At Finovate Fall 2023 in New York, Liliana Reasor, founder of SupraFin, discussed the company’s approach to cryptocurrency ratings. With 20 years of experience at institutions like JP Morgan, Deutsche Bank, and Moody’s Analytics, Reasor has a significant background in crypto, risk management, and investment banking. She highlighted the growing importance of comprehensive risk tools in understanding the complex crypto sector.

FinTech Rising (FTR): “I didn’t really know from the event listing what your company did, but when I listened to your demo and saw you did ratings for cryptocurrencies like ratings for bonds, I found it really interesting. How did you get into that part of the business?”

Liliana Reasor: “I first got into digital assets and cryptocurrencies because I traded complex structured products and the credit default swaps for such, along with cash securities at Deutsche Bank. I traded all day. Back then, I used many risk and valuation software solutions to properly evaluate those securities and relied heavily on structure credit ratings research and data. After that, I worked in the risk portfolio analytics group at Moody’s Analytics and Morgan Stanley.

With my background in risk analytics, I saw a gap in the cryptocurrency market. There was no solution to help individuals understand cryptocurrencies. This made me think about the need for ratings or risk scores. By offering this data for sale, it could assist others in understanding cryptocurrencies much like Moody’s and S&P do for bonds. The lack of standards and analysis in this space was glaring.”

FTR: “I hadn’t come across a cryptocurrency rating system before.”

Reasor: “It’s essential. When I began in 2018, one of my advisors suggested starting with the ratings. I was unsure if the market was ready. But events like what happened with Terra/Luna/UST highlighted the need for such a system. Particularly as our crypto ratings/risk scores predicted the collapse of the Terra/Luna/UST ecosystem. The extreme volatility observed in prominent cryptocurrencies like Bitcoin and Ethereum further underlines this necessity. It’s evident that there’s a demand for accurate ratings in the market.”

FTR: “I’ve talked to some of the proprietary crypto traders. They trade based on price volatility. They can make money either way, but their focus is very short-term.”

Reasor: “Yes, but if there’s a fundamental issue and the price of a cryptocurrency starts to collapse, they could, depending on their exposure, potentially lose everything due to the rapid movement of the market. Seasoned traders with experience are probably considering fundamental factors as well.

However, newcomers to the crypto industry can’t possibly learn everything quickly. They need tools and well-researched information. Without such resources, it becomes almost impossible to properly buy, sell, or understand cryptocurrencies.”

FTR: “There’s the Global Digital Asset and Cryptocurrency Association, among other groups, aiming to educate financial professionals and advisers about crypto.”

Reasor: “They would be my perfect client base. Financial advisers.”

FTR: “Many financial advisers probably get questions from their clients about investing in crypto. Your service seems perfect for this.”

Reasor: “We offer crypto risk research and crypto risk scores/ratings that can be used to create and backtest crypto portfolios. Financial advisers would benefit greatly from our crypto risk research. They can also use the risk exposure data to create portfolios.”

FTR: “So, you have tools to analyze portfolios?”

Reasor: “Yes, we provide risk scores/ratings for each cryptocurrency and we also provide the risk scores for the risk factors that affect each cryptocurrency. We also have a crypto wealthtech app for credit unions and banks. Partnering with them allows for the integration of our crypto portfolio recommendation tools through an API. This offers a comprehensive risk assessment for cryptocurrencies where clients can buy a crypto portfolio at a click of a button and based on their risk preferences and is available through the app.”

FTR: “Have any banks or credit unions shown interest?”

Reasor: “We’ve partnered with a large fintech company, Q2, which works with 450 financial institutions. They’ve developed fintech apps for numerous credit unions and banks and collaborate with fintechs to deliver solutions, and we’ll be available on their marketplace..”

FTR: “It would be challenging to approach banks individually.”

Reasor: “Going bank by bank is doable, but it would require having a larger team. We’re currently a team of 10 people focused on product development, but as we grow we could do that.”

FTR: “How do you generate revenue? From ratings or research?”

Reasor: “We offer three main products. We charge a monthly fee for crypto risk scores and risk research, with the pricing based on the size of the group. For the wealthtech app tailored for banks and credit unions, we opt for a a combination of monthly fee and revenue-sharing model.”

FTR: “In the crypto space, a lot of information is freely available.”

Reasor: “Free information is typically worth what you paid for it. Our solutions target financial institutions, funds, prominent fintech companies and crypto companies, which prefer reliable data and information. Upcoming regulations in the UK will likely control the dissemination of misleading free information about cryptocurrencies. Companies will be held accountable for their claims.”

FTR: “Traditional financial investment materials are highly regulated for good reasons.”

Reasor: “Absolutely. We need specialized regulations for cryptocurrencies due to their unique nature and the lack of standards. The UK is actively researching to strike a balance between fostering innovation and ensuring consumer protection.”

FTR: “It’s risky to take no action or to blindly apply existing regulations. Cryptocurrencies operate differently from traditional assets.”

Reasor: “Exactly. The US should consider establishing appropriate regulations, possibly through self-regulatory organizations and eventually they should requite ratings for cryptocurrencies from third parties, with crypto risk knowhow and which should be new regulated entities that can prove they understand how to evaluate risk for crypto.”

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