Adam Reeds, CEO of Ledn, on Crypto Lending and Why Bitcoin Makes Great Collateral | Ep. 281

In an exclusive interview with cryptonews.com, Adam Reeds, Co-Founder and CEO of Ledn, talks about crypto loans vs. traditional loans, the future of crypto lending, and why bitcoin makes great collateral.

About Adam Reeds

Adam Reeds is the Co-Founder and CEO of Ledn, a global company regulated in the Cayman Islands that focuses on building financial products to help people save in bitcoin and digital assets. Prior to co-founding Ledn, Adam spent ten years at Dream Asset Management, where he developed, built, and financed a $1.5 billion portfolio of renewable power projects. It was Bitcoin’s connection with the energy that brought Adam into Bitcoin mining, where he and his co-founder identified a gap in financing digital assets. Today, Ledn is a broad financial services platform with clients in over 130 countries. Adam is a graduate of the HBA program at the Richard Ivey School of Business and also holds a Bachelor of Engineering Science from the University of Western Ontario.

Adam Reeds gave a wide-ranging exclusive interview, which you can see below, and we are happy for you to use it for publication, provided there is a credit to www.cryptonews.com.

Highlights Of The Interview

• Crypto loans vs. traditional loans
• The future of crypto lending
• Why Bitcoin Makes Great Collateral
• How Ledn survived the lending crisis of 2022
• Bitcoin mining in Canada and Canada’s energy consumption

Full Transcript Of The Interview

Matt Zahab
Ladies and gentlemen, welcome back to the Cryptonews Podcast. We are buzzin and as always, and I am super pumped to have today’s guest on the show, Adam Reeds, a fellow Canadian. We love to see it. He’s the Co-Founder and CEO of Ledn, a global company regulated in the Cayman Islands that focuses on building financial products to help people save in Bitcoin and digital assets. Prior to Co-Founding Ledn, Adam spent 10 years at Dream Asset Management, where he developed, built and financed a $1.5 billion portfolio of renewable power projects. It was Bitcoin’s connection with the energy that brought Adam into Bitcoin Mining, where he and his Co-Founder identified a gap in financial digital assets. Today, Ledn is a broad financial services platform with clients in over 130 countries. Adam is also a graduate of the HBA program at the Richard Ivey School of Business and also holds a Bachelor of Engineering Science from the University of Western Ontario. Absolutely love that. Can’t wait to get into all this stuff. Adam, pumped to have you on band. How you doing?

Adam Reeds
Doing well. Thanks Matt. Great, great to be here.

Matt Zahab
Adam, before we get into all the fun stuff here, I got to talk about some of your uni stuff. You went to Western Ontario. A couple of the guests on the show have gone to Western Ontario. For the listeners at home, Western Ontario is Canada’s version of, I would say, well, firstly, it’s an incredible academic school. And secondly, it’s Canada’s version of like Arizona State. It is absolutely wild. The parties are all world, beautiful people on the male and female side. Just an incredible school. How much fun did you have at Western?

Adam Reeds
I had a wonderful time and it’s exactly that. Obviously, people think of Canada as a pretty small place, but when they hear the numbers of the school, it’s 50,000 attendees, so a pretty amazing faculty and students coming from all over the world. And actually had a chance to go back. I was just there teaching a guest lecture at the business school there with a really good friend of mine. So it was pretty nostalgic to go back and share what we’re doing at Ledn and everything that I’ve done since post-grad. So I definitely love spending as much time in London, Ontario, where Western is as I can. And yeah, great school.

Matt Zahab
I love that. Before we get into all the crypto and Ledn stuff, I’d love if you could tell me a little bit about yourself, childhood growing up in Guelph, you said, for the listeners at home, Guelph is just about an hour outside of Toronto, small town, really good town, very agriculture. And I wouldn’t say so much tech, but like really focuses on nature and everything agriculture related. Incredible school there as well, really good people, great sports teams, you name it, but walk me through your childhood, couple hobbies, whatever you wanna tell us, and then segue that into the 10 years you spent at Dream where you built a $1.5 billion portfolio, because that is absolutely incredible, the floor is yours.

