With Florence Finance, we've set up both a protocol and a platform to connect real-world lending and decentralized finance (DeFi).
First off, from a borrower's perspective, it makes little difference if funding comes from stablecoins or as fiat from a bank. And from a lender’s perspective, credit risk and yield are not changed by the means of administration. Besides, the platform itself is antifragile – there is literally “no money in the bank” that can be stolen or hacked.
Florence Finance does not lend directly to SMEs. Our concept is based on lending to existing credit providers and lending platforms in an intermediate step. Generally, we provide funding on terms similar to – or actually even slightly better than – existing funding mechanisms. Competing with legacy funders (or banks, that is) on price is not our goal. We want to create an alternative source of funding in order to reduce dependence as a factor for both lenders and borrowers. We're aiming to drive the adoption of crypto on the whole.
Florence Finance has fully KYC- and AML-compliant funding partners. All of the loans are underwritten and backed by them. Loan-vault tokens – we're talking about tokenized loan vault participations here – can be gained by third parties in the secondary market through Curve.
It's as easy as pie. Simply apply online and share your necessary compliance information. Apart from that we'll only need to know about the size and nature of your credit request. Leave everything else to us – we look forward to your application!
Your capital will be transferred to a borrower of the loan vault. The borrower will set up and redistribute your capital according to their business model and the loan agreement with the vault or, respectively, with Florence Finance. Upon maturity of the loan, Florence Finance may redeem loan vault tokens, however, there is no guarantee of redemption as long as funds can still be utilized within the vault mandate. This basically means: if you wish to exit your position, you are primarily dependent on the secondary market – alternatively you can choose to wait for vault expiry or maturity.
The main risk associated with lending on Florence Finance is credit risk. This basically refers to the uncertainty that arises through the default of a borrower. However, determining the specific default risk of a borrower or a loan in a loan vault requires a trained/specialized credit officer and agency-approved credit models. So it's imperative to do this work on any and all of the vaults' borrowers and their respective business models – which, at the outset, will be handled by Florence Finance and its partners. Our aim is to promote and simplify credit information transparency over time. In the meantime, we're building a default reserve that can absorb smaller default losses should they occur.
Florence Finance is not a bank and has never been designed to be a bank. We explicitly don't take custody of your digital assets. However, Florence Finance is a clever and future-forward alternative in that it represents a decentralized platform that enables the transformation of digital assets (stablecoins, that is) into real-world loans or into credit assets through its customers (SME lending platforms). The Florence Finance loan vaults exchange stablecoins for credit exposure (loan vault tokens) with a yield – whether in stablecoin and/or in MDC tokens – that is proportional to the credit risk that is taken. Given this, all happens on-chain and all the yield is used to either reward funders or to grow and improve the platform, there is no safer, better, or more efficient way to create, administer and get access to this kind of credit exposure.
The Florence Finance protocol will undertake smart contract audits and publish them once complete. However, the platform is relatively safe as there is “no money” in custody on the platform.
The Florence Finance protocol is a limited-liability company (LLC) registered in the DMCC (commodity-free trade zone and designated crypto sandbox) in Dubai, UAE. The lending operations are administered through a limited-liability sister company under the name of Florence Finance Europe BV that is registered in the Netherlands.
As Florence Finance focuses on B2B-lending activity, which is unregulated in the EU and funds its activities in crypto (which are not deemed deposits or money by the regulator), it is currently not subject to financial or banking regulation in either Dubai or the EU. Given the nature of our business and our customers, however, our aim is to upkeep industry standards proactively with respect to governance, ethics, KYC and AML – should our business become regulated to comply with any of these regulations in the future.