Article and Artwork By: @CryptoKeith
To kick off the week Monday morning, Howard Krieger sat down for a Telegram-based AMA with KuCoin’s Steve Baillie to answer some of unFederalReserve’s top questions from both the unFed and KuCoin community.
These questions came from the Twitter community and the top 10 were selected. As usual, Howard demonstrated both his passion and expertise of the financial sector as he eased the minds of loyal unFederal agents by answering questions. He also painted a picture for what is to come for the B2B lending defi project.
Let’s dive into some of those questions and the potential relevance they may have for the future of the B2B challenger project.
- From Howard’s perspective, do you envision the top 10 US banks view unFed as a threat to their current system of banking dominance or a tool to bank more efficiently?
“I worked at two top 10 U.S. banks (HSBC and Wells Fargo) for over 10 years as a leader in consumer lending pricing and structuring, and consulted for 2 others over the next 10 during my time as a national technical leader for financial services valuation at KPMG. Banks that large do not actively scan the market for threats at our scale, (we are proud of how we’ve grown: https://www.unfederalreserve.com/) and their scale poses internal challenges to adopting new technologies. Very broadly, @SteveBaillie, each division at a bank has business development specialists that explore for opportunistic partnerships. From their perspective though, remember, acquisitions have to be vetted across the ENTIRE vertical in their channel to make sure they are not stepping on existing departmental leader toes, and across the ENTIRE horizontal of business lines to make sure that no other group is working to solve the problem (e.g. inorganically or organically.) At most we’d be considered a tool, as their internal tech folks across all divisions focus on innovation that improves existing processes and not replaces them. We are a little too revolutionary to gain the attention (good or bad, lol), my guess, with any bank that holds $100 billion or more in assets.”
UNDERSTANDING WHAT THE TOP 10 BANKS VALUE
Howard flexed his impressive background — working at HSBC and Wells Fargo for over 10 years has given him an intimate behind-the-curtain view at what challenges banks at every level struggle with. Understanding these pain points is key to creating and capitalizing on solutions for each with creative defi products. It also means that Howard has a good pulse on what attention $eRSDL will have on top level banks. At this moment, he is not concerned in the least. If anything, he suggested unFed could serve as a tool to enhance existing bank processes.
2. What is the biggest hurdle to onboarding a bank vs a US chartered bank?
“Nothing we can’t handle, and we can talk about this in more detail (https://discord.gg/Qm2HeUjS) after the AMA this morning. First off, the community of $eRSDL holders includes a number of consumer banking and non-bank lending professionals. Establishing and maintaining credibility with the companies for which they work is paramount. There’s a reason safety is the first of our five principles. So there are a couple of entities to please. Once we take care of them, then the operation becomes business development focused, not product adoption focused. By last count, we fall under about 6 + 3 (quasi) U.S. government agencies’ jurisdiction. The banks know that, and they have their own investment criteria. The adoption hurdles, as we see them @SteveBaillie, are threefold 1) get our ducks in a row with those regulatory entities (which we largely are), 2) lay the IT rails (which Ryan’s team is all over) and 3) match their treasury product criteria. This last part would relate to how the platform, an example of which can be seen here: https://lending.unfederalreserve.com/ prices risk. The proper B2B DeFI platform will allow for uncollateralized lending and will operate without interrupting or creating new workflows. Keep it clean and easy for them. Safe and secure.”
THE KEY TO ONBOARDING BANKS
CeDefi is essentially a bridge between centralized and decentralized finance. Bridging that gap presents several hurdles that unFederalReserve is taking on with full steam ahead. A key factor to bridging that gap, particularly in the CeDefi space, is establishing trust.
Trust for these banks and non-banking lenders can be achieved through compliance, reputation and product. While many projects in this space focus on tech, unFederal Reserve has put together one of the most impressive compliance teams in the market. They understand exactly what a bank (including US chartered banks) requires to be onboarded. Howard outlined it in three steps:
- Get our ducks in a row with regulatory entities
- Lay the IT rails
- Match their treasury product criteria
These rails are designed to make the transition mirror that of their regular lending processes. That way, it will drastically cut down the learning curve. Keep it simple, easy and secure.
3. Would eRSDL ever consider a referral concept for its banking and non banking lenders to further secure the early to market advantage?
“The $eRSDL community is a great referral network. Our community recognizes we are all in this together. We receive inbound requests from professional service organizations, non-bank lenders and individuals from complementary businesses (i.e. risk, compliance, underwriting, funding, servicing, etc.) stemming straight from the holding community. Our “unFed agents” and our soon to be launched ambassador program graduates will expectedly bring with them new opportunities. Our advisory team (https://www.unfederalreserve.com/team) has over 200+ yrs in the marketplace and just as many non-bank lenders with whom they break bread. Once up to speed, we may use marriage brokers to help with expanding the platform’s participants. But a lot of success, @SteveBaillie, stems from serving customers with courtesy and efficiency they deserve and desire.”