Adam Reeds
Yeah, happy to. So Guelph was a great place to grow up. It’s when I was there, it’s grown a little bit since then, but it’s about 100,000 people city. And it’s about an hour from Toronto, as you mentioned. So I think what’s unique about it is the size of the town. It was five high schools. I think it’s six now expanded a little bit, but everyone knows each other. And that kind of makes for a nice community. And so it was a wonderful place to meet a lot of great people, still really good friends with a lot of friends that I grew up with in Guelph. Definitely a hockey town. I’m an okay athlete by no means a great athlete. So it wasn’t a competitive hockey player, but many of my friends were. And so that makes it very Canadian in the setup there. And yeah, I actually, I continued on one of my best friends from Guelph was my roommate at Western. And so still really good friends with him. And as I continued on to Western, took a business school and engineering at Western. And that was really helpful because I was able to combine a technical background with a knowledge and some of the interest I had in business. And that led me into the start of my career in renewable power. And so graduated after Western, joined a startup that was actually focused on building out renewable power projects throughout North America. And really I joked at the time that my job was to convert kilowatt hours into dollars. When I mean not that just in the business sense of creating projects like that, but in the explanation of how I was able to communicate and think about investing in the energy sector, kind of combining a knowledge, a technical background in engineering with that in business. And so spent 10 years developing and financing renewable power projects. There was some good incentives that the government had in place in Canada. And from there, really learned about how to put together and provide financing to large scale infrastructure projects. And that led it itself well to understanding Bitcoin because Bitcoin mining is an infrastructure project in itself. And through many conversations I had with my current co-founder, who was a friend that I met at Western at business school there, we decided to think about how to apply our different backgrounds. His first off in Bitcoin and mine in energy finance into create something new for the space. So to jump ahead a little bit, after spending 10 years in the renewable power sector, we decided to think about how to again, apply that knowledge into Bitcoin. And as we set out to build a Bitcoin mining operation, which was again, a small infrastructure project, no one would finance it. And so that was kind of the introduction into thinking about how to apply that knowledge from the energy sector into a new sector and think about how to advance things from there. So I’m kind of jumping ahead a bit, but that was the kind of relationship between starting in energy finance and then applying it to Bitcoin.

Matt Zahab
What year did you guys build or at least try to get financing for the first mining rig?

Adam Reeds
Yeah, it was 2016 that we thought about and really approaching it. And then yeah, 2017, I think, the interesting thing about 2017 was there was broad retail interest, but no institutional interest yet or limited institutional interest. I think there was some of the investment banks looking at helping out some of the miners and taking some of the mining companies public, but there was no institutional interest at least broadly, at least speaking from a Canadian perspective in any of the banking institutions, it was quite the opposite. It was viewed as a risky endeavor. And that was actually the opportunity. So the opportunity was how do we take something that’s pretty misunderstood and thinking about how to provide something of value to it? And I think kind of tying back, that was the parallels I saw in renewables. And so I think what’s interesting, even when anything’s new, is the questions that are asked at the beginning are often not the most important once people begin to understand it. What I mean by that is if I can take a basic example with renewables, when solar projects first came out, everyone was asking, well, how do we know the solar panels are gonna last for 30 years? How do we know they’re not gonna fall apart? How do we know they’re not gonna blow off the roofs? It was really always around technical questions. And I think then once people get comfortable with the technology, the questions advance, and it’s like, okay, well, how do we know that if we’re putting a project on IKEA’s roofs, that IKEA’s gonna pay the bills for 20 years. And it’s more like traditional credit and that type of analysis. And so I saw this like deja vu with things happening in Bitcoin and that the questions that we’re asking was like obsession about the tech and not about the application. I was like, okay, even though this is quite different, there’s some interesting parallels as far as the challenges I went through with trying to finance renewable power into the challenges that I’m now experiencing with trying to talk about financing Bitcoin projects. And so I was like, okay, if something is misunderstood, there’s interesting opportunity here. And I think any innovation and any opportunity to generate profits comes out of misunderstanding of misallocation of knowledge. And so when you see knowledge gaps, there’s often an opportunity where a small amount of people know something deeply, the masses don’t, and then therefore things can really become exciting if you can connect that

Matt Zahab
Well said. That was absolute gold right there. I want to just take a quick step sideways if we will. And I’d love if you could take a little riff on sort of specifically the Bitcoin mining sector in Canada. And we do have a very significant, a significant chunk of the listener base is Canadian, which I absolutely love. And again, just priming this for the listeners here, Canada has a plethora of renewable energy. We have obviously anyone can really put solar on their ground, but we have obviously tons of natural falls, like Niagara Falls, we have a bunch of turbines in Quebec, we have oil, we have windmills all over the place. There’s tons of electricity and a massive chunk of the power grid in Canada that isn’t being used. In fact, it’s the same as the States and almost everywhere in the world, you know, minus a couple of places like Texas where they do battle for electricity. But nonetheless, I’d love if you could talk about energy usage in Canada and how it correlates and relates to Bitcoin mining. And if you could also segue into are there grants, because I know Canada hands out grants left, right and center, but are there any energy grants that you can use specifically for Bitcoin mining as well?

