If you don't participate in lending with Qovex Earn, you will never be exposed to any risk from crypto lending as in that case your crypto is never lent to third parties. The Earn program and other crypto activities at Qovex are completely separate - Qovex never lends your assets without your instruction.
If you decide to lend your crypto, Qovex ensures you can do that with confidence. Availability of lending at Qovex depends on a number of considerations, including the jurisdiction where you reside. Lending is not available to US, UK, Canada, Japan and Singapore customers.
When you instruct us to lend your assets, they will leave our custody and will be outside of Qovex control and responsibility. When you lend out assets (stablecoin or crypto assets), you're giving it to someone else to borrow, and they promise to pay it back with interest. However, the borrower might not be able to pay it back for various reasons, for example, due to financial problems. That means you, the lender, could lose the assets you have lent out and/or yield. The possibility of that happening is called “credit risk”.
In summary, credit risk refers to the potential loss of assets and yield due to borrower's inability to repay the loan and/or criminal behavior.
For more information on risks related to the Qovex Earn account, please refer to the Earn Terms.
We have partnered with Tesseract, a regulated and experienced digital asset lending company, to provide crypto lending products.
Tesseract is a provider of diversified financial services and asset management for digital assets. Founded in 2017, Tesseract has multi-disciplinary expertise in providing industry-leading solutions in digital asset credit markets, portfolio management, decentralized finance, and blockchain technology. Tesseract manages hundreds of millions in assets for its customers, is regulated by the Finnish Financial Supervisory Authority, and operates globally.
The partnership is underpinned by a core principle of full transparency. We monitor operations, deployment channels, and yield-generation activities on a weekly basis, and provide you with monthly performance reports on loans and key portfolio parameters, as well as updates on overall market developments and risks related to lending products. Our partnership with Tesseract for lending uses a separate legal entity (a special purpose vehicle) to keep your loans and assets separate from Tesseract’s other partners. SPV's higher transparency allows us to create a more tailor-made low-risk lending experience and enables us to provide performance reports that can help foster trust in the market.
Yield is generated solely through lending assets to reputable and creditworthy institutions. Our lending partner conducts thorough credit due diligence on all borrowers to ensure that there is minimal risk involved. Importantly, you do not take any risk on the price development of the assets, and the assets you choose to lend are always lent out in the same asset.
Moreover, our lending partner ensures minimal risk by diversifying the loan portfolio across multiple borrowers. This means that the assets deposited by users are not solely lent out to one borrower, but rather distributed among several. The maximum exposure to any individual borrower is determined by the tier system which is based on their credit rating.
Our lending partner categorizes borrowers into 4 tiers:
Tier 1: Large top-tier market makers from traditional finance (higher credit rating with lower credit risk)
Tier 2: Crypto-native market makers (average credit rating with medium credit risk)
Tiers 3 and 4: Smaller market makers (lower credit rating with higher credit risk)
The maximum exposure to each is based on their credit rating, ranging from 15% for Tier 1 to 5% exposure for Tier 4 borrowers.
Our lending partner requires borrowers to provide at least 100% collateral for all stablecoin loans.
Only liquid assets, such as BTC, ETH, USD, USDC, USDT, XRP, ADA, AVAX and DOT are accepted as collaterals.
In addition, our partner’s risk management team monitors the price development of the collaterals provided for loans on a regular basis, and execute margin calls if the value of the collateral were to fall below a preset threshold.