THE UNFEDERAL RESERVE AMBASSADOR PROGRAM
Howard highlighted the importance of the unFederal community and advisory team who continue to create new opportunities for the project behind the scenes. He also briefly hinted at the launch of the unFederalReserve Ambassador Program that should serve as a referral resource to further provide exposure to the unFederalReserve project. Such opportunities could include defi project partnerships, banking opportunities, outreach and overall project exposure.
4. Please can we get an update on any progress with what will be done with the reacquired tokens from client fees?
“As previously announced here: https://unfederalreserve.medium.com/unfederalreserve-announces-a-new-reserve-fund-4cc9f8b9e9ec, the reserve pools are increasing as transaction volumes steadily increase. Reserves are transparent and available on the markets page. Please take a look and you’ll come to the same conclusion. @SteveBaillie, check out the bottom half of each token performance page to see how the reserves are building up. https://lending.unfederalreserve.com/markets/USDC As previously announced, as we develop the utility of the token, we know we need the logic that acts on the existence of $eRSDL in a user’s wallet. The function might be simple at first and independent of other initiatives. Concurrently, all streams are progressing forward. We spend a substantial time each week making sure that all the verticals’ opinions are represented, considered and factoring into the final project. We are only as strong as our community. Lastly, yes, with the income generated by the reserve factor, we are going to begin model buybacks. These amounts will be steady at first, climbing as more dollars flow through the pipes. The question we want to know after you’ve checked us out, is, “How are we doing?”
$ERSDL TOKEN FUNCTIONALITY AND BUYBACKS
Howard breaks down the utility of the $eRSDL token while reminding us that the focus remains on transparency and continuing to build liquidity through the various projects. He also verified that the ReserveFunding product will begin the model buybacks. The buybacks shall be a feature where unFederalReserve ‘buys’ the monthly licensing $eRSDL that shall be paid by each bank and non-bank lender using the product. The amounts bought should steadily increase as more dollars flow through the product (pipes).
5. Are we still on schedule for the projected 40bn through pipes EOY for $eRSDL?
“Our early estimates are not entirely out of the realm of possibility, and have been revised to reflect new information, expanded regulatory gating and the reality of doing this kind of business in America. As our newly minted advisor, former Coinbase Chief Compliance Officer, Martine Niejadlik (https://unfederalreserve.medium.com/meet-our-advisor-martine-niejadlik-efdb3319cedf) would attest, there are actual size restrictions on the dollar volumes allowed in this space above which registration and licensing from those 9-ish entities from the first question are required. So, how do we address it? Well, we are concurrently establishing funds that can handle each up to $150 million dollars (max), and we know getting scalable means installing a broker-dealer. We are working with broker-dealer candidates to see if we can hand the reins of that piece of the puzzle.
The tokenomics support the revised estimates as modelling indicates our multiple product lines are supporting multiple revenue streams. We will receive a higher spread on the smaller initial volumes than intended. The math supports the plan @SteveBaillie, and so now it’s a matter of getting everything over the finish line. We meet every objective we set to accomplish, so I am not concerned. It would be great to hear your thoughts on that here: https://discord.gg/Qm2HeUjS .”
$40 BILLION THROUGH PIPELINE — END OF YEAR GOAL
The original goal of $40 billion of funding through unFederalReserve products by the end of the year is still within our grasp. Howard did discuss the most recent hurdle provided by the newest member of unFederalReserve’s advisory team, Martine Niejadlik. With a background in compliance at Coinbase and Amazon, Martine understands how to identify hurdles and how to work within compliance to solve them. Once we have passed these hurdle, we will be much closer to achieving our goal.
6. Any perspective on $eRSDL hitting real bankless people worldwide?
“The reality is that being bankless starts at the top. unFederalReserve put out a piece about the concept of natural rights: https://unfederalreserve.medium.com/robinhood-gamestop-and-natural-rights-58d2c5b2771b with specific reference to the January 2021 debacle with U.S. equity markets and the Robinhood application. A natural right is roughly defined as, “a principle or body of laws considered as derived from nature, right reason, or religion and as ethically binding in human society.” Natural rights are an entitlement for all personkind.
So understandably, imagining that every human can have at least one wallet in the near future is not out of the question. However, success will be defined by going through the hand-holding process, top-down leadership, community engagement, rewarding and even making some processes more difficult, when appropriate. Check out our 30-sec commercial @SteveBaillie here: https://youtu.be/PXGj_3bu_fc to learn about how we solve the unFederalReserve’s population, and imagine that the benefit for these local institutions is that our rails lower the cost of doing business. Competitive pressures should force down prices, and now the unbanked can afford to feed their family and take care of their life’s basic needs.”
BANKING THE UNBANKED
Howard broke down the theory of natural light and its effect on society. As mentioned before, Howard believes it is only a matter of time before new technology takes hold within our society. The crypto space has multiple benefits for the unbanked. unFederalReserve looks to help by lowering the cost of doing business so that the lower prices can present the unbanked with opportunities to take care of their families.
7. How many separate platforms will there be to service each product aside from p2p? Will there be one big pool for everything?
