Protocol | Fintech

A startup is promising crypto yields without the crypto headaches

Eco is trying to be a nonbank with bank-like services — and crypto hidden away on the back end providing higher yields.

Eco CEO Andy Bromberg

Andy Bromberg is a crypto entrepreneur. His new venture, Eco, promises bank-like services, minus the bank.

Photo: Victor J. Blue/Bloomberg via Getty Images

A startup is taking on traditional banking with a crypto-powered offering — but it's letting its customers still deal in dollars.

Eco CEO Andy Bromberg says he's not running a neobank, which typically offers a different brand and interface over accounts that are actually housed in a chartered sponsor bank. It's also not a crypto exchange or wallet: It's going after consumers who haven't caught the crypto bug. Instead, he said , Eco's attempting to rethink the entire system of savings, checking and payments with a crypto-based business model on the back end.

"A lot of fintech has made better consumer products," Bromberg said. "Neobanks are better products to deal with money, but they don't work on better infrastructure and alignment" with customers.

Staking a claim

"Eco is not a bank," the company proclaims in bold font on its website. But it lets you "spend, save and make money," aiming to replace a bank, a checking account and a credit card. When you spend at certain merchants you get 5% back. And you earn a 2.5% annual yield on your balance — compared to less than 0.5% at many banks. Goldman's Marcus currently offers 0.5%, among the highest bank rates.

Eco customers only deposit and only ever see fiat dollars in their Eco account. Consumers can deposit their paychecks, or send in cash. But on the back end, Eco converts that to crypto, in the form of USDC stablecoins.

The crypto world is alight with interest in staking, a process of leaving crypto coins in an account and allowing them to be used to secure blockchain transactions. It's part of the complex world known as decentralized finance or DeFi, but the end result of this "yield farming" looks a lot like earning interest. And the rates are high — Coinbase offers 4%, and others offer yields of 8% or more for staked coins. USDC coins are created by Centre, a consortium backed by Circle and Coinbase, and they're popular for staking.

Eco lends out USDC, and provides 2.5% cash back to consumers, or up to 5% for referrals — which is all converted back to fiat for consumers. This is Eco's version of a savings account. They could earn more if they bought the USDC directly and staked it at Coinbase or other crypto companies, but Eco is betting that consumers will prefer the simplicity it offers, and Eco's approach is safer than direct "on chain" approaches, Bromberg said.

Unlike a regular bank, Eco accounts are not FDIC insured, which is standard at most banks. Eco says that many of its customers don't need or care about FDIC insurance.

Eco uses Wyre, a crypto-fiat API provider, to convert its users' fiat dollars into USDC. Wyre, a FinCEN-registered money services business, also handles compliance issues.

"Our job is to abstract away all dollars, stablecoins and money movement stuff behind the scenes and have one simple balance," Bromberg said.

Eco is lending out deposits just like a traditional bank but in a different way, Bromberg said. However, it's not regulated the way a licensed bank is. Eco users' capital is only lent out to regulated financial institutions, Bromberg said. He wouldn't name these institutions: "We leverage Wyre to provide yield but do not have anything to share beyond that."

There is demand to borrow stablecoins for a variety of different uses, from retail investors looking for leverage to crypto miners that need loans for operations to OTC desks, Bromberg said.

Bromberg is the former president and co-founder of startup CoinList, which spun out of AngelList to do token offerings for projects like Filecoin. Eco initially planned to launch a token, but as of now has not moved on those plans. Its website makes reference to "Eco Points," and says its team's compensation is tied up with them.

Regulatory questions

Regulators could have questions about the model. BlockFi, a crypto company, has been scrutinized by regulators in Vermont, Alabama, Texas and New Jersey, for its BlockFi Interest Account with concerns that it violates securities laws.

"We are closely watching all that, and haven't been convinced by the regulatory arguments on the status of that," Bromberg said. "We're monitoring and making sure we're up to date."

Eco customers can also spend their money through transactions from their Eco account — currently it only works at Amazon, Uber, DoorDash and Instacart. The merchants get paid in dollars via virtual gift cards, which provide 5% cash back to the consumer. This is designed to be a replacement for a traditional credit card, but it's limited at present.

Eco is also preparing to launch bill pay, to enable a much larger set of payments. And in November, the company plans to introduce a debit card to enable spending anywhere. That will require engaging with a chartered bank, Bromberg said — it's hard to escape the established financial system.

Eco is not regulated as a bank, but the entities it uses are regulated, Bromberg says. One company it works with is Prime Trust, a Nevada chartered trust company which receives Eco's deposits, since Eco is not regulated as a money transmitter. Prime Trust is a money transmitter regulated by FinCEN. And either Prime Trust or Wyre holds Eco customers' deposits at any given time, Bromberg says.

Aside from some explainers on its website, Eco doesn't promote the fact that its back end is crypto-based, because it wants to make its product as simple as possible for consumers. "We're happy to talk about it," Bromberg says. "People don't really care."

Eco recently raised $60 million just five months after raising $26 million in pre-seed funding—from investors including Andreessen Horowitz, Founders Fund and L Catterton.

Protocol | Policy

Why Twitch’s 'hate raid' lawsuit isn’t just about Twitch

When is it OK for tech companies to unmask their anonymous users? And when should a violation of terms of service get someone sued?

