Here’s Why Investors Poured $2M into Spout Finance’s 0% Interest Stock Loans

• Spout Finance has secured $2 million from top Web3 giants like Draper Dragon to further develop its interest-free tokenized stock lending product.

• Margin loans come in USDC at 50% loan-to-value, with borrowers retaining ownership of their equities and any resulting dividends.
• Spout eliminates borrower fees by funding lender yields through systematic covered call options contracts, bypassing the up to 12.7% interest rate charged by legacy brokers.
• The platform is currently live on Solana devnet (beta.spout.finance), and users can secure access to the upcoming private beta launch by messaging the team on X via @0xmryan or @SpoutFi.

Spout Finance, a Solana (SOL)-based decentralized liquidity protocol, has raised $2 million to upgrade traditional prime brokerage by pioneering the world’s first 0% interest USDC loans backed by tokenized stocks.

Spout Finance was funded by major market players, including Draper Dragon and Solana Labs. As such, the platform gives retail consumers access to interest-free margin loans, without giving up their equity ownership or dividend income.

While legacy brokerages like Charles Schwab and Fidelity trap investors with predatory interest rates of up to 12.7%, Spout uses DeFi to globalize elite Wall Street lending strategies for the masses.

How Spout Finance offers zero percent interest loans without going bankrupt

In traditional finance, borrowing against your own stock portfolio is a luxury reserved for the ultra-wealthy. Legacy brokerages benefit from massive rate spreads by charging everyday users high tiered rates while the Federal Funds Rate sits much lower.

To get a more reasonable 4% to 6% rate from a private bank, individuals typically need a minimum of $5 million in Assets Under Management (AUM). For everyone else, long-term borrowing against equities is impossible because daily interest compounding rapidly erodes portfolio value.

To solve this, Spout Finance lets anyone collateralize digital US equities to borrow USDC at a 50% loan-to-value (LTV), and at a 0% interest rate for as long as they hold the loan.

How Spout Finance’s 0% stock loans are threatening Wall Street

Spout Finance does away with borrower interest by completely flipping how lender yield is generated. Instead of charging the debtors a rate spread, Spout funds the cost of the loan through systematic covered calls on the collateral.

More specifically, the platform sells weekly far out-of-the-money (OTM) options contracts tied to the pledged shares. The premiums collected from these options are used to pay lenders, thereby granting borrowers interest-proof multi-year liquidity. Even more, clients retain full ownership and benefit from any upside movements or dividends from their underlying stocks.

“Spout Finance lets individuals put up tokenized shares of stock as collateral for margin loans without paying interest. It covers its costs by selling options contracts tied to the pledged shares… That is prime brokerage economics made available to individuals. It is why I have invested in the company and serve as a strategic advisor,” said J. Christopher Giancarlo, former CFTC Chairman and Spout advisor.

Backed by Web3 giants and Wall Street veterans

The $2 million fundraising round attracted a powerful mix of crypto venture funds, liquidity providers and regulatory advisors.

Other than the aforementioned three, additional institutional investors were Anchorage Digital, Flow Traders, Taisu Ventures, Vessel Capital, Solayer, 2Square Capital, and Bering Waters Ventures.

Strategic and angel backing came from Solana Labs co-founders Anatoly Yakovenko and Raj Gokal.

Elite advisors include J. Christopher Giancarlo (13th Chairman of the US CFTC, board member at Nomura, Paxos, and chair of Polymarket’s advisory board), Samiz Bayan (Partner at Draper Dragon), and Neil Amhis (Quantitative Strategy Advisor, former Quantitative Analyst at BNP Paribas).  Additional participants include DeFi founders and strategic ecosystem partners.

Notably, the newly acquired capital will be used to aggressively scale the Spout Finance engineering team. This will enable the build-out of a robust DeFi credit layer designed to seamlessly connect asset issuers, decentralized exchanges, and crypto wallets.

What’s next?

Spout Finance is currently operational in beta on the Solana devnet. Active traders and investors looking to test interest-free tokenized stock lending can explore the platform at beta.spout.finance.

To secure early access to the upcoming private mainnet beta launch, users can apply by messaging the team directly on X at @0xmryan or @SpoutFi.

Disclaimer: This content is a press release and is intended for informational purposes only. It was not written by 36crypto, does not reflect the views of 36crypto and is not a financial advice. Please do your research before engaging with the products.