“ReserveLending, the $eRSDL live #DeFI platform, may be found here: https://lending.unfederalreserve.com/ This platform boasts over $52 million in TVL. Our next product, to be launched in the fourth quarter, will be a vault product named ReserveFunding. You can think of a vault as an investment vehicle. Within a robust regulatory framework provided by our lawyers at: https://www.gouldratner.com/ and Winthrop & Weinstine, P.A. (https://winthrop.com/) the DeFI platform is focused on high net worth persons and non-bank lending institutions to get them acclimated to how DeFI can help them manage liquidity. Once a month we will put a community selected token on the platform. The tokens we put on will likely have a high growth impression, and allow those alt coin holders to use their appreciated value to invest in #RWA real-world assets. ReserveB2B is, specifically, a banking product that allows non-bank lenders to manage liquidity between themselves. This product, @SteveBaillie, takes some specific coding to allow for non-collateral, making sure $eRSDL is in the licensees, but with limited recourse.”
unFederalReserve has two new exciting products to be launched this year. ReserveLending is currently live with $52 million in the pipeline. The ReserveFunding allows for lenders to use fallow cash as an investment vehicle. Lenders will now be able to fund Cefi and Defi through the use of vaults. Howard is excited to grow out various vaults that will offer unique investment strategies for lenders.
ReserveB2B will allow for non-bank lenders to manage liquidity between themselves.
8. Any partnerships in the pipeline?
“Yes, but under our NDAs and other legal agreements, we must use discretion until the parties say otherwise. Some vendors providing key components to our platform include Plaid and Circle for fiat-to-crypto onramp rails with walls. We are also exploring KYC (Know Your Customer) support for ReserveFunding, @SteveBaillie, using Securitize.io (https://securitize.io/) or other vendors. Fireblocks is of particular focus given some of their major wallet integrations.
Of our existing partnerships, our most exciting one is our strategic marketing JV with El Capitan advisors (article here: https://cointelegraph.com/press-releases/el-cap-and-unfed-partner-for-high-speed-b2b-cash-management-solution)
It is from this relationship that we not only identify opportunities to deploy capital for worthwhile projects in tribal lending and other sectors, we can begin to create pools which reflect El Caps investment criteria specifically. The result could be a series of curated onramps from fiat-into crypto and then onwards to where directed to best serve the treasury management needs of El Caps multi-billion dollar MRB clients. Other partnerships are in the works with other members of our industry, where they may be operating out of other jurisdictions. We can use these relationships to help cross-promote and raise awareness. We have also had advanced conversations with other Tier 1 exchanges about ways we can move forward contingent upon each other sharing information (e.g., our corporate formation docs and its SOC1/SOC2, when available).”
As much as Howard would love to divulge current partnership talks, he reminded us that we are bound by certain NDAs and other legal agreements. Although he did hint at looking into further partnerships to enhance our KYC compliance. What Howard can speak on is the current El Capitan Advisors partnership that is looking for solutions in untapped sectors like tribal lending. The more onramps into our products, the more the product can grow. Or as Howard says, “all ships rise with the tide.”
9. License fees, access to tiers of services, governance?
“We use $eRSDL to track if our licensing fees have been paid and by whom. We have begun using Treasury capital to invest in CeFI entities. In order to design our licensing fee tracking prototype, we will begin using income from ReserveLending and the CeFI investments to purchase $eRSDL out of the market. Our basis for the purchased amount will be a percentage tied to a KPI like reserve amount, total borrowers, etc. More detail will be shared in the coming weeks.
Tiered information access and opening up to greater DAO capabilities will come with our new discussion forum; to be released once we are comfortable it provides an arena for good discourse and actionable content. $eRSDL’s utility currently comes from the holders’ ability to participate in almost every aspect of the project. Gating mechanisms, @SteveBaillie, with sequestered data is something we are considering a desirable feature to add to the platform. We have also discussed celebrating our unFederalReserve family (https://www.unfederalreserve.com/) by offering some token of our appreciation that can only be accessed if $eRSDL is in your wallet and you are connected to ReserveLending. More to come on those exciting achievements and more.”
LICENSING FEE DETAILS
Although the exact licensing fee percentages have yet to be released for ReserveLending, the main takeaway is that the licensees will be required to purchase $eRSDL coins that will eventually be bought back by unFederalReserve. Although we cannot discuss price, the licensing buyback function should naturally increase demand of the token, lowering the maximum supply over time.
Howard revealed tiered access to information in the form of a future discussion board along with an appreciation offering for those participating in ReserveLending. More details on these topics will be released in the near future.
10. Concluding Remarks
“Rather than try to reinvent the pieces of the vertical @SteveBaillie, we are searching for those elements already out there that align with our needs. We are focused on launching good products, see that costs of capital are lowered, and the greater economy (including the bankless) are served. We are a boring software company, but we are excited to have each of you come join the $eRSDL community.”
The unFederalReserve team remains laser focused on the aspects of the project that truly matter — creating products that solve various issues in the mid-defi b2b lending space. Executing on those products will help build trust and our reputation to open up doors for years to come.
The last nugget from the AMA was a tease from Howard of an upcoming partnership reveal. When asked about the timing of revealing information, his response was, “this week actually…”
As we look forward to upcoming news from the team, be sure to tune into this week’s town hall meeting set for Wednesday, August 11.