Adam Reeds
Yeah, so to just talk about the first part of what you said there, it’s exactly right. The renewable power sector supplies the majority of electricity in Canada, so most of that is hydro. Canada’s blessed with ample rivers, streams, lots of water that’s traveling big distances that you can put turbines in front of and grab hydro electricity. So that provides a significant amount of the electricity. Like Quebec’s grid is like 95% hydro. Ontario’s is a big chunk as well. Nuclear does play a big part in Ontario as well. I use the provincial reference because all the different provinces regulate their own energy. And then the only provinces that would be more skewed towards fossil fuels would be Saskatchewan and Alberta, but still broadly speaking, when you look at Canada as a whole, it’s a very clean grid. So that makes it interesting for Bitcoin mining because if you set up Bitcoin mining here in the right grid conditions, you’re able to power that Bitcoin mine with primarily renewable energy. And as you said, there’s a lot of situations where the power is not needed. So Quebec used to be like most places in North America used to have more heavy industry. That heavy industry has moved offshore. So there’s a lot of situations where grids are overbuilt and the power may not be needed in that circumstance. And therefore there’s like significant amount of existing infrastructure that can be used to power Bitcoin mining. And what’s cool about Bitcoin mining is it doesn’t care where it is. You need some internet connection, but by no means is it like robust. The internet connection needs it just needs something basic. And so you can put this anywhere. And it’s like an energy sponge to really optimize efficiency across grids. So that’s pretty cool. I would say Canada was decently positioned for it. But of course, regulation is always the key piece that can some adoption limits. And there was concerns with, okay, what if this goes too far? You know, obviously there’s a little bit of efficiency to be gained, but you know, how do we make sure it’s not overdone? So years ago, Quebec was in good headings, but then they started to do RFPs and it scared some of the Bitcoin development away from that, just given that the thought that the sector may not be as big as it could have. So I think there’s a little bit more there. But now you see more development, I would say in the places like Texas where it’s a little bit more of a free for all as far as setting up and more just private to private. So there’s the only province in Canada that regulates electricity almost like a free market is Alberta. The other provinces, you have to follow pretty stringent provincial guidelines as far as fulfilling how electricity is placed on the grid and proper approvals and things like that. So things just don’t move as fast as they do in fully unregulated or deregulated markets like Alberta and Texas.

Matt Zahab
How classic Canada was that? Had something good, fucked it up. I think we might be the best in the world at that, having a competitive advantage and just wiping it all away.

Adam Reeds
Yeah, Canada tends to kind of wait and see, which is, you know, it can be a little bit of the Achilles heel on a lot of things I’d say for sure.

Matt Zahab
That’s truly wild. Let’s jump into Ledn. Before we get into it, give me the elevator pitch and then we’ll get into the fun stuff here.

Adam Reeds
Look, Ledn came out of solving our own problems. As I mentioned, Marisi and I, my co-founder of the business, we started to set up a Bitcoin mine in Canada, looked to get banking and financing for that exact mine and couldn’t achieve it. So built a solution that solved our own problem and from there decided and understood that there was a lot of other people, companies, ideas, applications worldwide that could benefit from a Bitcoin back loan. And so launched that first product in 2018 and then thought about how to build out more broad financial services. So since then have been focused almost exclusively on the boring and lending space. And that also means allowing clients to have opportunities to earn yield on their assets by lending those assets out and helping clients meet their financial goals by saving and maintaining, building their digital asset wealth.

Matt Zahab
So you guys are sort of information a digital asset lending company that sort of specializes in Bitcoin lending.

Adam Reeds
That’s right.

