SALT Lending Reaches Settlement with the U.S. Securities and Exchange Commission

A Message From SALT

September 30, 2020 (DENVER) — Salt Blockchain Inc. f/k/a Salt Lending Holdings, Inc. (“Salt” or the “Company”), a company that provides crypto-backed loans and is expanding its product offerings to include wealth management services, today announced it has reached a settlement with the U.S. Securities and Exchange Commission (“SEC”) related to Salt’s offer and sale of SALT Tokens in its “membership token sale” or “initial coin offering” (“ICO”), in which the Company offered and sold digital tokens (“SALT Tokens”) starting in 2017 through 2019. The SEC has simultaneously granted Salt an important waiver that will among other things allow the Company to participate in future capital raising activities under Regulation D of the Securities Act of 1933 (“Securities Act”).

Salt has cooperated with the SEC and has been working toward a settlement for many months. Throughout that time, Salt has continued to grow and has proven the viability of the lending business and technology described to investors in connection with the ICO. Now that the Company and the SEC have reached a settlement, Salt plans to expand its product offerings to include products focused on asset management and the preservation of wealth. “As part of Salt’s current leadership team, I can speak to the fact that this experience has certainly been a humbling one. While it has forced us to hit pause on a number of initiatives and product releases, it has also given us time to think about how we want to evolve the business,” said CEO of Salt Justin English. “I’m excited about Salt’s future and am grateful for the opportunity to pursue our vision of building products and services that will help our customers build and preserve their wealth.”

Without admitting or denying the findings in the order, the Company consented to the entry of an administrative order that requires it, among other things, to cease and desist from future violations of the offering and registration provisions of the federal securities laws (the “SEC Settlement”). Under the terms of the SEC Settlement, the Company will register SALT Tokens under Section 12(g) of the Securities Exchange Act of 1934 as a class of securities, maintain that registration and make timely filings as required by law and the SEC Settlement, and pay a civil monetary penalty of $250,000.

In addition, under the terms of the SEC Settlement, the Company will administer a claims procedure available to those who purchased SALT Tokens directly from the Company before and including December 31, 2019. Pursuant to that claims procedure, purchasers of SALT Tokens from the Company before and including December 31, 2019 who elect to participate and timely submit a complete Claim Form and required supporting documentation will be permitted to provide their SALT Tokens to the Company in exchange for payment of the amount due under Section 12(a) of the Securities Act (consideration paid with interest thereon, less the amount of any income received or damages if the person no longer owns the security). The Company will distribute a Claim Form to purchasers in accordance with the terms of the SEC Settlement. As required by the SEC Settlement, the Company will submit a monthly report to the SEC of the claims received and the claims paid under its voluntary claims procedure as described in paragraph 17 of the Undertakings in the SEC Order. The SEC Order is available at https://www.sec.gov/enforce/33-10865-s.

How to Grow Your Business Capital Through Cryptocurrency

By Annabelle Pollack

Disclaimer: Buying cryptocurrency is risky. This article is for informational and educational purposes only and does not constitute investment or financial advice.

Cryptocurrency is reshaping the finance and business worlds. Not only has it challenged conventional thinking, but it has provided new avenues for entrepreneurs and business owners to start and grow their businesses in these uncertain times. Many of them have turned to crypto as a way to raise initial capital or to fund ongoing operational costs. If you’re seeking creative ways to grow your business capital through cryptocurrency, there are a few ways to go about it — the most important thing when it comes to getting involved with crypto is doing your research to identify the best avenue for achieving your business goals.

Choose the right cryptocurrency for your business

When it comes to determining which cryptocurrency is the ideal fit for your business, you have several options from which to choose. At the moment, there are already more than 1,000 unique cryptocurrencies in which you can transact. But just as there are blue-chip stocks, a guide to cryptocurrencies by FXCM details how some digital currencies are considered the “gold standard” of the industry. At the top is Bitcoin, which is regarded as the first incarnation of cryptocurrency and is projected to have a market capitalization of $1 trillion in the near future. Next is Ethereum, whose $83 billion market capitalization is poised to expand in the coming years due to its growth potential in the online sphere. Then, there is Litecoin, and its surging market cap of over $18 billion. Bitcoin, Ethereum, and Litecoin are seen as the strongest investments, with Yahoo! Finance noting how a high market cap is indicative of high investor activity. All three are extremely liquid, too, which means they can be easily sold at the market price. Each cryptocurrency is different and may boast specific features that others do not. Some factors to consider as you’re choosing a cryptoasset for your business are security, privacy, transaction speed, block times, market cap, liquidity, and the blockchain upon which the cryptocurrency is built. Once you identify which factors are most important to you, you can narrow down your options and choose the crypto(s) best suited for your business.

Buy and Trade Crypto

Once you’ve done your research, identified your cryptocurrency of choice, and learned the ins and outs of the industry, you can evaluate whether you’re confident enough in your knowledge to move forward with buying and trading digital currencies. That being said, it’s essential to prioritize safety and security regardless of whether you’re trading frequently or buying for the long term. A good way to do that is to find a reputable online cryptocurrency trading platform that can help you buy and trade crypto, as well as help protect your investments. Some trading platforms even offer crypto CFDs (not available in the United States) that don’t require a special wallet or exchange account, but will ask you to speculate on the direction of their price movements instead. You can also invest in several coins at the same time, as doing so may help you mitigate the risk that comes with putting all your eggs in one basket. This way, you’re more likely to see your business capital increase.

