Salt Lending temporarily suspended withdrawals in November 2022 but is set to resume its operations in the first quarter of 2023 after securing a Series A recapitalization funding.
- To improve its balance sheet and replenish its capital reserves, Salt Lending disclosed that a $64.4 million fundraising round had been completed.
- To increase the size of its capital reserve, Salt intends to look for additional finance later in 2023.
Announcement
One of the first cryptocurrency lenders in the world, Salt Lending, declared on February 8 that it had finished a $64.4 million fundraising round that would improve its balance sheet and refill its capital reserves. Shares of the Company’s Preferred Stock will be distributed to Accredited Investors in exchange for their investment. The Series A recapitalization effort should enable the company to resume its operation in the first quarter, though regulatory authorities still need to approve it.
Salt Lending, a Denver-based company, imposed a “hold” — or a freeze — on withdrawals and deposits to its lending platform shortly after the FTX meltdown in mid-November. As with some other cryptocurrency businesses, Salt had used the Bahamas-based FTX as a source of liquidity for its lending activities.
The crypto experienced a “perfect winter storm” in 2022, which resulted in the loss of important industry players such as Terraform Labs, Voyager Digital, Celsius Network, Three Arrows Capital, FTX, and BlockFi. Although Salt was not immune to these market dynamics, Shawn Owen, founder and acting CEO of Salt, stated on February 8 that the company was “committed to emerging stronger than ever.”
Suspension of California License
Salt Lending never declared bankruptcy, but the withdrawal freeze it implemented in November caused a minor social media uproar. Along with losing its California lending license, the company also abandoned plans to sell itself to Bnk To The Future.
Although Owen said that:
“Salt is coordinating with the state’s regulators to reinstate the California license. It is still suspended. We are being as transparent as we can and educating them on every aspect of the specifics of the business strategy. But at this time, Owen cannot predict when or when the license will be reinstated. Because they exercise judgment, nothing can be guaranteed. But we’re making every effort to act professionally.”
Series B Funding Round in 2023
According to Owen, Salt intends to seek more fundraising later in 2023 to expand its capital reserve. This additional financing is expected to take the form of a Series B transaction in the $100 million range.
Apparent effects of FTX’s demise on Salt’s operations. According to Owen, we had accounts on FTX. The rapid fall of the exchange in the Bahamas astounded him. We believed that FTX was a platform that belonged to us up until 48 hours before [it fell] since it had strong liquidity and a user-friendly UI.
On the SALT platform, people and businesses can obtain fiat loans using Bitcoin and other cryptocurrencies as collateral; however, occasionally, borrowers choose to repay their loans and reclaim their collateral.
Owen claims that “the November withdrawal and deposit freeze “frightened our consumers.” As you can guess, some of them had already been put behind bars and had lost money in Celsius and BlockFi. As a result, they assumed that this was just another instance. Everything is falling apart.”
Strict Regulation
Naturally, many other people were shocked and in disbelief, and requests for additional regulation of the bitcoin business soon began to arise. Others think that because of all the crypto loan failures, there is now a gap in the market, and banks and other traditional financial institutions will fill it.
Counterparty Risk
Although the cryptocurrency industry is still out of the woods, Salt Lending’s interim CEO thinks a more thriving sector will ultimately emerge. To use a technical phrase, “antifragile,” describes Bitcoin and other cryptocurrencies, he said. It is accustomed to being attacked, and each time it survives, the attack is stronger than the last. “I believe that right now, there is no doubt that we will return stronger.”
