Maple Finance, an on-chain, institutional credit marketplace that's aspiring to fill a gap left behind by the collapses of crypto lending heavyweights like BlockFi and Celsius, has its sights set on Asia as financial hubs like Hong Kong and Singapore provide more regulatory clarity around digital assets.
Maple, which falls under the decentralized finance (DeFi) category, differs from centralized finance or CeFi platforms like BlockFi in that it allows lenders to see loan operations on the blockchain, promising to offer more transparency. Cumulatively, the three-year-old startup has issued $2.2 billion in loans, and currently it has around $50 million deposited on the platform.
To fuel its expansion eastward, Maple recently closed a $5 million strategic investment from a group of crypto-focused investors. The round was led by BlockTower Capital and Tioga Capital, with participation from Cherry Ventures, Spartan Capital, GSR Ventures, and Veris Ventures, as well as past investors Maven 11 and Framework Ventures.
"In Asia, you have regulatory clarity, or rather, regulatory support, both coming out of Hong Kong and Singapore in terms of new legislation that's come through, and you already have a very heavy trading focus over there," Sidney Powell, co-founder and CEO at Maple, told TechCrunch.
While Maple's two dozen employees are spread mostly across Western Europe and North America, a number of its major borrowers have come from Hong Kong and Singapore.
"A lot of the more bullish trading activity that occurs in terms of like Bitcoin price movement was largely driven by trading activity that was coming out of the Asia time zone, based on the times that the trading was occurring, so I see a really big opportunity to get more active there on the ground," the founder said, adding that Maple plans to add its first headcount in the region.
The "DeFi summer" of 2021, which saw a spike of retail investor interest in financial products built on Ethereum smart contracts, "engendered a lot of speculation," Powell admitted, but he argued that yield farming, which allows users to earn high yields by providing liquidity to DeFi protocols, "also got the space going." Now that the crypto market has cooled down significantly, 2023 is the year that DeFi "needs to prove out the use case," he said.
Notably, decentralized lending platforms have promised to bring more financial inclusivity to small and medium enterprises by allowing them to access undercollateralized loans. The idea is commendable, but a few backlashes in the industry has prompted a reckoning of these platforms' design shortcomings.
Goldfinch, a DeFi protocol extending loans to real-world businesses, faced a major loan default after a Kenyan motorcycle company recently breached its loan agreement. Maple had its own setback after several borrowers missed payments following the FTX implosion, leading to a temporary suspension of its lending pools on Solana, an Ethereum challenger seen as having close ties with FTX founder Sam Bankman-Fried.
Maple started as a credit marketplace connecting institutional lenders and borrowers, but it has recently rolled out its own direct lending business, offering loans that are overcollateralized and secured by Bitcoin, Ether, and staked Ether collateral.
"Other players try to focus on just trying to build the technology, kind of like Uber and Airbnb. What we've tried to do is to act as an underwriter so we need to show credit expertise. I think it gives us a little bit more control over the outcome and it's a little bit closer to Apple in that it's more vertically integrated," said Powell, explaining Maple's decision to launch its own lending arm.
"I think now is the time to do that because all the other competition exited, and so that's created this opportunity for us to step in and offer a product," he continued. "But that product has to be improved upon what they did. With those players, you couldn't see how the loans were performing; but when I post a loan on the blockchain you can always see how it's performing, so I can never lie to you that our loan book is performing when it's not."
Maple is also working on diversifying its customer base. In the early days, many of its borrowers were market makers that provided liquidity to crypto exchanges. As trading volume remains low during the market downturn, the lending platform is now touting safer products, such as tokenized treasury bills, or T-bills, to those who want low-risk interest rates.
"That appeals to startups who might have done a seed or a Series A funding round because they just want to put their funds somewhere that's going to be relatively safe and know that they can get it back at short notice," explained Powell.
Meanwhile, Maple has plans to offer trade finance to real-world companies, like a traditional trading business that needs a loan to fund its shipment of a commodity overseas. This new direction, Powell said, "ties in quite nicely" with its expansion in Asia, particularly major shipping hubs like Hong Kong and Singapore.
"Import and export businesses are something that we could potentially fund a lending pool for on Maple. Already, we've been pitched a few trade finance deals and so establishing business relationships on the ground in Singapore and Hong Kong is something that I hope to do," said the founder.