Crypto lending is nothing without transparency

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The collapse of centralized and decentralized crypto lending projects alike during 2022 had a profound impact on the market. Terra alone evaporated over $60 billion in wealth from DeFi. Centralized bankruptcies like FTX, BlockFi, Celsius, Genesis and many, many others lost a similar, if not higher, combined amount. But the sudden collapse of these companies was not just due to a particular market event — it was a symptom of larger structural issues for the lending industry. 

The crisis exposed some stark realities about the unstable foundations that the digital asset lending industry had been built upon: an industry-wide lack of transparency, a complete absence of internal risk management controls and ring fencing, and poor underwriting standards.

But people still need lending and borrowing services for bitcoin, stablecoins and digital assets — particularly in the developing world, where I was born and raised. 

As battle tested players continue to rebuild the industry, we will also see new faces that are lured by the opportunity to “fill the void” left by the bankrupt players. We’ve already seen Coinbase, Kraken and Bitstamp launch their own crypto lending solutions, adding legitimacy to the market and highlighting the size of the opportunity.

As new players enter the lending game, they must operate with extreme transparency, prudency, and care. If user collateral is going to be rehypothecated and lent out elsewhere, it’s important they are transparent and upfront with their yield generation strategy. Users need to be able to see exactly how and where their funds are being put to use. 

Arrive out of necessity, remain out of convenience

My perspective on this lending crisis, as everything else in my life, is heavily influenced from having observed the economic collapse in Venezuela.

Chaos thrust upon us by hyperinflation pushed us toward an unexpected lifeline: Bitcoin. My family and friends, along with millions of other Venezuelans, found it out of necessity — when there were no dollars to go around and nothing else to exchange for your burning Bolivares. However, once Venezuelans realized what bitcoin was and what it could do, they didn’t want to sell it. And if they did, they would come back to it when they could — because it just worked better.

It was a practical, survival-driven use of cryptocurrency. When I saw what Bitcoin was doing for people back home and what it could do for others, I realized that the way we interacted with these assets needed to evolve.

Simply holding digital assets isn’t enough for everyone. People need solutions that allow them to use their digital assets as collateral, or earn interest — for this, they need to be able to trust a platform. 

How do we design our systems to be as transparent as the cryptocurrencies they’re handling? Last year’s shocks showed that we need a new approach, one that builds real trust and stability without losing the innovative core that makes bitcoin and digital assets special.

Clarity in service terms and risk exposure isn’t just valuable — it’s non-negotiable

Several prominent cryptocurrency lenders have started implementing proof-of-reserves (PoR) protocols, following the footsteps of some of the larger, world-class exchanges that came before them — a big step toward increasing transparency and integrity in the sector. Trust and accountability are greatly needed, and PoR — a procedure that enables businesses to demonstrate that they have enough assets to cover liabilities (i.e. customer deposits) — introduces both.

Through PoR, companies can openly confirm an important aspect of their integrity and financial health. Importantly, this is done through third-party attestations and using cryptographic proofs, sharing results with stakeholders to build trust. Clients need assurances that lenders are genuinely standing on solid financial footing.

More than just a practicality, the idea of using bitcoin and other cryptocurrencies as collateral is an essential service that can open up financial opportunities for millions of people. But the stability of this lending model isn’t inherent; it depends on fundamental ideas of risk management and transparency. 

Read more from our opinion section: Washington shouldn’t give in to crypto panic

The key concept here is this: Cryptocurrency lending platforms that do not clearly disclose risks, and fully reveal their lending and risk management policy — including Proof of Reserves standards — could be endangering the financial security of their clients.

One notable example of the consequences when risk management fails is what happened with Celsius. After filing for Chapter 11 protection, Celsius proposed a bankruptcy plan that would return some crypto deposits to retail customers — with most customers projected to receive a ~67% recovery through various means — including equity shares in a new entity.

This is what happens when you don’t uphold stringent risk management protocols.

In unstable economies, the risk is even more pronounced. For individuals using digital asset  lending services to weather economic storms, clarity in service terms and risk exposure isn’t just valuable. It’s non-negotiable. They deserve straightforward processes that allow them to access their digital asset wealth without navigating a minefield of hidden clauses and undisclosed risks.

We’re creating a space everyone can trust

Transparency is key. It can’t be an afterthought; it has to be part of how platforms do business every day. Companies must be honest, showing users the whole picture, including the risks involved. This full-on transparency is crucial for everything, especially when it comes to offering bitcoin or digital asset loans. It’s about ensuring user assets stay safe, even when markets get rocky.

But being transparent isn’t a catch-all solution; people need to understand what’s going on. That means educating users and giving them the info they need to make smart decisions, not just throwing financial terms and numbers at them.

And solid risk management can’t just be something a few platforms do; it has to be standard everywhere. Instead of just reacting when things go wrong, there needs to be a focus on preventing problems before they start. That means keeping a close eye on funds, stress testing different scenarios and knowing how to contain bad situations if and when they happen.

We’re in a pivotal moment, and creating a successful path requires doing the work that builds back trust with users.

By focusing on clear communication, education and solid risk management, we’re setting up for more than just quick fixes; we’re creating a space everyone can trust.

Mauricio is the co-founder of Ledn, a digital currency lending company that prioritizes transparency and client control through new, innovative products such as DCNs, Growth Accounts, and Custodied loans. Ledn was the crypto industry’s first digital asset lending company to complete a Proof-of-Reserves.  Since its inception in 2018, Ledn has originated over $635M (USD) retail loans and over $4B in institutional loans.
Mauricio experienced the impacts of hyperinflation in Venezuela and saw how quickly money can lose all its value. In hopes that he could provide for his family in the future, he escaped the economic catastrophe through Bitcoin and went on to earn his MBA at Western University in Canada.
Views are my own. The author is a co-founder of 21 Technologies Inc. (Ledn). Read Ledn’s disclaimers at and risk disclosure statement at

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Crypto lending is nothing without transparency is written by Mauricio Di Bartolomeo for

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