On Monday, the top regulatory official and Vice Chair for Supervision, submitted remarks to the and the . Michael Barr, Federal Reserve's Committee on Financial Services U.S. House of Representatives Barr : "The Federal Reserve will be heightening its focus on liquidity, credit, and interest-rate risks as supervised institutions manage the changing financial conditions." said in his written testimony Barr added, "Another priority is monitoring the risk of crypto-asset-related activities. Some financial innovations offer opportunities, but as we have recently seen, many innovations also carry risks—which can include liquidity runs, the rapid collapse of asset values, misuse of customer funds, fraud, theft, manipulation, and money laundering." With debacles in the crypto world like and its sister company, , , it's not hard to see why regulators have noticed. FTX Exchange Alameda tanking spectacularly Liquidity is a key concern for all exchanges now, like Crypto.com, which recently released a to maintain transparency. full account of its reserve In a time of economic stress, a lack of liquidity impacts businesses of all sizes, including the ever-increasing remote gig-economy workers. That's what led , a Web2 platform that provides alternative funding for businesses, to make its first entry into Web3 with . Crowdz recently released the for Avalon Marketplace, a "blockchain-based invoice receivables marketplace." Crowdz Avalon Marketplace white paper According to the white paper, Avalon Marketplace will tokenize receivables – which denote any debt owed to a company, such as an outstanding invoice – risk-score the receivables and sell them as assets in an open marketplace. The goal is to shift liquidity – businesses with outstanding invoices who are waiting on 30-day or 90-day remittance need to get paid sooner, and those who have the liquidity can purchase and profit from those receivables. The states that the Avalon Marketplace, "powered by Crowdz," is to be released to institutional investors only. Crowdz is working with popular Layer 2, , to keep fees low, transactions fast, and provide scalability while providing security from the mainnet. press release Polygon Ethereum We spoke with , Senior Director, Product, and , Director, Business Development for Crowdz, to learn more about their plan to address liquidity through receivables on the blockchain. Marc Meyer James Kouzinas HN: How did Crowdz start? What was the original intent? JK: "The original intent for the platform was to bring technology to the invoice finance space. If we consider the invoice finance market and trade finance in general. Factorers and banks are using legacy software architectures, which means that when a customer wants to participate in an invoice finance deal, they're met with a cumbersome process for onboarding. So that creates a bad experience with onboarding and leads to inaccurate pricing on risk. Crowdz sought to bring technology to the markets that can price risk more effectively and provide a radically better onboarding experience for customers. That was where the marketplace concept was developed to make it easier for both funders and businesses seeking financing." HN: When was Crowdz founded? JK: "The company was founded in 2014. But back then, it was more like an e-commerce company. But it radically changed and started focusing on financing because as they entered this e-commerce market, they realized there was a huge opportunity here. $3.5+ trillion in value gets transmitted globally through trade." HN: Have your core services become more relevant because of the massive increase in remote workers? JK: "I think COVID has been a huge driver in the last 24 to 48 months. We saw a lot of disruption in supply chains. As a result, payment terms become protracted. So a business that's dealing with a large enterprise or a sub-contractor that's already on 30- or 60-day payment terms got pushed out. These larger businesses with a healthier cash position than their subcontractors and vendors are essentially borrowing money from the 'little guy' by pushing out payment terms. That has been a massive driver in the growth of our services. We've been running a program with Facebook (Meta) for just over a year now that buys the receivables of diverse-run businesses. We're coming to these businesses saying, 'hey, if you have slow onboarding with banks, we'd love to have you participate in his program.' I think the program has pushed over $70 million in one year. We've had a really great working relationship with Meta." HN: What advancements have you made in receivables with Avalon Marketplace? MM: "We've made a leap forward in everything related to the end-to-end customer lifecycle. So, automated onboarding – we streamline the process, and we do all the KYC. The marketplace allows us to automatically upload invoices and score them quickly based on the risk profile. So, the entire onboarding, loading, and searching processes are more automated than it used to be. Then we reconcile payments with invoices, which is not always the case with traditional companies." HN: What are the benefits of a Bank-as-a-Service (BaaS) platform? MM: "Having a bank-as-a-service (BaaS) platform today will help us drive transactions and reconciliation automatically. We can push payments and get more information, so we offer a giant leap forward in improving customer service. We're trying to streamline the experience and get cash very quickly. The next step is to make it more liquid and more exportable. That is what we were moving toward through blockchain. We believe that blockchain allows a better, more transparent, more efficient way to exchange value – which could be an invoice, but it could also be real estate or an equity." HN: What are the benefits of running your platform on blockchain? MM: "We believe that blockchain allows things that centralized databases and processes cannot do, such as having efficient secondary markets, which create more liquidity. Syndicating invoices becomes easier. There are also efficiencies in the process – having tags for the payments and making the payments automatic. All the new efficiencies eventually create more liquidity, which is better for the person asking for capital and for those investing in these instruments because the cost is lower and creates more value on the supply and demand side, which I think is the beauty of the blockchain in this particular case." HN: Since you are targeting traditional finance and institutional investors, how much of a learning curve is there for them to understand the Web3 platform? MM: "To the credit of all financial institutions, when we talk with the data officer or an innovation team, they know exactly what it means for them. They know that the way they operate is not sustainable. We bring value because we don't work against financial institutions. We work with venture institutions. They want to understand how they can leverage what we do to improve their product for the customers." JK: "Traditional financial institutions are doing some invoice digitization, but not to the extent that it can be fragmented and shared on secondary markets and have smart contract logic coded in. We have a front end where customers who seek financing can onboard, they can go through the general Know Your Customer (KYC) and Know Your Business (KYB) questions, and we can do a risk score assessment on them. On the platform, they can upload their receivables. Typically, we like to integrate with the accounting platform through an API because that automatically retrieves the receivables data. It also allows us to get important financial information that we can use for risk scoring. We then take those receivables, and we digitize them, and we mint them as NFTs. in that way, we're standardizing the data for receivables and placing some of that data on-chain." HN: What are your plans for the phased rollout of the marketplace? JK: "For Phase One, we will allow a funder to purchase receivables as NFTs, and the ownership changes straight to the funder. And the beautiful thing is there's transparency. Supply chain transparency is the quickest way to eradicate fraudulent activities because you can see what's happening on chain between the two counterparties. Once the NFT is purchased, the crypto arrives in the SMEs wallet, and then they can convert that to fiat currency which they use to run operations, pay wages, and use that capital to grow the business. Moving forward in Phase Two and Phase Three of our roadmap, we will explore the fragmentation of receivables. Once they are tokenized, you can bundle them and potentially fractionalize them, depending on what token standard you've used. That allows for a fascinating conversation around securitization syndication, where you can start making receivables pools that people can participate in." Summary Crowdz represents a trend we expect will continue in 2023 – companies with stronger ties to traditional finance creating Web3 solutions for institutional investors. The larger vision has appeal for everyone who has ever had an invoice go unpaid for weeks or months at a time. It will be interesting to see the functioning Avalon Marketplace at work. If it creates faster returns for the little guy and a profitable area for larger businesses sharing their liquidity, perhaps it will be among the success stories in 2023 for Crowdz, and for the Web3 world overall, which is always looking for new use cases to improve lives. Cover modified from an image by from Pixabay. David Mark

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