Listen to this articleBelow is our recent interview with Sefton Kincaid, Chief Executive Officer at Cicada:
Q: What is Cicada?
A: Cicada is a disruptive credit risk management company enabled by the growth of stablecoins, smart contracts, and modern data reporting architectures.
Managed by a seasoned team of former buy- and sell-side credit professionals, our co-founders also have deep crypto lending expertise, having underwritten $850m in loans at a 1.2% default rate during the prior cycle.
Q: What does Cicada do and how is it unique?
A: Created following the collapse of multiple centralized lending desks and FTX, we have a unique business model solution to centralized black-box lenders. At our core we are credit underwriters and structurers facilitating the growth of institutional lending on transparent public blockchains. We enable lenders to participate in risk-managed loans via non-custodial wallets, reducing the need for lenders to give direct access of funds to an intermediary.
We never touch customer funds on chain and smart contracts prohibit any possibility of rehypothecating customer assets.
These roles have different names within crypto, like “Pool Delegate” or “Arranger,” but there are two services we provide:
- Partner with Credit Origination platforms to create legally sound, regulatory compliant, and globally scalable credit products for on-chain capital
- Underwrite and structure asset-backed direct lending deals
Q: What products are Cicada managing and what solutions do they provide?
A: The first product we launched on Maple.Finance is a structured loan that passes through the investment grade rated credit yields primarily via liquid asset-backed securities like CLOs. CLOs are an asset class that has been difficult to access for most investors, crypto-natives in particular. The asset class has demonstrated clear benefits over three decades of relative outperformance vs. similarly rated credit instruments like bonds and mortgage-backed securities.
Our second initiative will be rolled out in phases on Atlendis.io. Here we are underwriting and structuring difficult-to-service asset-backed lending opportunities.
Q: What advantage does your company have over its competitors?
A: During ‘21 and ‘22, the co-founders at Cicada tested and verified a differentiated business model to the traditional direct lending and asset management business. Our team unbundled the asset management operating stack, leveraged blockchains, credit origination protocols like Maple and Atlendis, and modern data reporting to create a lending product at 1/3rd the cost base of at-scale asset managers.
Our mission is to extend this thesis into difficult-to-service and capital-constrained markets that use modern data reporting tools and integrations.
Q: Is there anything more you would like to add or highlight?
A: Yes, one of the great under-appreciated truths of modern finance is that securitization, when done properly, is an incredible human invention to drive productive investment.
It was probably the moral hazard-ridden excesses of the Global Financial Crisis that lead to a stigma on securitization. But the reality is that securitization, or the trancheing, repackaging, and trading of risk is what finance is all about and it is the most advanced form of finance.
Sadly, for a number of reasons, the process of securitization is extremely expensive and operationally intensive, resulting in banks only doing such transactions for large businesses.
What we are particularly excited about is taking a difficult-to-service market like trade finance, our prior operational learnings, plus the under-appreciated truism that securitization provides real-world benefits and combining them with modern data reporting tools to manage covenants and borrowing bases in a more real-time and efficient manner to drive down costs for both borrowers and lenders.
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