Get a crypto-backed loan

In an instance where you need cash but are unwilling to part with your crypto entirely, consider taking out a crypto-backed business loan. As the name suggests, this type of loan is secured by cryptocurrency, offering a way for you to get cash or stablecoin without having to sell your cryptoassets. The amount of cryptoassets you’ll be required to put up as collateral is contingent on a few factors including your loan amount, loan duration, and Loan-to-Value ratio (LTV). If this option appeals to you, a SALT loan might be just what you’re looking for. SALT accepts a dozen coins as collateral including Bitcoin, Ether, and Litecoin, and you can choose one or more of the offered collateral types to secure your loan. SALT also offers flexible loan terms, allowing you to choose your desired loan-to-value ratio from 30%-70% (amount borrowed divided by the value of your crypto), the duration of your loan (3–12 months), and whether you’d like to receive your loan proceeds in fiat or stablecoin. Interest rates are competitive, too. By taking out a crypto-backed loan, you can secure the funds to start a new business or operate and improve an existing one without selling your crypto.

Accept cryptocurrency payments

Another way that a business can generate further capital is to accept payments via cryptocurrency. For instance, Business2Community claims that businesses can lower the transaction fees involved during payment transactions due to the high number of peer-to-peer processing networks accepting popular coins. Compared to traditional methods like wire transfers and check payments, cryptocurrency can be a lot faster and more efficient. In addition, cryptocurrency transactions can be conducted directly between the business and the customer on the blockchain, which avoids the potential for third-party scams and external payment disputes. By accepting cryptocurrency payments, businesses can simultaneously grow their capital and streamline payment processes.

While there are significant risks that accompany cryptocurrency investments, doing your research and being diligent can help you significantly grow your business capital and fund new developments. Exploring different payment options and looking into specific coins can help you become more knowledgeable when it comes to determining the best way for you to start or operate your business.

 

SALT Announces the Recipient of the 2020 SALT Opportunity Scholarship & Internship

SALT is proud to announce De’Alsha Diamond as the recipient of the 2020 SALT Opportunity Scholarship & Internship.

“The program is part of our commitment to diversity and is intended to provide educational and work experience opportunities while helping remove financial barriers for those that have been underrepresented in the STEM fields and FinTech industry,”said Debra Johnston, Chief People Officer at SALT. “ We are excited to be a part of the next steps in De’Alsha’s journey and to continue working toward the long-term goal of building a more diverse and inclusive workforce.”

De’Alsha Diamond graduated from Montbello High School in Denver with a 4.0 GPA and has since obtained certificates in Web & Graphic Design and Healthcare Patient Services from the Community College of Aurora. She recently worked in Quality Assurance at Ibotta and is also a graduate of the Professional Development program through CrossPurpose, a non-profit organization focused on abolishing relational, economic, and spiritual poverty through career and community development.

As the recipient of SALT’s scholarship, De’Alsha, as of September 21, 2020, is attending a Software Engineering course through General Assembly, a leading global technology education organization providing robust training in mobile and software engineering, data science, product management, and other digital-related skills. The Software Engineering course is a 12-week, full-time program designed to transform students from novices to job-ready, full-stack software engineers. Following the successful completion of the course, De’Alsha will have the opportunity to partake in a 12-week paid, part-time internship at SALT where she will be able to apply her knowledge and work alongside our software engineers.

Participation in the SALT Opportunity Scholarship & Internship program will enable De’Alsha to expand her coding abilities and gain related work experience that will help her pursue a career in software engineering.

“Diversity in the workplace is essential for so many reasons, primarily because of all of the different perspectives that come with it,” said Brandon West, Product Director at SALT. “I think most people struggle to understand what other people go through and they naturally see the world through their own eyes. When you start to diversify your workforce, you start to understand the world differently — you begin to think about different personas and users of your products and rather than problem solving and engineering for the same type of person, you begin to do that for everybody. That’s the value that diversity adds to a company.”

SALT announces first-ever distributed custody model for securely storing collateral assets, onboards Fireblocks as first partner

This new model will allow SALT to distribute risk, enhance security, reduce interest rates, fund loans more swiftly, and focus on expanding its suite of wealth preservation products

We’re excited to announce Fireblocks, a platform that secures digital assets in transit, as our first partner for securely storing and transferring customers’ collateral assets. The partnership with Fireblocks marks a shift in SALT’s business model from self-custody to a more distributed custody approach that will allow us to onboard additional partners in the future and add greater flexibility for capital providers. This new approach also enables us to distribute risk, fund loans and conduct transactions more quickly, and provide customers with enhanced security for their cryptoassets, as well as lower interest rates on crypto-backed loans.

“When SALT was founded in 2016, custody wasn’t where it is now, so we built a proprietary custody solution to keep our customers’ collateral assets safe,” said Justin English, CEO of SALT. “Now that the industry has matured and companies like Fireblocks have come to the forefront, we’re excited to work with them to streamline our operations and expose their networks to our suite of wealth preservation products. They have a proven ability to safely and securely store and transfer collateral assets and to do so swiftly, which will inevitably allow us to provide faster service to our customers and focus more on product development.”

The move toward third-party custody solutions will also enable SALT to provide greater security and flexibility to capital providers that may prefer to work with a specific custodian, provided the custodian meets our rigorous security standards.

“MPC has quickly become the industry standard among the largest and most trusted institutions in the digital asset space,” said Michael Shaulov, CEO and co-founder of Fireblocks. “We’re proud to partner with the SALT team to help them strengthen security, reduce costs and expand operations as they move into the next stage of their growth.”

Fireblocks meets these security standards by combining multi-party computation (MPC) with Intel SGX technology to create a proprietary, defense in-depth approach to digital asset security — this allows organizations to accelerate operations without relying on physical hardware or slow, manual processes.

“Security is our top priority as we make this shift to be commensurate with our growth and distribute risk among trusted custodians,” said Dirk Anderson, chief technology officer at SALT. “The primary reason we’ve chosen Fireblocks as our first partner is because of their approach to MPC technology. Not only does it meet our security standards, but it will grant us more flexibility and increase the speed at which we can conduct transactions. This means we can fund stablecoin loans much faster and reduce the turnaround time for returning customers’ collateral assets once their loan has matured.”