Matt Zahab
And if I were a betting man, one of the biggest questions you probably get are, you know, Adam, tell me the difference between Bitcoin lending and traditional lending. Because, you know, anyone can go to the bank and get a loan. I mean, mind you, two, three years ago, that loan was a lot sexier than it is today with, I guess, in Canada, what, six, seven, eight percent interest rates now. But, you know, you guys are giving loans at a much sexier and much more appealing price with better terms as well. It’s crypto back lending. What are the biggest differences between traditional lending and crypto slash Bitcoin lending?

Adam Reeds
Yeah, the biggest difference is Bitcoin is the best and most pristine collateral there is globally. So what’s incredible about this asset, it’s the same to everyone globally. And that’s not true for any other asset, including gold. So even gold is jurisdictional. Financing gold in a vault in Venezuela is very different than finance and gold in a vault in Canada. And we get into assets like real estate, obviously, very different terms for what you can get on a mortgage in Mexico versus the US. So I think the best thing I like about building on this asset class is fairness. The terms can be the same everywhere because the asset is the same everywhere. And that’s incredible.

Matt Zahab
Interesting. So walk me through some of the conversations or perhaps not conversations, but use cases. Why would someone want to rent out their Bitcoin, their crypto to use this collateral? And then on the other side of the coin, why would someone need to take out a loan? Is it mostly mining projects? Is it mostly crypto related projects? Are you guys doing this for sort of Web2 folks as well? More TradFi folks? Like, give me a bunch of use cases that you guys are going to town on.

Adam Reeds
Of course, yeah. So the key piece that’s the same for everybody is have Bitcoin, don’t want to sell it and need Fiat for other purposes. So the use cases range from for smaller loans, paying down perhaps more expensive debt, paying down credit card debt to larger use cases, we’d be diversifying, perhaps purchasing real estate, perhaps wanting to invest in other asset classes like equities. And then even use cases like wanting to buy more Bitcoin. So we developed a product for that called B2X using your existing Bitcoin to buy more of it. And so we see a plethora. Some of the use cases that I love to see is we’ve seen people use their Bitcoin back loan to finance a business, pay for education, pay for medicine. So all different types of meaningful use cases that are really incredible to see. I’d say the other thing that we love to see is for some people accessing our loan products, it’s the first loan that they ever achieved or first loan that they were ever approved for. So this is this is incredible because again, on the concept of fairness, it’s just not at all even close to the same the availability of banking, financial services that you have in many different markets. So for those to be able to qualify for a loan, it adds a whole bunch of different other benefits other than just financial. In some cases, it’s self-esteem. It’s like, oh, I got something. I did something I can grow now. So that’s pretty interesting to see.

Matt Zahab
Quick little funny story. Well, actually, it’s not funny. It’s actually the opposite of funny, but I won’t name him, but one of my close buddies is trying to buy condo in Toronto. The condo he’s looking at is about 1.2 mil. He does well for himself, makes about two, I think just over 200K a year Canadian has enough to put 20% down as well. And the banks will not get him alone. Again, this guy makes over 200K a year. He has I think the 225 that’s needed to put the 20% down payment in Canada. If you’re a first time home buyer and it’s less than a mil, you can put 5% down. If it’s more than a mil, you have to put the traditional 20 and they won’t even get him a loan right now.

Adam Reeds
Is it because he’s self employed?

Matt Zahab
Yeah. Bingo. So he doesn’t have a traditional Canadian stamped TSX 500, whatever you want to call a company that’s signing his paychecks. It’s just wild. Like this dude has never missed the payment, has crazy high credit score, like literally perfect on paper. And the best he can get is a loan from a boutique bank. And I want to say they gave him 11.5%. It’s like, oh yeah, that’s great. It’s crazy right now. Absolutely craziness.

Adam Reeds
Yeah, look, it’s kind of an interesting aspect because we call them mortgages, but they’re really financing future cash load of guaranteed income, right? So the banks want to take the security of the real estate collateral as secondary, but really the primary source is locking in future income. And so it’s pretty wild amount of belts and suspenders that are needed to get something. And then if the loan is insured, it’s really the taxpayers on the risk as well to back up that insurance. So it’s a common problem and something that really isn’t unlocking future wealth for Canadians.

