- Coinchange is a fintech app that leverages high-yield passive income opportunities in DeFi.
- Its two core products are a trade account that acts as a fiat onramp and offramp and a yield account for earning interest on stablecoins.
- Coinchange says it’s aiming to offer regular people access to the same financial opportunities that money managers enjoy.
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Coinchange leverages DeFi to offer high yield to retail investors. Crypto Briefing spoke to the firm’s CEO, Maxim Galash, to hear about the benefits and challenges of offering DeFi opportunities to new crypto entrants.
Yield Farming Through Banking-Like Apps
Coinchange is a consumer fintech company providing retail investors with seamless, frictionless access to low-risk and high-yield passive income opportunities in DeFi. They initially launched as a crypto brokerage platform in 2017, until the explosion of the DeFi space in 2020 led to a pivot toward wealth management strategies leveraging yield farming.
Today, Coinchange offers two core products: a trade account that acts as a fiat on and off-ramp, and a yield account offering low-risk, high return dynamic interest on stablecoin deposits.
The trading account allows Coinchange users to deposit and withdraw fiat through wire transfers, ACH, and debit cards, make crypto transfers to and from their non-custodial wallets, and buy cryptocurrencies like Bitcoin, Ethereum, USDT, and USDC.
The high yield account, meanwhile, is Coinchange’s flagship product. From a user’s point of view, it may look similar to other interest-bearing products like Celsius, Nexo, and BlockFi. However, it works very differently. Rather than lending out the customers’ crypto deposits to institutions, Coinchange leverages a market-neutral yield farming strategy to generate risk-free passive income for its stablecoin depositors. Explaining the firm’s approach, Coinchange CEO Maxim Galash says:
“In the background, we take in USDT and USDC deposits and feed that liquidity into multiple DeFi protocols and pools, including Uniswap, Sushi, and PancakeSwap, based on a comprehensive risk-analysis approach, and then we distribute a portion of the yield we make to our customers.”
In simple terms, Galash adds, the process is “similar to a loan, but here you own that loan—you control that money, and based on the behavior of the counterparty, you can pull that money any time you want.”
Coinchange uses data to achieve its results; all processes are automated and executed by sophisticated algorithms that monitor price, volume, liquidity, slippage, fees, and several other data points to adjust and optimize the strategy in real-time.
Coinchange’s current yield farming strategy is based on stablecoins and providing liquidity to stablecoin pools. However, in the future, the firm plans to add riskier strategies based on more volatile assets like Bitcoin and Ethereum.
Fund safety is a major point of concern for custodial wealth management crypto platforms. Galash says that risk management is Coinchange’s top priority, which is why its yield farming product uses complex automated models to mitigate market risks and manual processing to mitigate protocol risks. Coinchange also insures customers’ deposits by allocating a portion of its profits into a separate wallet custodied by Fireblocks. “If anything goes wrong,” Galash says, “we’ll be able to cover the losses.”
As a crypto wealth manager, Coinchange’s mission is to provide customers with easy access to relatively risk-free, passive, and highly profitable investment opportunities through a product that looks and feels like the typical banking application everyone is already accustomed to. “People are already making 10 to 20% in the traditional markets,” says Galash, “but it’s not regular people like us. It’s professional money managers who go to golf clubs, private clubs, and live in certain neighborhoods.”
According to Galash, Coinchange is trying to “provide the same investment opportunities and wealth management services to regular people, with regular jobs, and regular incomes.” Unlike other similar products, the platform doesn’t require lockups or minimum deposits, and there are no hidden fees.
Democratizing DeFi investing is not an easy task, however. Aside from the general lack of regulatory clarity concerning similar products, the U.S. Securities and Exchange Commission (SEC) has recently initiated a crackdown on competing firms like BlockFi and Celsius. On this topic, Galash says that Coinchange is a fully regulated business in Canada with an MSB license active until 2023. The firm is also working with U.S. regulators to ensure compliance in different states. Galash says that the team wrote to the relevant regulators in each state and received mixed responses. “Right now, we’re focused on acquiring money transmission licenses (MTL) to be able to legally operate even in the states that didn’t respond favorably to our letters,” he explains. “The next step is becoming a regulated investment advisor (RIA) which would effectively label our products as separately managed accounts (SPA) and make us fully compliant to operate in the U.S.”
Coinchange’s high yield account currently averages about 16% APY on USDC and USDT deposits, which is among the best rates offered across CeDeFi competitors and the DeFi space. Already one of the leading options on the market for crypto users looking to capture yield, the firm is well-positioned to see rapid growth as the space starts to approach mass adoption.
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