Crypto firm Alameda Research rules out banks from using DeFi for new funds

Alameda Research, one of the largest trading firms in the crypto market, bypasses banks to earn up to $1 billion

The computerized trading company, which specializes in buying and selling digital assets, is owned by one of the richest men in the crypto industry, Sam Bankman-Fried, the founder and CEO of the exchange FTX.

On Thursday, Alameda will leverage a pool of stablecoin funds deposited by five investors for a $25 million syndicated loan that will be made via blockchain infrastructure on the Maple Finance marketplace. This will be the first in a series of drawdowns expected to reach $1 billion over the course of a year, with the first lenders including digital asset managers CoinShares and Abra.

Stablecoins are cryptocurrencies pegged to other assets, typically the largest and most stable currencies in the world.

The Alameda deal prevents banks and other intermediaries from arranging the new financing. Instead, it will test the utility of decentralized finance, or “DeFi,” markets, which have exploded in size over the past 12 months.

“The flexibility that comes from a decentralized, on-chain lending platform like this helps Alameda adapt to [a fast-growing] landscape,” said Sam Trabucco, co-chief executive of Alameda.

The company uses stablecoins for its trading activities and hopes to get funding cheaper and faster by tapping directly from peers than from banks, Trabucco said.

DeFi markets have grown by 1,700 percent over the past year, with a total value of $247 billion. Trading volume on decentralized exchanges has seen similar growth, with more than $300 billion worth of transactions taking place each month.

But the rapid growth has also brought hacks and thefts. According to Tom Robinson, chief scientist and co-founder of Elliptic, investors have lost more than $10.5 billion to theft and fraud in DeFi markets this year. In 2020, these losses amounted to $1.5 billion.

“The relative immaturity of the underlying technology has allowed hackers to steal users’ funds, while the large liquidity pools have allowed criminals to launder the proceeds of crimes such as ransomware and fraud,” he added.