Matt Zahab
No, it’s absolutely wild. Adam and folks are out to a quick break and give a huge shout out to our sponsor of the show. But when we get back, we are going to continue on the future of crypto lending and rebuilding the digital asset lending space. Until then, huge shout out to PrimeXBT, longtime friends of cryptonews.com and longtime sponsors of the Cryptonews Podcast. PrimeXBT offers a robust trading system for both beginners and professional traders. It doesn’t matter if you’re a rookie or a vet, you can easily design and customize your layouts and widgets to best fit your trading style. PrimeXBT is also running an exclusive promo for listeners of the Cryptonews Podcast. The promo code is CRYPTONEWS50 to receive 50% that is 50% of your deposit credited to your trading account. Again, that is CRYPTONEWS50 all in word to receive 50% of your deposit credited to your trading account. And now back to show up with Adam. Another question off topic on my end of my apologies for jumping around here. When I was doing research for the show in my head, and again, obviously you guys are, I believe you said you’re, you know, you’re HQ’d and the came and now, which makes total sense. But when I was doing the research for the show and I was like, Oh, another Canadian guy, Canadian company crushing it and crypto, I was like, Damn, I sort of wish these guys went public because like there’s so many, I don’t want to say so many, but there’s a couple of companies like you guys who have such a high ceiling and who are doing really solid work and making good money. And I wish there were more opportunities for Canadians to invest in them. Obviously once you do this, you’re, you know, you’re KYC’d up the yin yang. It’s an absolute logistical and compliance nightmare. But was there ever a thought you and your co-founder, do you guys ever discuss going public on the TSXV and working your way up to the TSX?

Adam Reeds
Yeah, we’ve definitely discussed a lot of different ways to kind of take the company forward in the future. I think going public to me, it’s one source of one path, but the key is it has to be sustainable. So to your point, you made about just adding friction to the company, you had a whole bunch of costs when you take a company public that don’t necessarily add value to clients. And so that’s the main thing we’re focused on is if we can provide good service and do it at fair pricing, we’ll grow the company. And then what we need is, I think going public is an interesting avenue, but it has to be at a time where the compliance costs and other costs associated with me taking a public company are a lower percentage compared to the overall volume that you’re doing. And so I think when you see companies go public too early, they end up with this kind of like, almost like ball and chain attached to them where they’re managing to the public markets instead of managing to their clients. And that becomes problematic. And so we wanna make sure that we’re doing the latter, managing to our clients, and then we’ll have a sustainable business. And that’s again, one tool as far as how you can approach the public markets later. But I do hear you, I think the idea to give many investors more options to invest and other different ways to kind of participate in the sector is interesting and something that we’d love to do. One more thing on that I’d say, the other piece is like, issuing a token and that’s something we’ve stayed away from up to this date just because like, I think you really have to think through does the token add value? And what we’ve seen is like other lenders that have a token, they really only have the token because they issued it as far as their ICO. And so they needed it for their initial fund raise and then they have it. And I would say, candidly, it’s a pretend that there’s use cases for it, but really it’s just to kind of keep the price up to keep their initial ICO investors happy where there’s really not a need today. So it’s like keep the model as simple as possible. The one of the favorite things we have at the company is the best restaurants have the smallest menu. And what we mean by that is like keep things like so simple, you curate a good list of things and you have a tight menu and therefore you provide a really good experience and the best companies in the world do this, right? Like think about the experience you have when buying an Apple computer. There’s like good, great, you know, best, you don’t have buyers remorse on anything you buy from the Apple store and that same for other products like Dyson and Vitamix and all these like, you know, great brands that have taken what really is a commoditized product and just wrapped it in a really good experience to make sure that they’re really are limiting choice for the better.

Matt Zahab
That was beautifully said so true there one more thing on going public and I’ve seen it happen so many times almost more specifically with you know companies that have Bitcoin or crypto exposure or our crypto product focused they go public and something happens most of the time it’s oh now we need more money and then they do death spiral financing and then it’s like now you have so many outdated options and soon to be vesting options on the table that some finance year some you know, P boutique owns and they literally control almost as much stock as you do and then you’re at their will now. It’s like It’s just it’s so unfortunate to see and I really wish it didn’t happen, but on the flip side. I do wish That’s the average Joe and Josephine more specifically the average Canadian Joe and Josephine had the opportunity to invest in really good crypto companies like yourselves besides just the usual, you know ETFs and indexes that you can invest in because it’s like those guys there’s only such a ceiling with them and their price is so correlative to the price of whatever asset usually Bitcoin or ETH and and it’d be really cool to invest in companies like yours. Is is there anyone who’s doing that or do you think that’ll change anytime soon where the average person can and will have opportunities to invest in up and coming companies like yours?