From a customer standpoint, the biggest and most exciting changes to note are increased security, faster services, and the offering of lower interest rates. Aside from these changes, the customer experience will largely remain the same. Just as they do now, borrowers will still be able to make deposits and withdrawals, and will be able to continue tracking the health of their loan via our Loan-to-Value monitoring and real-time notification systems.

“We believe working with Fireblocks and other custody partners in the future is in the best interest of both the business and our customers,” said English. “Not only will we be able to offer more competitive interest rates, but we will have the time and resources to focus on expanding our offerings to include products that are designed to help our customers build and preserve their wealth.”

To apply for a loan or learn more about our suite of wealth preservation products, visit https://saltlending.com/getaloan/ or contact [email protected]. For questions contact [email protected].

About SALT

SALT, the pioneer of crypto-backed lending, offers a way for individuals and businesses to use their cryptoassets as collateral to secure a fiat or stablecoin loan without having to worry about credit checks. SALT offers flexible loan terms and accepts multiple cryptoassets as collateral including cryptocurrencies, stablecoins, and tokenized gold. SALT also offers competitive interest rates and does not charge origination or prepayment fees. As cryptocurrency becomes more widely adopted and additional real-world assets become tokenized, SALT’s mission is to offer solutions that make it possible for people to securely hold, manage, and borrow against their cryptoassets. Founded in 2016, SALT is headquartered in Denver, Colorado. For more information, visit www.saltlending.com or follow us on Twitter, Facebook and Medium.

All SALT loans are subject to KYC, AML, and other Terms, Conditions, and Restrictions. Please see saltlending.com/terms and FAQ for additional information. Loan options and terms may not be available in your jurisdiction, for your loan amount, and/or collateral type. SALT Loans are subject to jurisdictional limitations and other restrictions. SALT may not be able to offer a loan to all borrowers. SALT loans are originated by Salt Lending LLC. NMLS #1711910. NMLS Consumer Access (https://www.nmlsconsumeraccess.org/).

About Fireblocks

Fireblocks is an enterprise-grade platform delivering a secure infrastructure for moving, storing, and issuing digital assets. Fireblocks enables exchanges, custodians, banks, trading desks, and hedge funds to securely scale digital asset operations through the Fireblocks Network and MPC-based Wallet Infrastructure. They have secured the transfer of over $70 billion in digital assets and have a unique insurance policy that covers assets in storage & transit. For more information, please visit www.fireblocks.com.

Media Contacts

SALT

Kendra Staggs, [email protected]

Fireblocks

Yelena Osin, [email protected]

The Evolution of the Crypto Market and its Role in Asset-Based Lending

Originally published in ABF Journal

Cryptocurrency is a disruptor. Not only has it changed the way we conduct business, but it has changed the way we think. The most obvious manifestation of how cryptocurrency has disrupted our thought patterns is in the way we think about money — about who issues it, how to transact with it, how to put it to work and how to keep it safe. It also has changed the way we think about our government, our right to privacy and our financial freedom. What’s less obvious is how cryptocurrencies are disrupting the way we think about and participate in asset-based lending. The advent of Bitcoin catalyzed the creation of a myriad of cryptocurrencies, many of which became viewed as assets, yet at the time, there was no way for crypto investors to unlock the value of these assets without selling them. This is the problem SALT’s founders set out to solve in 2016 and in doing so successfully, made asset-based lending as we once knew it a thing of the past.

Creating a New Asset Class

As Bitcoin began to experience wider adoption following its release in 2009, it became clear that some investors were purchasing crypto to trade on a daily basis while others were choosing to invest long-term, viewing Bitcoin more as an asset than as a spendable currency. As more investors adopted this long position and began to think of cryptocurrencies as an asset class in their own right, the term “HODL” emerged in 2013 on a bitcoin-talk forum and has since become one of the most commonly used words in the crypto vernacular. This HODL culture has grown significantly over the years and has evolved to where investors are buying, selling and trading these assets not only for themselves but on behalf of others. This activity has taken the form of crypto portfolios and crypto funds, which offer access to this new asset class for individuals and allow them to diversify their portfolios while eliminating some of the overhead of learning how to purchase and safely hold cryptoassets. By providing a way to collateralize cryptoassets to secure a cash or stablecoin loan, SALT provides opportunities for individuals, businesses and capital providers to build and preserve wealth.

How to Lend Cryptoassets

As the first-ever crypto-backed lender, SALT has developed the technology and processes required to successfully lend against cryptoassets, giving borrowers a way to unlock the value of these assets without selling them. Take Bitcoin for example. It’s one of many cryptoassets we accept as collateral on our platform, yet it makes up more than 80% of the collateral securing our loan book.

What makes Bitcoin a strong form of collateral? The answer lies in Bitcoin’s combined characteristics. Like gold, Bitcoin is scarce, fungible, divisible, transferable and durable. It is also extremely liquid given it is traded on global exchanges every day. Additionally, as a decentralized asset, Bitcoin is highly secure. All of these properties make Bitcoin both a viable asset and a highly efficient form of collateral that has piqued the interest of some of the largest financial institutions in the world.

One thing to note is Bitcoin’s volatile nature, which can pose challenges specifically for the ABL market. However, SALT’s risk management technology effectively manages this volatility. Our technology includes real-time loan-to-value (LTV) monitoring, margin call and liquidation triggers, real-time notifications and the safekeeping of assets through institutional grade custody solutions. For example, our loan-to-value (LTV) monitoring system tracks the prices of assets 24 hours a day, 365 days a year, providing borrowers with the ability to monitor the health of their loan in real-time. If, during periods of heightened volatility, a borrower’s collateral declines in value and their LTV breaches our margin call threshold, we protect the borrower by issuing a margin call that prompts them to take action to restore the health of their loan. Actions borrowers may take include paying down principal or depositing additional collateral to recalibrate their LTV to an appropriate level (70%). If no action is taken and asset prices continue to decline, SALT has the ability and the right to liquidate collateral assets to preserve lender capital. The overcollateralized nature of our loans combined with our risk management technology and ability to liquidate assets enables us to protect the lender, and as a result, we’ve experienced zero losses of principal to date.

