Conduit: The Stripe for Decentralized Finance - Crypto API Provider

Financial Institutions and the Growing DeFi Market

Financial institutions are actively seeking avenues to participate in the cryptocurrency market, and decentralized finance (DeFi) presents a potential pathway for increasing their market share. A key feature of DeFi is the ability for investors to generate yield on their assets.

This yield is earned through lending cryptocurrency and receiving interest in return. However, it’s important to note that DeFi lending carries significantly more risk compared to traditional lending practices, largely due to the inherent volatility within the crypto asset class.

Introducing Conduit: A DeFi API Solution

Similar to how high-yield bonds offer increased returns for accepting greater risk, DeFi lending can provide substantially higher interest rates than conventional savings accounts.

Conduit is developing a suite of APIs designed to empower developers in building platforms that offer access to DeFi products. Kirill Gertman, CEO and co-founder of Conduit, previously served as VP of product at BRD, a crypto wallet acquired by Coinbase in November of the previous year.

Gertman’s experience highlighted the difficulties in locating vendors providing the necessary backend tools for product development. Following a period at Arrival Bank and a six-month tenure as product head at Eco, he established Conduit to fulfill the backend solution he had been unable to find.

“The fintech landscape already boasts a robust infrastructure, with providers like Stripe and Marqeta offering solutions for various use cases,” Gertman explained in an interview with TechCrunch. “For virtually any requirement, there’s an API readily available.”

Conduit’s objective is to function as a comprehensive resource for neobanks and financial institutions, enabling them to integrate their products into the DeFi ecosystem. A key advantage is Conduit’s own regulatory compliance, which alleviates the compliance burden for companies utilizing its tools.

How Conduit Facilitates DeFi Access

To participate in DeFi yields, users’ fiat currency is initially converted into stablecoins – cryptocurrencies pegged to the value of traditional currencies. These stablecoins are then invested in various crypto protocols, such as Compound and AAVE.

Conduit provides two distinct solutions to facilitate access to these yields. The first is a growth earnings account, offered by neobanks to allow customers to invest their fiat currency in DeFi. The second is a corporate treasury solution, providing high-yield DeFi accounts specifically for companies.

“We manage the ledgering and handle numerous complexities, delivering a simplified package to our clients,” Gertman stated. “This eliminates their need to navigate challenges like converting dollars to stablecoins or calculating interest rates.”

Current Market and Future Expansion

Gertman refrained from disclosing specific client names, but categorized them as neobanks and smaller cryptocurrency exchanges, particularly those located in Latin America. The company’s largest client base is currently in Canada, where the product initially launched, and Brazil.

Expansion plans include entering the U.S. and European markets. Gertman identifies two primary benefits stemming from the growth of DeFi products. Firstly, DeFi protocols are permissionless, granting access to lending and borrowing without traditional credit checks or collateral requirements.

Secondly, DeFi connects users globally, enabling investors in regions with low or negative interest rates to earn higher yields. It also simplifies borrowing for companies by accessing a global liquidity pool.

Growth and Regulatory Considerations

Conduit intends to triple its fully remote workforce over the next year, focusing on hiring engineering, sales, and compliance professionals with regional expertise in North America and Latin America. Regulatory factors have influenced Conduit’s target countries.

Gertman noted that a lack of clarity in regulations from the Securities and Exchange Commission (SEC) has hindered Conduit’s entry into the U.S. market.

Recent Funding and Future Outlook

To support its global expansion, Conduit secured a $17 million seed round led by Portage Ventures, with participation from Diagram Ventures, FinVC, Gemini Frontier Fund, Gradient Ventures, and Jump Capital. Several fintech executives from companies like PayPal, Coinbase, and Google Pay also contributed to the round.

Given the substantial legal costs associated with maintaining compliance across all its markets, Gertman determined that a larger-than-average seed round was necessary. “Market conditions were favorable, and we capitalized on that opportunity,” he said. “We are prepared to navigate potential market downturns, even a ‘crypto winter.’”