Adam Reeds
I think, I don’t know in detail, but I know there’s a bank to the future which is run by Simon Dixon. So I think he’s created a crowdfunding way to participate and given his background in the crypto sector, I think that’s one opportunity that I think there may be limitations there. I think, I assume it’s not open to US investors. I’m not sure about Canadians participating in it, but there may be similar securities roles about participating in that, but I think there’s been some different attempts to democratize investing in that aspect.

Matt Zahab
I love to see that happen. Let’s keep going on the digital asset lending space. What does the future of crypto lending look like? I know you’ve done a bunch of talks over the last little bit. You were just in Riyadh. Also, what’s Riyadh like? That’s probably so cool. We’ll get into that. But you’ve done a bunch of talks on rebuilding the digital asset lending space, the future of crypto lending and why Bitcoin makes great collateral all tied into one. That’s your main thesis and I absolutely love that. Let’s just, I guess, to start. The future of crypto lending, what does that look like? Are we going to see any really cool innovations or is it just going to be a larger scale, more macro focus of what the current products and capabilities are present day?

Adam Reeds
Yeah, maybe first I’ll just talk about what we focused on this year, because I think it sets up for well, for where we’re going and really coming out of the 2022 blowups. Let’s just call it frankly, what it was. We knew that there was a massive need for more transparency and a complete loss of trust in the digital asset lending industry. And so we focused on sharing more and more of what we’re up to and trying to really position all the information we’re sharing and just talk about what’s going on under the hood and how do we make sure clients are comfortable with all the different activities. So really it was adding more transparency, but then once you provide that transparency, giving clients more control so they can make their choice on what they wanna do with their digital assets. And so earlier this year, we announced us, something called the open book report. So we show now how much assets are sitting in custody, how much is lent out, all the different activities that are going on and talk frequently about the types of lenders that we’re lending to. And then we also created within the savings product that we’ve renamed to our growth accounts, we really say created a best in class structure for clients to earn yield on their digital assets. And what we saw from the 2022 blowups was, there was a whole bunch of contagion that happened. And so if I showed up and I just wanted to take a Bitcoin back loan, I was exposed to clients that are earning yield on their Bitcoin or other digital assets. And frankly, everything was commingled. And so what we did was we took our yield products, which are our growth account products, and we separated it out legally and technically. So we said, if you wanna earn yield on your Bitcoin or your USDC, we’ll create a separate legal entity for that. And we’ll lend out directly from that legal entity so that the activities of that account are not commingled with the activities of our Bitcoin back loans. And so something like really straightforward, obviously this exists in traditional finance, but we want to make it really clear and come up with the best in class structure to do that. So that was a big focus on how we updated the growth accounts. So they’re now legally and technically ring fenced, bankruptcy remote to lead in as a corporate entity for clarity, not bankruptcy remote from the activities of that account. So there is still risk in that if those assets are lent out and those borrowers have issues, there is still exposure there. But what we’re trying to make clear is what you have exposure to and what you don’t have exposure to so you can make the right decision with your assets. So that was the kind of progress that we made this year was taking something that people viewed as all commingled together and then separating it out into separate entities so that clients could again make their own choice on what activity they wanna participate in and not. And so that was the progress there and kind of going into the future, I’d say it relies on the same theme. So more and more transparency, I’d say also the benefit of blockchain and this technology is that it does allow for absolute transparency. So I think we’ll see more and more things coming on chain, more and more information on utilizing all the transparency that this technology allows and kind of moving it into the future that way. I’d say the other future of this is of course we can’t ignore regulation. I think the challenge this industry has is that the technology and for the most part, some of the marketing and education does work globally, although, you know, be adjusting for different cultural nuances with how clients learn and invest in this asset class, but the regulation is not, right? The regulation is still ring fenced by country and you have to play ball in order to make sure that you can bring the masses into this industry. And so that’s the piece that I think everyone is wrestling with now is like, how do you absorb the compliance costs with being a regulated entity and what markets are our focus? So that’s why I think you see, you know, kind of naturally the bigger markets, you have companies that are just servicing those, of course the US being the largest market and so you’re kind of getting this fragmentation that’s happening now as far as areas of focus.

