For the founder of the high-yield cryptocurrency savings account Hodlnaut, Zhu Juntao has always been fascinated by how financial systems work. A graduate of Singapore Management University, Jun Tao joined Credit Suisse's derivatives desk for three years before stumbling upon cryptocurrency in 2017.
“I bought my first bitcoin in 2015 and started doing spot arbitrages across the various cryptocurrency exchanges. That was very profitable for me back then. "
Juntao, however, was soon beaten with a high capital gains tax of 55 percent in Japan. He felt the taxes were too high and left the country to return to Singapore.
In 2019 Juntao and his co-founder officially launched Hodlnaut, a crypto credit and lending platform that customers can use to deposit their cryptocurrencies and earn up to 10 percent interest.
Earn 10% interest on your cryptocurrencies
For users unfamiliar with the high interest rates on offer in cryptocurrencies, it is not uncommon to question how sustainable that high interest rate is, especially when traditional banks only offer an annual interest rate of one to two percent.
In traditional finance, investors and traders are familiar with leveraged trading, and leverage is often only provided up to ten times your collateral. This means that you can borrow up to ten times your amount.
This is also how real estate loans work, in which your property is pledged as security for the bank and the bank can lend you up to 90 percent of the property's value.
Image credit: Hodlnaut
In the world of cryptocurrency, however, there is up to 100x leverage. Institutions could borrow from companies like Hodlnaut to margin the trade and leverage 100 times to win or lose 100 times. This has fueled the demand for cryptocurrency for collateral, with institutions willing to pay a rate of up to 20% for cryptocurrencies.
In the backend, Hodlnaut simply borrows these cryptocurrencies and shares the earned bonus with the users.
Getting started with Hodlnaut is easy: after you have registered for an account and completed your KYC (know-your-customer) process, you can simply deposit your cryptocurrencies with Hodlnaut and earn interest on a daily basis.
Currently, Hodlnaut does not allow direct purchases of cryptocurrency, also known as fiat onramp, on their platform in US dollars, and they only accept cryptocurrency deposits.
“Our current focus is on ensuring we get the best interest income on our users' cryptocurrencies, and we are not focused on providing an on-ramp solution. There are other industry players who are now focused on this issue, "Juntao told Vulcan Post.
How do they differ from similar players?
This model isn't new as several companies have emerged with similar offerings in the past few years. Well-known companies in this field include Blockfi, Celcius and Gemini.
When asked how Hodlnaut compares to its competitors, Juntao said they are currently offering their customers the fairest and highest interest rates, up to ten percent on stablecoins – a term used to describe cryptocurrencies, their value pegged to the USD, and six percent on Bitcoin.
Cryptocurrency Interest Rate Comparison from May 2021 / Photo credit: Hodlnaut
“Not only do we offer the best prices, we're Singapore based and a full Singaporean team. Our customers and users can rest assured that they can always contact us and we are fully compliant with all legal requirements of the Monetary Authority of Singapore (MAS), ”Juntao told Vulcan Post.
To date, Hodlnaut has over 5,000 users who trust them to manage over $ 300 million worth of cryptocurrencies. This is 100 times more than a year ago and an even higher amount compared to what they started with.
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Hodlnaut's assets under management grew 100 times each year
While Hodlnaut currently has over $ 300 million in assets under management, it wasn't all rosy for Hodlnaut to begin with.
We started with my co-founder and myself running an asset management of just under $ 30,000. As we grew, our corporate bank OCBC suddenly shut down for no official reason from the bank.
We received a call that our account is being closed and that we need to withdraw the money. I remember going downstairs to withdraw all the money from the bank and to this day I am a permanently banned client of OCBC.
– Zhu Juntao, founder of Hodlnaut
Waiting for the green light for Singapore crypto licensing
With the increasing awareness and interest in cryptocurrencies in Singapore, MAS created its first legal framework for cryptocurrency services, the Payment Services Act, which went into effect on January 28, 2020.
According to the law, cryptocurrency providers in Singapore must acquire a license and be regulated under the supervision of the agency – this was finally passed in Parliament in January this year.
Juntao and his team are currently eagerly awaiting the MAS license result, which he has already submitted. Companies without the licenses of the Payment Services Act are not allowed to operate in Singapore, although Juntao has assured us that MAS has granted them an exemption.
While the process of obtaining the official license is taking longer than expected, Juntao believes that Singapore is a country where financial companies offer the best environment to operate and is confident that they will soon receive the outcome of the license application.
With the company growing rapidly, the team wants to release an iOS version of Hodlnaut so customers can track the value of their portfolio on the go.
The company is also looking for ways to give its customers access to higher-income products in the cryptocurrency space.
Selected image source: Hodlnaut