CLST Markets, an institutional-only lending and borrowing venue for stablecoins and crypto assets, has successfully facilitated an uncollateralized multi-million USDC stablecoin loan executed by Amber Group for the first time. The fixed-term transaction was executed in the form of the first electronic promissory note for a stablecoin issued on the Algorand Blockchain.
Swiss-based FinTech company CLST led the successful transaction between Amber Group and an undisclosed counterparty. The underlying asset, a USDC stablecoin issued on the Algorand Blockchain (commonly referred to USDCa), was settled Peer-to-Peer and is based on an electronic promissory note (eNote), a technology provided by FQX which is seamlessly integrated into CLST. The multi-million USDC stablecoin loan was borrowed by Amber Group at a Fixed Term and with a contract duration of less than a year.
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An eNote is an unconditional promise to pay a specific sum to another party at a specific future date and can be modularly structured to fit any financing purpose. The eNote is based on blockchain technology and can be easily transferred to any third party (i.e., an investor). When compared to other financing tools, eNotes excel through their modularity and global transferability, based on a standardized legal framework. Single eNotes™ are stored as NFTs on a blockchain. By issuing multiple eNotes, an issuer can obtain financing in a way comparable to commercial papers.
The uncollateralized transaction marks a significant milestone in institutional crypto asset lending by solving the problem of over-collateralization. Borrowers are routinely forced to pledge an amount of collateral that exceeds the value of the loan to mitigate the risk of cryptocurrency price fluctuations. This impediment is holding back the development of borrowing and lending in the crypto asset industry.
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Overcoming this obstacle, whilst keeping risk at manageable levels, will finally allow institutions to unlock the full potential of a maturing short-term debt market as TradFi and DeFi converge.
Counterparty risk is mitigated by the innovative use of electronic promissory notes, a tried and tested method of providing lenders with a globally enforceable legal provision in the event of loan defaults.
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