Matt Zahab
Very interesting. Taking a step back, how did you guys survive last year? Because last year was an absolute shit show. I mean, it was nightmare fuel in the purest sense of nightmare fuel, especially as a lending entity. What was the secret sauce? How’d you guys do it?

Adam Reeds
Yeah, we did a lot of things differently leading up to the crisis that allowed us to survive. The first was making sure that any asset that we offered an account for, we had a real use case for. This wasn’t true for some of the other large names that are no longer around in that, for example, to talk about the yield accounts first, if you’re going to offer a yield on that asset, you better make sure that there’s a true market for that. What happened was there was an incentive that caused this to not be true for some of the large players that failed in that if you, for example, were incentivized to get as many assets on platform as quickly as you could, which some of the venture investing was motivating, you then offered yield on assets that didn’t have a true market for, or maybe you offered a yield that was higher than market. For example, this is just for an example only, but let’s say I’m offering to pay 10% on link. If the market can only support 3% on link, what was happening in some of the background is they’re mismatching assets. I would take the link, maybe post it to a DeFi protocol, borrow stables, and then lend that stables out at a yield that was high enough for me to earn a spread, but now I have directional risk. This type of activity worked well in an up only market, but as things started to compress, they couldn’t meet margin calls and were offside on different loans and borings, and therefore the house of cards that was built up came crashing down. So that’s number one, that’s a mismatch of assets. The other one was a mismatch of tenure. So if you think about if I’m going to offer open term Bitcoin deposits, you have the right Matt to deposit Bitcoin when you like and withdraw it when you like. So I better make sure that if I’m offering a yield on that, I have to do the same thing on the other side. So I can lend that Bitcoin out, but I have to make sure that I can withdraw that Bitcoin back from the borrower at the same time. And so I have to make sure I maintain my inventory. Well, this was not done. So you had situations where you took liquid deposits and you took that and lent it out in very illiquid loans or sometimes like investments. So there was a situation where one digital asset lender took open term client deposits and made venture investments, obviously very illiquid and talk about not even like a term to it, that’s pretty wild when you think about getting liquidity back for that asset. So that’s a big one. And the other thing I think is just back on the theme of transparency. So if you’re not open with what you’re doing, you’re not providing the right information for clients to make a choice of how their digital assets are being utilized, then you end up with these black box business models and problematic on all sides. So we were the first crypto digital asset lender to launch proof reserves. So we put it on ourselves before any type of regulation was required. We’ve been doing this for several years now where we offer, we send all of our information on an anonymized basis. No client information is shared to a third party, a qualified accountant, and they verify that we have more assets than liabilities on the platform. It’s just a way to keep our systems honest and make sure that we can again provide that confidence to our clients.

Matt Zahab
It’s crazy how that’s not the norm. It’s crazy how like what you guys are doing is like almost considered unscalable in space. Like it’s just wild. Like just sketch balls after sketch balls. Crazy.

Adam Reeds
Yeah, it’s tough, right? And I think it is challenging because the space and some of the activity that has happened get again, co-mingled from a media standpoint. The reality is like fraud and these situations happen in any type of industry, but that’s something that we all need to do better.

Matt Zahab
Yeah, so true. We are getting a little tight for time here. A couple more questions and we’ll wrap up Adam. Another thing you guys are doing, which is really cool, and I’d love to know how this works. You guys are helping clients refinance their Celsius loans with Ledn. How are you guys making that work?

Adam Reeds
Yeah, this is a really exciting opportunity. And obviously we feel horrible for what happened to the Celsius borrowers and all clients within any crypto lending platform or broader platform that had issues. And so what we’re trying to do is offer a really competitive way for clients to refinance their loans. And so the reason this is important is the way the Celsius and I think true for other bankruptcies in Celsius, you have the option to either take your net equity of the loan back or refinance that loan. And so if you take your net equity back, what can happen and again, not financial advice, but just some of the information that we’ve been receiving and just relaying that is there may be a taxable event for you doing that. In that if you say had a loan that you posted 20,000 of Bitcoin and you had a $10,000 loan against it, obviously adjusting for haircut splits, let’s say you have a net equity position of 10. If you just take that 10 back, you’ve effectively sold your 20K to repay the 10 and therefore there may be a deemed capital gain. And so this is like a double whammy for those that have been through really a very difficult situation. So not only did I get hair cutted by the bankruptcy, but now if I take my net equity of the loan, I might get a capital gain as well. It’s like, come on, hit me when I’m down. So what we’re doing is we’re offering a way for clients to use Ledn services to participate and coordinate with the Celsius bankruptcy committee to be able to effectively unlock their collateral and reinstate that loan on Ledn’s platform with new terms that Ledn’s providing. And so this has been very active for us. We put a lot of thought and work into making sure we can provide something that’s super helpful to the Celsius community. And it’s very active and hoping that that gets resolved in the next few months.

