most conceivable cases will counteract the losses from loan defaults. Credefi also does not do arbitrage between the interest of borrowers and lenders, meaning that lenders are entitled to the entire interest of the enterprises they finance. Credefi focuses on enabling lenders and borrowers to make informed investment choices and improving the access to finance to those in need, while putting market participants in the driver’s seat rather than being beholden to the whims of a bank.
If you have questions about our fund or would like to be sent investor documents, you can contact our investor relations department at [email protected].