Choosing a Crypto-Backed Lender

SALT’s business model is attractive to crypto investors (e.g. traders and asset managers) and businesses (e.g. mining operations and exchanges) for a few reasons. First, we provide access to liquidity, offering loans ranging from $5,000 to the millions. Typical use cases include businesses seeking working capital to fund operational costs and large capital expenditures, or investors seeking leverage, diversification or risk management. Second, since our model is asset-based and requires overcollateralization, we do not rely on a borrower’s credit profile and can fund loans within 24 to 48 hours, assuming the borrower meets our strict AML/KYC requirements. Third, customers know their assets are safely and securely held with institutional-grade custody providers for the duration of their loan. Fourth, our loan process is straightforward and customizable. We allow borrowers to lend against a single cryptoasset or a portfolio of cryptoassets and offer flexible loan terms, including durations ranging from three to 12 months, LTVs up to 60% for individual loans or up to 70% for business loans, and competitive interest rates ranging from 5% to 12% depending on the borrower’s jurisdiction, loan amount and LTV. While we are no longer the only crypto-backed lender in the world, we are one of the few that incorporate a human element into our business model. Unlike completely automated lenders, SALT offers both phone and online support, and assigns each customer a loan support specialist at the time of loan origination. These human touches positively impact a borrower’s experience with the platform; they know that by choosing SALT, they will always have the option to speak with someone about their financial needs.

The Evolution of the Crypto Market and Tokenization

Since SALT’s founding in 2016, the crypto lending market has grown exponentially. According to a report from Credmark, the crypto lending market reached $8 billion in total lifetime loan originations as of Q4/19 and has since surpassed $10 billion following Q1/20. These numbers not only indicate the growing demand for liquidity among crypto holders but also the growing interest among capital providers to get involved in the crypto market. For example, we’ve witnessed an influx of both crypto native (BitGo Prime and Genesis Capital) and traditional financial institutions (Silvergate) that provide leverage and liquidity vehicles at the institutional level.

Another thing to consider regarding the evolution of the crypto market is that as the world becomes tokenized, the very definition of the term “crypto market” is changing. With the emergence of companies like Paxos and Harbor, we’re beginning to see increased tokenization of real-world assets like gold and real estate. At SALT we already accept Pax Gold (a gold-backed cryptoasset) as collateral on our platform and our vision for the future goes well beyond our current collateral scope.

The Role of Alternative Investments

As crypto becomes more widely accepted, a growing number of people are assessing their own risk profiles and determining the best way for them to participate in the crypto market. For those with lower risk profiles, the market has evolved in recent years to offer individuals or businesses indirect exposure to this new asset class. As previously mentioned, crypto portfolios and crypto funds are part of this evolution along with alternative investment companies like Cadence (portfolio company of Coinbase Ventures). Cadence is a securitization platform for private credit that grants access to exclusive high yield, short term investments traditionally reserved for institutions. In February 2020, we partnered with Cadence to offer prospective investors the opportunity to gain exposure to cash flows associated with a portfolio of underlying loans collateralized by cryptoassets. The first note of $500,000 was oversubscribed in five days and we have since worked with Cadence to issue $2.9 million in notes to investors to date. As more companies like Cadence provide structure, liquidity and indirect exposure to alternative asset classes like crypto, we expect to see even greater demand from investors seeking attractive risk adjusted returns.

Opportunities for Institutional Investors

There’s no doubt cryptocurrency has changed the way we think about asset-based lending. It has formed a new asset class and also has catalyzed the trend of broader tokenization — a trend that will inevitably expand the universe of collateral options and have a meaningful impact on the ABL industry. If you’re a decision maker at an institution and are interested in learning more, email [email protected] to discuss opportunities to build and preserve wealth in this rapidly evolving industry.

A CBDC Crash Course: Can sovereign-focused digital currencies become a monetary reality?

By Rob Odell

Article originally published on ValueWalk

China’s central banking system officially launched large-scale testing of what could be the world’s first digital sovereign currency. The People’s Bank of China, the nation’s central bank, is working with main banks in major cities, with a focus on digitizing the renminbi. During this trial, users register their mobile phone numbers for access to digital wallets. Through that access, they can use digital currency, issued by the central bank, to withdraw and transfer money, and to pay bills.

If this test is successful, it means that China could be one of the first countries to develop and maintain central banking digital currency, or CBDC. But China’s move toward CBDC doesn’t necessarily mean that other countries’ central banking systems will, or can, automatically follow. Moving an economy from bills and coins — whether physical or virtual — to 100% digitization isn’t something a country just does. Furthermore, there is the question of whether central banks can — or should — work directly with consumers and businesses, in direct competition with commercial and investment banks.

As such, the CBDC reality is a few years away.

Defining Digital Currency And Central Banks

Mention the words “digital currency” and the first thought that might come to mind is Bitcoin.

Certainly, Bitcoin, Ether, Litecoin, and other cryptocurrencies are digitized value exchanges, which can be used to buy goods and services. But cryptocurrencies and central banking digital currencies are two very different sides of the digital coin. While cryptocurrencies are privately developed and distributed, CBDCs are government-backed sovereign currency systems, complete with appropriate denominations. In other words, think digitized fiat currency, overseen by the central banks.

Much like cryptocurrencies, however, CBDCs are recorded on digital ledgers, which keep track of ownership and transactions by users with ledger accounts. But unlike cryptocurrencies, these ledgers would be overseen by central banks, which would also issue the currencies and process transactions.