Matt Zahab
Love that. So cool. Adam, what an episode. Really appreciate you coming on last segment before we wrap up. Hot take factory. Let’s let a couple hot takes fly and then we will conclude. What do you got for me? It doesn’t have to be crypto related. It can be health, wealth, happiness, alien, space, AI, you name it. But give me a couple of Adam hot takes before you leave us today.

Adam Reeds
Oh, look, I mean, I will keep it crypto related. I think that what’s been exciting is on the ETF front is, when everyone’s thinking about price, but the other thing that this is changing when the ETFs eventually do happen is that it unlocks a whole bunch of new avenues on the digital asset lending space. So right now we’re paying 1% on Bitcoin, which admittedly is the lowest it’s been over the last couple of years, but as the institutional volume comes back, we’re gonna see more trading activity to kind of balance out the ETFs. And so what we think we’re gonna be able to do is raise the rate on Bitcoin yield there and then provide more liquidity to this new and emerging market. So I think that’s something I’ve been thinking a lot about is like, we’re not just gonna see price, we’re gonna see a whole bunch of activity happen and a whole bunch of broad interest come in and that’s super exciting. Outside of that, I guess my hot takes, maybe just to kind of draw a life lesson, I actually, I’m a private pilot in my spare time. So what I think a lot about is everything we’re doing is acting with intention. So when you take off one of the first things that the control tower asks you is, what are your intentions? So what do you intend to do with that flight? So I try to think about that every day. I think about when I wake up, what are my intentions for the day? What are my intentions for the week? How do I want things to go? And based on the outcome, if it doesn’t happen a certain way, you need to pivot and you need to think about other options. So it’s always like, if this happens, what’s plan A, what’s plan B, how am I gonna make it through and how am I gonna feel if these go a different direction? So that’s my kind of closing hot take is be intentional with your thoughts, be intentional with your activity and with your days, time’s the most valuable thing we have. So use it to the greatest way you can.

Matt Zahab
I love that. What an ending. Where do you fly out of Billy Bishop?

Adam Reeds
Yeah, I learned out of Billy Bishop, the Island Airport in Toronto, and yeah, I’ve been flying a little bit internationally. Had an opportunity to fly in Bahamas last year, which was pretty incredible kind of island hopping there. So, yeah, definitely an incredible activity for anyone to uptake. And as I said, it provides a lot of lessons and, you know, thinking that’s applicable to many other aspects in life. So recommend it.

Matt Zahab
So cool. Adam, what an episode. Really appreciate you coming on. Before you go, can you please let our listeners know where they can find you and Ledn online and on socials?

Adam Reeds
Of course, so I’m on Twitter, just my full name, @adamreeds, Ledn is @hodlwithLedn on Twitter. Instagram is Ledn.io or Ledn.es. We have a Spanish Instagram as well for our listeners in Espanol. And yeah, todo bien, that’s it.

Matt Zahab
Love it. Adam, thanks a lot. Really appreciate it. Can’t wait for round two. Wishing all the best to you and the team.

Adam Reeds
Thanks a lot for the time Matt, I’d appreciate it.

Matt Zahab
Folks, what an episode with Adam Reed, Co-Founder and CEO of Ledn he was dropping knowledge bombs left, right and center. Anything crypto lending related Bitcoin being great collateral. The future of crypto lending, you name it. We covered it. Huge shout out to Adam and the team for making this happen. If you guys enjoyed this one and I hope you did, please do subscribe. It would mean the world to my team and I. Speaking to the team, love you guys so much. Thank you for everything. Justas my amazing sound editor. Appreciate you as always my man and back to the listeners. Love you guys. Thank you as always. Keep on growing those bags and keep on staying healthy, wealthy and happy. Bye for now and we’ll talk soon.