Gives you 5-18% interest on your Crypto, is it safe?
credit card Gives you 5-18% interest on your Crypto, is it safe?

By KnewMoney | knewmoney | 11 Jul 2020

I see a lot of posts across the cyptocurrency space in line with: “Is (CDC) safe?” “Is it legit?” “How are their rates so high?” My goal is to provide a list of readings and points that helped me come to my conclusions. Here we go:

Some Positives:

Finances: CDC has the largest insurance policy in the crypto space: this is underwritten by Lloyds in the UK

They have multiple partnerships with banks across the world: metropolitan bank in the U.S., Wirecard (unfortunately) in Europe. In every jurisdiction they have a debit card, they have a local partnership with a bank.

So they have multiple partnerships with multiple banks to co-host a bank account with them. Do you think Metropolitan Bank would risk their company cosigning onto CDC without assurances? Do you think Lloyds would front a policy to CDC without any due diligence? You don't get these things without opening your books and proving that you are legit. This provides some level of reassurance that their finances are in order.

Security: They constantly focus on being security first which I deeply appreciate in this space. They have multiple certifications as a company, some that no other crypto exchanges have. A list of their certifications: ISO27001:2013, ISO/IEC 27701:2019, PCI:DSS 3.2.1, Level 1 compliance and CCSS. They have best practices around the use of cold storage partnering with Ledger. Your Fiat account is held by the partner bank (FDIC insured up to $250,000 in the US) again they couldn't have an account with a bank, especially an FDIC account, without transparency. Read more here

They have active bounties going on Hacker One, and have paid multiple people to find holes in their system, this shows a proactive approach to hacks and a commitment to security:

They also give you the option of holding your own keys in a separate wallet that they have no control over, which is an amazing sign from an exchange.

The Company: There team has many experienced and legitimate members (check their twitters, histories and linkedins) Some of the core members all worked together at Kris' (CEO) previous company. Kris Marszalek is the CEO and you can find many podcasts and AMA videos of him, he comes off as knowledgable, focused on the larger vision of the company, and a competent leader. To back this up he has successfully exited 2 companies that he took from 0 to 100 million in revenue.



They haven't released a lot of numbers (as far as revenue and sustainability) but Blockfi offers similar interest rates and had 650+ million dollars in assets under management and 1 million dollars a month of revenue which was seeing a doubling month over month around December 2019 (we know this because Blockfi opened up a round of outside funding). If Blockfi is pulling those number with JUST loans, CDC is presumably doing just fine with loans, debit cards (Blockfi is working to add a credit card to their platform), and exchange (also something Blockfi is trying to add).

CDC is big and growing from March 23 2020 Kris stated:

"So if I look at December numbers and February numbers, we had like 2.5x growth. If you look at March its going to be probably 3 or 3.5x in terms of volume growth, transactions coming to the platform."

He also had the answer to this question:

Is the monthly growth rate still around 20% - for App users?

Kris: So it varies month to month, but it's still in double digits. And then some KPIs are much more than that and for users specifically, it's still in double digits. So we're very happy with the growth rate because we announced 1 million users in September last year. So it's been a massive growth since then, probably announcing the next milestone, either 3 million or 5 million. We'll see how it goes. But so the platform is going very nicely. We're very happy with how the business is performing, especially in Q1 and every month is a record month for us."

Lastly they have grown their customer and employee base:

They now have over 350 employees and 2 million customers:

Some Concerns:

It’s not clear what happened at Kris’ past companies he left both, one (Yiyi Hong Kong) you can’t find much info on and the other (Ensago) had a tumultuous end with possible financial mismanagement. His company Beecrazy got acquired by Ensago which made him COO, then Ensago merged with iBuy and he was made CEO (the business idea was to be a Groupon clone). Kris was CEO at that point as it went down the drain, he left before it completely crumbled. Although Groupon clones weren’t a great business model and I’m not surprised it crumbled, there are financial questions around it that will likely never be answered (How much was financial mismanagement, how much was deal sites being a dying business model?). Either way, if he left CDC, you should worry. Though I believe he has found his billion dollar idea (rather than his smaller former companies) and this is his long term play. I also truly believe Groupon clones were doomed to fail, see Groupon themselves, I don’t think there was anything anyone could do to save Ensago. yiyi link and Ensago crumbling

The numbers are not completely transparent, Kris has said this year could be profitable if they wanted, but they will spend more on R&D and expansion so it may not turn a profit (which is fine, and arguably the right move). It would be nice if they gave concrete and transparent user and financial data instead of just having to take Kris' word for it. This isn't required and it's not like Coinbase or Gemini do this, (that's a really important point) but it would be nice.

They are located in Hong Kong, this is subjective but being located in the EU or US could be seen subjectively as better, especially with the unrest in Hong Kong currently.

They are making their own blockchain with CRO, this is a large project that takes time and energy away from being a bank. That being said it enhances the features of them being MORE THAN a bank and could pay off big (it's a big bet and possibly an unnecessary risk, depending on your viewpoint).

I haven't seen any investors in the company, it is always nice to see a venture fund or big name cosign and fund a company (that means they've seen the books and trust the leaders), though this could also be seen as a positive, showing they don't need outside capital...

Their tokenomics are not transparent, see: I would like to know why tokens are moving like this and have more transparency of what they are doing with both CRO and MCO.

The MCO "moon stopover" is not clear YET, they say it will add value to MCO through the White Label program but we will have to wait and see (if it is lackluster MCO may not be as good of an investment as we thought). I have faith this one will be remedied soon.

My Conclusion: All in all they have a lot of ducks in row and seem very legitimate. You can't get much safer with a company other than it going public or having some big backers and being based in a country with more regulations. If they were to take funding we would know other people we can trust have vetted their books (that is somewhat subjective though). NO MATTER WHAT, not your keys, not your crypto. If you put money with CDC you are taking on a risk to get a reward. That reward for me is two things:

  1. Great interest rates and a great all encompassing product with the debit card, exchange, earn, loans etc. (A true "crypto bank")

  2. Supporting the future of what I hope crypto is. I hope crypto destroys traditional banking and makes it more democratized. The only reason 8-18% interest sounds ridiculous is because mainstream financial titans have made it sound ridiculous, pushing 0.25% savings accounts as "savings accounts," when you aren't saving anything because of inflation. They then pay workers (mostly management) millions and put billions into stock buybacks, dividends, the company itself, etc. Traditional finance could give customers much better deals and rates, they just want more profit for themselves and don't have competition (this is a big point for me, companies like Blockfi, Cred, Nexo, and CDC are leveling how profitable finance "should" be, to benefit and onboard customers to the future of crypto). You can argue how much is to spread the profits and how much is just to onboard new customers. They may slash rates once they hit mass adoption...we will see. As of now they are a bank that is spreading profits to customers rather than just themselves and investors.

My Choice: With all that being said I am 25% CDC, 25% Blockfi, 25% cold storage, 25% spread over other exchanges (binance, coinbase, gemini, uphold, etc.) though that is flexible and more of it will be on cold storage depending on the week, with up to 50% and even 75% being in cold storage at times. I would also move some of what is in Blockfi to Cred or Celsius if they were allowed where I am and may move some to Nexo. I wouldn't and you shouldn't put all your money into CDC or any single source (I would argue even keeping everything on just a cold wallet is ill advised - just in case you lose your keys or do something stupid) unless you are willing to chance losing it all (there is always a chance). That being said, the way this company is set up, that chance is about as small as it can be with the current structure of the crypto market. I am very comfortable putting part of my portfolio with them.


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