Speaking of central banks, these institutions have big-picture monetary goals for the nations in which they operate. The above-mentioned People’s Bank of China, as well as the U.S. Federal Reserve, Bank of England, Deutsche Bundesbank, and others are responsible for national monetary policies. They also deal with the nation’s commercial and investment banks, as lenders of last resort. They aren’t in business to work with consumers or businesses.

Just because central banking systems don’t work on the commercial level, it doesn’t mean they haven’t. In writing for the National Bureau of Economic Research (NBER), economists Michael Bordo and Andrew Levin pointed out that central banks’ histories are filled with examples of interactions with consumers and businesses, and “often, these activities were considered more important for the central banks than the conduct of monetary policy, both in terms of daily operations and the priorities of top management.”

For example, the Bank of England conducted general business and consumer banking activities during the 17th and 18th centuries. And, in the United States, a highly successful post office savings bank system operated from 1911 through 1967, using the post office network to offer government-backed deposit accounts and other financial services. In many cases, postal banking performed central banking functions — such as funding two world wars — before the Federal Reserve stepped in to determine national monetary policy.

Digital Sovereign Currency Structure: The Theory…

Researchers and scholars have been pondering the idea of centralized digital currencies for a few years. The most recent study along these lines was released in June 2020 by the Federal Reserve of Philadelphia, and entitled “Central Banking Digital Currency: Central Banking for All?” Led by University of Pennsylvania economist, Jesús Fernández-Villaverde, the authors explored whether a central bank, such as the U.S. Federal Reserve, could successfully implement a 100% digital sovereign currency structure, which could realistically compete with commercial financial institutions without too much disruption.

The authors determined that, in theory, and absent any kind of financial panic, a digital conduit between central banks and consumers might be effective in optimizing fund allocations. Furthermore, a direct-to-consumer sovereign digital currency could help streamline and potentially eliminate current time-consuming and costly payment systems.

Bardon and Levin also suggest that central banking systems could offer digital currencies to the general public through specially designated accounts, opened in partnership with commercial banks. The banks could keep corresponding amounts of commercial funds in segregated reserve accounts at the central banks. Furthermore, setting up a CBDC infrastructure would be a straightforward process. Thanks to the internet, brick-and-mortar branches wouldn’t be necessary.

So, in theory, a CBDC is workable.

Now, The Reality…

China is pushing ahead to set up the first bona fide, workable CBDC. Meanwhile, other central banking systems, including the Bank of England, Bank of Japan and the Swiss National Bank, are working with the Bank for International Settlements (BIS) on additional CBDC research.

But the BIS cautions that jumping on the CBDC bandwagon right now will mean bumps in the road, mostly in the forms of security, convenience and accessibility. The current coins-and-bills banking system has sophisticated infrastructures in place to handle peak demands for money, and can support potential bank runs. Then, there are the questions about privacy and potential data breaches. Take for example, a situation in which the Federal Reserve issues $1 million to an individual’s stablecoin address. That individual then spends $100 from the same address at an online retailer.

Right now, with the way most blockchain technology functions, that retailer can look at that stablecoin address and see without question that there is nearly $1 million in the account. Cryptocurrency proves that while blockchain technology is great for anonymity, it is far from private. We must find a way to bring the same level of privacy to CBDCs as we currently experience with traditional banking, so that it is both private and public in all of the right ways. Until then, CBDC will likely remain more of a futuristic vision than become a reality.

And, from a larger-picture perspective, Fernández-Villaverde and his colleagues caution that the move to CBDCs could give central banking systems monopoly power, siphoning business away from commercial banks. Commercial and investment banks are set up to support maturity transformation — in other words, using consumer and business deposits for longer-term loans, such as mortgages. Central banks don’t have the capacity to do this; such a lack could be dangerous to economic policies.

Keeping It Cash … For Now

Though the Chinese central bank is experimenting with sovereign-backed digital currency and centralized ledgers, the CBDC concept isn’t close to implementation. Even China is phasing in CBDC very slowly. Coins and bills will be with us for a while longer, at least until security, accessibility and privacy issues — not to mention potential monopolization scenarios — can be worked out.

Still, the increasing use of cryptocurrency continues to prove that digital mediums of exchange are workable. As the People’s Bank of China continues working with sovereign-backed digital exchanges, other central banks will likely examine their own regulatory, legal and technical risks to determine the feasibility of CBDCs.

The Role of Federal Reserve: What It Can and Can’t Do

From business closures to event cancellations and stay-at-home orders, the coronavirus pandemic has had its way with the United States. Millions are unemployed, and millions of small businesses struggle to stay afloat in the punishing economic downturn.

The Federal Reserve, or “the Fed,” has been making headlines as it tries to limit the pandemic’s economic damage, including by lending $2.3 trillion that the government called for in its relief package, dubbed the CARES Act. This action has left many Americans wondering where the Fed got so much money, what the Federal Reserve can and can’t do, and what power the Fed has over our nation’s economy.

What Is the Federal Reserve, anyway?

It’s essential to define what the Fed is to understand its role in our economy. The Federal Reserve is America’s central banking system. Before the Federal Reserve, people panicked their bank would fail when a neighboring one closed its doors. Hordes of customers would run to withdraw their money, ultimately causing those banks to go belly up, too.

After a particularly terrible panic in 1907, Congress stepped in to create the Federal Reserve in 1913 through the Federal Reserve Act. The initial goal was to avoid these bank runs and provide banks with emergency funding. But today, the Federal Reserve System takes other measures to ensure the health and stability of the economy and a secure banking system.

How does the federal reserve work?

The Federal Reserve Act created a decentralized bank that functions without government financing or approval but still protects both public and private interests as a mixed organization.

It has three key entities:

1. Board of Governors

At the heart of the Fed is the Board of Governors, made up of seven officials appointed by the government and confirmed by the Senate. It acts as an independent federal agency, and its job is to direct the monetary policy — the money supply and interest rates. Its goal is to make sure we maintain a stable economy.