The case Twitch is bringing against two hate raiders is hardly black and white.

Photo: Caspar Camille Rubin/Unsplash

It isn't hard to figure out who the bad guys are in Twitch's latest lawsuit against two of its users. On one side are two anonymous "hate raiders" who have been allegedly bombarding the gaming platform with abhorrent attacks on Black and LGBTQ+ users, using armies of bots to do it. On the other side is Twitch, a company that, for all the lumps it's taken for ignoring harassment on its platform, is finally standing up to protect its users against persistent violators whom it's been unable to stop any other way.

But the case Twitch is bringing against these hate raiders is hardly black and white. For starters, the plaintiff here isn't an aggrieved user suing another user for defamation on the platform. The plaintiff is the platform itself. Complicating matters more is the fact that, according to a spokesperson, at least part of Twitch's goal in the case is to "shed light on the identity of the individuals behind these attacks," raising complicated questions about when tech companies should be able to use the courts to unmask their own anonymous users and, just as critically, when they should be able to actually sue them for violating their speech policies.

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Issie Lapowsky

Issie Lapowsky ( @issielapowsky) is Protocol's chief correspondent, covering the intersection of technology, politics, and national affairs. She also oversees Protocol's fellowship program. Previously, she was a senior writer at Wired, where she covered the 2016 election and the Facebook beat in its aftermath. Prior to that, Issie worked as a staff writer for Inc. magazine, writing about small business and entrepreneurship. She has also worked as an on-air contributor for CBS News and taught a graduate-level course at New York University's Center for Publishing on how tech giants have affected publishing.

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Over the last two years, many retailers have seen the benefit of investing in new, flexible payments. Ones that reflect the changing lifestyles of younger spenders, who are increasingly holding onto their cash — despite reports to the contrary. This means it's more important than ever for merchants to take note of the latest payment innovations so they can tap into the savings of the COVID-19 generation.

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Antoine Nougue,Checkout.com

Antoine Nougue is Head of Europe at Checkout.com. He works with ambitious enterprise businesses to help them scale and grow their operations through payment processing services. He is responsible for leading the European sales, customer success, engineering & implementation teams and is based out of London, U.K.

Protocol | Fintech

When COVID rocked the insurance market, this startup saw opportunity

Ethos has outraised and outmarketed the competition in selling life insurance directly online — but there's still an $887 billion industry to transform.

Life insurance has been slow to change.

Image: courtneyk/Getty Images

Peter Colis cited a striking statistic that he said led him to launch a life insurance startup: One in twenty children will lose a parent before they turn 15.

"No one ever thinks that will happen to them, but that's the statistics," the co-CEO and co-founder of Ethos told Protocol. "If it's a breadwinning parent, the majority of those families will go bankrupt immediately, within three months. Life insurance elegantly solves this problem."

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Benjamin Pimentel

Benjamin Pimentel ( @benpimentel) covers fintech from San Francisco. He has reported on many of the biggest tech stories over the past 20 years for the San Francisco Chronicle, Dow Jones MarketWatch and Business Insider, from the dot-com crash, the rise of cloud computing, social networking and AI to the impact of the Great Recession and the COVID crisis on Silicon Valley and beyond. He can be reached at bpimentel@protocol.com or via Signal at (510)731-8429.

Protocol | Workplace

Remote work is here to stay. Here are the cybersecurity risks.

Phishing and ransomware are on the rise. Is your remote workforce prepared?

Before your company institutes work-from-home-forever plans, you need to ensure that your workforce is prepared to face the cybersecurity implications of long-term remote work.

Photo: Stefan Wermuth/Bloomberg via Getty Images

The delta variant continues to dash or delay return-to-work plans, but before your company institutes work-from-home-forever plans, you need to ensure that your workforce is prepared to face the cybersecurity implications of long-term remote work.

So far in 2021, CrowdStrike has already observed over 1,400 "big game hunting" ransomware incidents and $180 million in ransom demands averaging over $5 million each. That's due in part to the "expanded attack surface that work-from-home creates," according to CTO Michael Sentonas.

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Michelle Ma
Michelle Ma (@himichellema) is a reporter at Protocol, where she writes about management, leadership and workplace issues in tech. Previously, she was a news editor of live journalism and special coverage for The Wall Street Journal. Prior to that, she worked as a staff writer at Wirecutter. She can be reached at mma@protocol.com.
Protocol | Enterprise

How GitHub COO Erica Brescia runs the coding gold mines

GitHub sits at the center of the world's software-development activity, which makes the Microsoft-owned code repository a major target for hackers and a trend-setter in open source software.

GitHub COO Erica Brescia

Photo: GitHub

An astonishing amount of the code that runs the world's software spends at least part of its life in GitHub. COO Erica Brescia is responsible for making sure that's not a disaster in the making.

Brescia joined GitHub after selling Bitnami, the open-source software deployment tool she co-founded, to VMware in 2019. She's responsible for all operational aspects of GitHub, which was acquired by Microsoft in 2018 for $7.5 billion in one of its largest deals to date.

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Tom Krazit

Tom Krazit ( @tomkrazit) is Protocol's enterprise editor, covering cloud computing and enterprise technology out of the Pacific Northwest. He has written and edited stories about the technology industry for almost two decades for publications such as IDG, CNET, paidContent, and GeekWire, and served as executive editor of Gigaom and Structure.

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