2. Reserve Banks

There are 12 Federal Reserve Banks spread throughout the U.S., each one having nine directors. Six directors are elected by commercial banks and three by the Board of Governors, protecting interests from both parties.

Reserve Banks are structured similarly to private corporations. They oversee member banks and carry out the monetary policy in their region. Reserve Banks act independently, but the Board of Governors supervises their actions.

These banks also have other vital roles like distributing currency to other banks, placing money into circulation, acting as a bank and fiscal agent for the U.S. government, and providing critical information about their local, national, and international economies to the Federal Open Market Committee.

3. Federal Open Market Committee (FOMC):

The FOMC is a committee comprising the Board of Governors, the Federal Reserve Bank of New York President, and four members from the other 11 Reserve Banks, who serve for one-year terms.

The FOMC’s primary role is to determine whether the Federal Reserve should buy or sell government bonds, known as Open Market Operations (OMO), to maintain the economy’s stability. It also establishes a target federal funds rate, which is the interest rate banks charge one another for overnight loans.

Where does the Federal Reserve fit into the government?

The role of the Federal Reserve within the government can seem confusing since it has public and private aspects. The Fed is accountable both to Congress and the public and maintains transparency in all its operations.

Ultimately, the Fed is a product of the government because it was created by an act of Congress, which still oversees the whole system and can amend the Federal Reserve Act at any time.

But Congress created the Fed to work autonomously and to be shielded from political pressures by using a privatized structure for the Reserve Banks. It also keeps a hands-off approach by letting the three entities carry out their core responsibilities independently of the federal government.

Can anyone override Federal Reserve decisions?

There isn’t a formal legal power that can supersede the Fed’s monetary policy decisions. Still, the Federal Reserve Act allows the Treasury to “supervise and control” the Fed where jurisdictions overlap.

But the Treasury hasn’t needed to do this because a system of checks and balances keeps the Fed’s operations transparent and answerable to the public and Congress. Just because the Fed can influence the economy, doesn’t mean it doesn’t have to follow the rules.

Independent public accounting firms audit Reserve Banks annually. The Board of Governors also gets audited by its Office of Inspector General and an outside auditor. The Board of Governors annually publishes the results on its website.

The House of Representatives and the Senate hold the Fed accountable by requiring it to report twice a year on its monetary policy and economic decisions. Fed officials also deliver speeches throughout the year to the public so that everyone understands the reasoning for its decisions and actions.

Does the Federal Reserve print money?

If you’re a Bitcoiner, or you spend a decent amount of time on Twitter, you’ve most likely seen the “money printer go brrrr” meme that went viral in March of this year. It cropped up in response to the Fed’s announcement on March 12, 2020, that it would offer $1.5 trillion in short-term loans to banks to help combat “unusual disruptions” in financial markets as a result of the coronavirus. The meme, while more of a social commentary than an accurate depiction of the Fed’s responsibilities, expresses frustration regarding the government’s role in inflation and the devaluation of the US Dollar — as evidenced by the meme’s numerous likes and shares, many Americans share this same sense of frustration. While the meme is accurate in many ways, it unintentionally brings to light the common misconception that the Fed prints money. In reality, printing money is the responsibility of the U.S. Treasury. The Bureau of Engraving and Printing prints paper currency, while the U.S. Mint makes coins. The Treasury oversees both offices.

While it doesn’t print money in the literal sense, the Fed does buy cash as needed from the Bureau at cost to put into circulation, but the monetary base in circulation and at central banks typically stays the same.

The Fed manages the money supply by creating and destroying money. It swaps old, ragged bills for fresh ones or adds and deducts from digital balances. But it also manipulates the amount of money in circulation. The FOMC decides on whether to add or remove cash from the economy by buying or selling government bonds and other securities. This influences the amount banks will lend out and keep on deposit, which then affects interest rates.

That being said, where the misconception holds some truth is in the way the Fed puts more money into circulation; the Fed can’t print money, but it does have the power to essentially create money out of thin air. As a banker’s bank, it does so by making “large asset purchases on the open market and adding newly created electronic dollars to the reserves of banks.” In exchange, the Fed receives large amounts of bonds including US Treasury securities, mortgage‐​backed securities, corporate debt and other assets. Rather than paying for these bonds in cash or gold bars, the Fed instead credits the account of the bank selling the bonds so that digital money moves from one place into the other.

The process is like taking out a personal loan of $10,000 at the bank. The bank doesn’t give you a suitcase full of cash. What you get is a credit that shows up as some numbers on a screen, reflecting your new account balance.

Because the Fed operates digitally, it can create money with a few keystrokes and use it to purchase assets or lend money. On a televised interview with “60 Minutes,” Former Fed Chairman Ben Bernanke said, “To lend to a bank, we simply use the computer to mark up the size of the account they have with the Fed. So it’s much more akin, although not exactly the same . . . to printing money, than it is to borrowing.”

The Fed did this when it promised to lend Americans $2.3 trillion, as called for in the CARES Act for economic relief and stability across the nation for those who were struggling because of the pandemic.

What can the Federal Reserve do or not do?

If the Fed can make money but not print it, what other actions is it able to take or is prohibited from taking?

What can the Federal Reserve do?

The Fed is an emergency lender for banks in financial distress, so it can lend money to failing banks to keep them afloat. But the Fed’s core responsibility is to manage the money supply, which has far-reaching effects on regulating the financial market.

It’s permitted to use four main tricks to change the amount of money in the economy:

1. Changing the reserve requirement

The Fed dictates what percent of deposits banks have to keep on hold. It usually ranges from zero to 10 percent and is currently set at zero because of COVID-19. The more banks have to keep on reserve, the less there is to go out into the market.

2. Changing interest rates on reserves

The Fed pays commercial banks interest rates on their required and excess reserves, a rule that went into effect in 2008. When the Federal Reserve wants to speed up the economy, it lowers the interest rate so that banks have less of an incentive to hold on to money.

3. Changing the discount rate

The Fed encourages and discourages banks from borrowing money from it by raising or lowering its lending interest rates. When the discount rate is low, banks borrow more to lend to each other and the public.

4. Conducting open market operations

The FOMC decides how many bonds to buy or sell. When it wants more money in the market, it buys these bonds from banks to put more money into their account. When it wants to slow down the economy, it sells the bonds to take away bank money.

This is the Fed’s most common tactic to influence the economy. For example, from 2008 to 2009, it bought over a trillion dollars of government bonds to inject money into the stumbling financial market. This lowered interest rates on short-term loans to almost zero percent.

But the recession went too deep. So, the Fed did something it hadn’t done before. It started buying long-term assets from banks in a process that’s known as quantitative easing (QE), boosting the money supply further and stimulating lending and investment.

What can’t the Federal Reserve do?

The Fed can only indirectly influence the nation’s economy. This means it does not have the power to take any of the following actions:

Set the federal funds rate

The federal funds rate is the amount of interest banks charge to lend their excess cash reserves overnight to each other. Banks frequently do this to meet the Fed’s reserve requirement.

While the Fed can’t set this number directly, the FOMC sets a target federal funds rate depending on what direction it wants the economy to go. Then, it works within what it’s permitted to do to influence banks and reach the benchmark rate.

Set the prime rate

Banks use the prime interest rate for commercial and consumer borrowing for things like credit cards and personal, car, and home equity loans. Banks often set the prime rate based on the Fed’s target federal funds rate.

Hike up mortgage and student loan rates

Mortgages and student loans are long-term assets whose rates are determined more by market-driven factors than FOMC decisions.

That said, the Fed purchased mortgage-backed securities to lower long-term rates on mortgages in 2008 so that banks wouldn’t need to borrow from each other to meet the reserve requirement. But these actions still affect federal funds rates significantly more than mortgage and student loan interest rates.

Use taxpayer money to fund its operations

The Fed doesn’t get any funding from taxpayers because its money comes from interest accruals on government securities and treasuries purchased through its OMO. There are other sources, too, such as foreign currency investments. After paying its expenses, the Fed turns any extra money over to the U.S. Treasury because it’s not operated for profit.

What’s the potential impact of the Federal Reserve’s powers on the economy?

Although the Fed can only work behind the scenes to stabilize the economy, it exerts a massive influence on its operations.

For example, the Fed can speed up or ease the economy by manipulating the money supply to increase or decrease consumer spending. It starts by influencing bank lending rates through selling and buying government bonds.

When banks have more excess reserves, there’s more to lend to the public, so interest rates are lower. Lower interest rates encourage people to borrow money, which is then spent on goods and services. More consumer spending generally means a better economy, while “even a small downturn in consumer spending damages the economy” and can even lead to a recession. Below is how the Fed’s actions impact specific aspects of the economy.

Interest rates

The Fed uses a trickle-down effect to influence interest rates. Remember, they can’t set federal funds or prime interest rates, but they can bend them to their will through OMO.

The Fed buying back government bonds from banks leaves more money for banks to play with while selling them means banks have to be more cautious about lending out their reserves. The economics of supply and demand shows excess cash in the market will drive down the interest rates banks charge to each other and the public, while a lack of money has the opposite effect.

The Fed also raises or lowers the discount rate and reserve requirements to change the interest rates commercial banks ultimately offer customers.

Inflation and deflation

When federal funds rates drop because of the Fed’s actions, prime rates usually drop with them. Consumers then borrow money for business and personal purposes to take advantage of lower interest rates. With greater amounts of money in their pockets, people spend more on goods and services, creating a spike in demand.

The larger demand pushes wages and costs higher to meet the production necessary to keep up with supply, causing a ripple effect. Prices increase across sectors, leading to reduced purchasing power. This is inflation and explains why a dollar today is worth less than a dollar last year.

Some annual inflation is good. It’s a sign the economy is doing well because consumers are spending. The Fed has a target core inflation rate of two percent. When inflation goes above or below the benchmark amount, the Fed steps in and works within its limits to move the needle toward inflation or deflation.

International relations

Although directing the U.S. monetary policy for the nation’s economic benefit is a crucial part of the Fed’s job, it also has foreign concerns.

Financial crises within our borders often have a global impact. The 2008 recession strained international markets because many countries have at least some assets and liabilities dominated by the dollar, causing them to sometimes borrow and lend in dollars.

To address the dollar scarcity, the Fed started swapping currencies with foreign economies in dire need of U.S. currency — over 583 billion dollars’ worth — at a predictable and fixed rate to keep struggling foreign banks afloat and prevent their economies from plummeting.

Sometimes the Fed also works with foreign central banks to set new banking regulations, as it did after the Great Recession.

Private bonds

As the pandemic continues to threaten the nation’s physical and financial health, the Fed is getting creative with its strategies, as it did in 2008 when it began buying long-term assets from banks.

Historically, the Fed has only purchased government securities. This time it’s buying 250 billion dollars’ worth of corporate bonds through exchange-traded funds (ETFs) to keep business up and running and workers employed. While this is good news in the short term, the long-term effects of this unprecedented move on the economy are uncertain.

The Federal Reserve: A system of the People, by the People, and for the People?

The Federal Reserve’s power and influence over our economy leaves many asking if it’s an unconstitutional entity. Though Congress takes a laissez-faire approach to the Federal Reserve, the system teeters between public and private domains.

The effect of its present monetary policy decisions on the future economy could determine which direction future reform sways. It could also decide if the century-old institution modernizes into a structure more accurately reflecting the concerns and voice of the people, and one maintaining greater transparency while ensuring the long-term economic stability of the nation.

July Update from SALT

In case you’re not a subscriber to our newsletter, we want to share some of our favorite highlights from July right here on our blog to help keep you up to date on all things SALT.

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How Financial Firms Navigate the Markets to Grow in Any Climate

SALT was featured on Adroll’s blog alongside Catch Benefits and Hippo Insurance. Learn how we’re navigating the markets and changing the way people interact with money in the full blog post here.

Read Adroll’s full blog post here


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ICYMI: SALT Announces Justin English as Chief Executive Officer

In case you missed it, we recently announced that Justin English has been named chief executive officer at Salt Blockchain Inc., parent company to SALT Lending. Co-presidents Rob Odell and Dustin Hull, who have been working together for the past six months to fill the CEO role and onboard English, will remain co-presidents and will continue to support SALT in their respective roles as chief product officer and chief financial officer.

Read the full announcement here.


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Creative Wealth Preservation with Blockchain Center

Our CPO Rob Odell joined Blockchain Center’s VR Crypto Mondays to talk with their CEO about crypto lending and creative ways to preserve your wealth.

Watch their full discussion here.


We Want to Hear From You

Share your feedback with us by rating our content and/or leaving a comment on our “What’s New” feature.

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Black Lives Matter

As operations at SALT carry on, it is not lost on us, as a company nor as individuals, that Black Americans continue to fight for racial justice. We are committed to hearing, learning from, and supporting our Black customers & communities in this fight for a more inclusive world.

Want to stay up-to-date on all things SALT? Signup for our monthly newsletter herehttps://cdn.forms-content.sg-form.com/76a45090-a050-11ea-8926-5efcf9d8f941

Questions about our products and offerings? Contact [email protected]

SALT Announces Justin English as Chief Executive Officer

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We’re excited to announce that Justin English has been named chief executive officer at Salt Blockchain Inc., parent company to SALT Lending. Co-presidents Rob Odell and Dustin Hull, who have been working together for the past six months to fill the CEO role and onboard English, will remain co-presidents and will continue to support SALT in their respective roles as chief product officer and chief financial officer.

English brings more than 15 years of senior management and board experience across the private equity, early-stage venture capital, consumer products, supply chain, manufacturing, distribution, and consumer services industries. Having founded three companies, he has extensive entrepreneurial experience with a specific focus on capital raising, financial modeling, and developing go-to-market strategies.

In addition to these areas of expertise, English currently serves as co-managing partner of First Catalyst Ventures, a US-based alternative investment firm focusing on early stage B2B technology companies. He also brings several years of board member experience to his new role, having previously served on several non-profit boards and on the board of SALT. Currently, he serves on the board of a non-profit private school as well as on the board of Elite Mining Inc., a crypto mining operation focused on clean energy and green mining.

Appointed to SALT’s board of directors in October 2019, English immediately did a deep dive of SALT’s talent, partnerships, brand, product offerings, and everything in between to determine the company’s potential. He began thinking about the ways in which it could grow and scale, and in doing so, played a significant advisory role in guiding SALT’s executive team in its decisions throughout his time on the Board. “It became evident that Justin was a natural fit for the CEO role,” said Joe Perry, chairman of SALT’s Board of Directors. “He has a strategic mindset and a proven ability to identify, understand, and execute on the necessary actions that will lead SALT to success.”

English has been a serial entrepreneur throughout his entire career and has extensive experience working with start-ups. This experience was a major factor in his decision to accept the role as chief executive officer. “I’m excited to take on this challenge for a couple of reasons, the first being that SALT is a start-up and start-ups are what I know,” said Justin English, chief executive officer, SALT.

“Second, SALT is well-positioned to challenge the conventional ways of thinking about finance — that’s something I’m really passionate about because so many of us go through life making decisions that have been historically viewed as correct, when in reality there’s so much more we can be doing to build and preserve our own wealth. With that in mind, I want to take this opportunity to build something that not only helps our customers lead better financial lives, but that gives our team a sense of purpose regarding the work they’re doing each day.”

With the addition of English as chief executive officer, SALT’s executive team now consists of six members: Dustin Hull as chief financial officer; Rob Odell as chief product officer; Dirk Anderson as chief technology officer; Alex Fader as chief legal officer; and Debra Johnston as chief people officer.

Want to stay up-to-date on all things SALT? Signup for our monthly newsletter herehttps://cdn.forms-content.sg-form.com/76a45090-a050-11ea-8926-5efcf9d8f941

Questions about our products and offerings? Contact [email protected]

June Update from SALT

In case you’re not a subscriber to our newsletter, we want to share some of our favorite highlights from June right here on our blog to help keep you up to date on all things SALT. Image for post

New Platform Feature

We’ve recently updated our platform to include a new feature that allows users to view all of their accounts in one place. If you have multiple accounts with SALT, you will be able to see this new feature after logging in and can navigate back to this display via the drop-down menu in the top left-hand corner. Please reach out to [email protected] with any questions.

Login to your account here


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How to Protect Yourself from Phishing and SIM Attacks

Did you know phishing & SIM swapping are two of the most common cyberattacks targeting crypto holders? Our blog post explains how you can protect against both types of attacks.

Read the full blog post here


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We Want to Hear From You!

We have recently added an option to our “What’s New” feature that lets you share your feedback on our content. You can share your thoughts by rating our content and/or leaving a comment.

Share your feedback here


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SALT, Wherever You Go

Monitor your loan-to-value ratio and loan collateral details on the go with the SALT mobile app.

Download on Google Play or the App Store


Black Lives Matter

At SALT, it is not lost on us, as a company nor as individuals, that Black Americans continue to fight for racial justice and many of the day-to-day freedoms a lot of us take for granted. We are committed to hearing, learning from, and supporting our Black customers & communities in this fight for a more inclusive world.

Want to stay up-to-date on all things SALT? Signup for our monthly newsletter herehttps://cdn.forms-content.sg-form.com/76a45090-a050-11ea-8926-5efcf9d8f941

Questions about our products and offerings? Contact [email protected]