← The Digital Executive
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- [00:00]
A
Foreign. Welcome to Coruscant Technologies, home of the Digital Executive Podcast. Do you work in emerging tech? Working on something innovative? Maybe an entrepreneur? Apply to be a guest at www.corazon.com brand welcome to the Digital Executive. Today's guest is Cole Snell. Cole Snell is the founder and CEO of Real Private Credit, a financial technology company pioneering security, liquidity and transparency in the private credit market. Under his leadership, Real Private Credit has developed an AI powered blockchain secured platform that detects fraud, prevents duplicate collateral pledging and brings immutable accountability to private lending, a market valued at nearly $1.8 trillion. Before founding Real Private Credit, Cole built his expertise at the intersection of finance, technology and risk management. He is also a published author on financial infrastructure issues, writing about how blockchain and modern technology can address systemic risk in private credit and strengthen integrity across the credit ecosystem. Well, good afternoon, Cole. Welcome to the show.
- [01:15]
B
Hi Brian, thanks for having me. Nice to see you again.
- [01:18]
A
Absolutely, my friend. I appreciate it. You're hailing out of Miami, Bahamas area. I know you go back and forth, but I'm in cold Kansas City. So I appreciate you just making the time today and really filling us in on what's new since our last podcast. So, Cole, if you don't mind, I'm going to jump in to your very first question. You founded Real Private Credit to bring security, liquidity and accountability to private credit. What specific failures or blind spots in the market convince you this infrastructure was urgently needed?
- [01:48]
B
Yeah, that's a really good question, Brian. And I appreciate being here again and I appreciate being able to dive into this amazing use case, this private credit use case for blockchain. My last business was I was preoccupied, occupied with use case. No use case turns into like a venture capital bonfire in blockchain. I mean, AI is a little bit different. AI is very, very practical and very straightforward. So analyzing this business. After being one of few founders to exit the RWA space over the last five years, I really had a lot of momentum and a real responsibility to find a really good use case for blockchain. And I defined a very specific corner of private credit. And that's small, medium business lending, specifically, if you will. There's very good legal and financial use case, call it governance if you want to pile that on top. And the specific gaps that I found, really, and that's always what you're looking for, is you're looking for a gap before you as an entrepreneur go out there and deploy capital, time, resources and try and convince other people to deploy Time, capital and resources. You really need to find a gap. You need to find an SHVP specific high value problem with hopefully a very understandable answer to that problem. Quality use case. So the kind of the four things that I was really looking at in terms of blind spots were a big across the gap in private credit, we saw first brands in tricolor happen about three months after we started deploying time and resources into finding a solution to this problem. There's a big lag in what we call point in time audits. The second thing was Uniform Commercial Code Friction specifically, that would be the third thing. And then a lot of information asymmetry and that's really ultimately where the gaps lie. Again, there was a massive issue with trust, massive issue with point in time audits, Uniform Commercial Code friction. Just Simply put, Article 9 friction specifically and information asymmetry were the kind of the four gaps, if you will.
- [03:45]
A
Thank you, I really appreciate that. And we generally start out the first question with, hey, we're looking for a way to fix the gap as you call it in your use case in private credit, small business, small medium business lending. Of course, that gap or solution again, being in the blockchain space. You and I Both work in web3 here, trust is a big one obviously. And then point in time audits, there's a lot of delay around that. And I know that having using that infrastructure around blockchain or web3 is also something that can really bring some more trust to the market. So I really appreciate that. And Cole, your platform uses AI to detect fraud and prevent duplicate collateral pledging. How do these risks typically go unnoticed today? And how does automation change the game for lenders and capital allocators?
- [04:37]
B
Yeah, it's also a really good question. As I'm answering your questions, I'm thinking about something that's very unique to the use case of SMB lending and specifically AI and blockchain. And we're thinking about legal rails. I mean, I hope your listeners as they're hearing this are thinking about a very unique opportunity to put new law onto the blockchain. But to be able to do that, you need to have the proper existing traditional regulatory framework to do that. And in 30 states in America thus far, and likely 50 states, by looking like June 2027, we will have full adoption by each state Secretary of State toward what's called a controllable electronic record or what would be Uniform commercial code article 12. And so that forward thinking by these regulators as it relates to asset backed collateral allow founders like me to move Away from just looking at blockchain as a new financial rail type, innovation, speed to settlement, efficiency, transparency. But we can also move forward and replace paper legal contracts with smart contracts, which is an unbelievably effective use case. And it's why I'm so excited. Having almost 6 years experience doing this, we really feel like we've uncovered the holy grail of use cases for blockchain. But to answer your question very specifically, using AI and detecting collateral fraud really comes down to something I call a lender silo. Now, fraudsters exploit this lender silo effect simply because lender A doesn't talk to lender B and borrowers can pledge the same, let's say like vin. In the case of recently there was this big fallout from tricolor vehicle identification number to the same small medium business or the same small medium business can pledge the same invoice without a centralized real time cross referencing system. Call this a double pledge. It's basically invisible inside of the existing system. If fraudsters know what they're doing, and clearly they do. The second thing we can look at is AI as a private eye of sorts. So this comes down to AI for entity resolution. The third thing that we look at is a reactive versus to proactive is moving from a reactive to a pro to proactive. Again, real time underwriting automation changes the game in this case by shifting from detection to prevention. So blocking the loan essentially before it's funded. And this can happen in a very autonomous way. And then obviously continuous monitoring. A lot of people in tech don't like the term real time. They actually, you want to ask a cto, does real time exist in technology? The good ones will tell, you know, and they'll say it's continuous monitoring. Me as a founder, I'm constantly bumping in heads with my cto. I want to say real time because I like to promote things and move things. He goes, no, no, no, no, it's continuous monitoring. So I, I digress. He's the cto, his name is Aaron. So instead of waiting for a human auditor to spot the discrepancy, essentially like a spreadsheet, for example, AI monitors 247 looking at capital allocators. And this means that there's like a risk dashboard kind of built in that's actually live and, and it's not say OCR ing 3 month old PDF as an example.
- [07:55]
A
That's amazing. I appreciate that. And you're really getting people engaged, stakeholders. I think, as you mentioned, there's a huge opportunity to bring some law into the blockchain space here. And I'm glad to hear that you've got 30 secretaries of state on board. But having you bring smart contracts to replace paper contracts is brilliant. I know people talk about it, but you're actually making it happen, which I think is awesome. But the AI piece, yeah, absolutely. You're leveraging AI and I know that will be key in fraud detection and of course it'll be very proactive in monitoring and preventing fraud as you mentioned in one of those, one of those examples there with lenders. So I appreciate that.
- [08:38]
B
Cool.
- [08:38]
A
You often talk about replacing opaque trust with immutable truth. What role does blockchain play in creating verifiable accountability without slowing down real velocity?
- [08:51]
B
I fortunately in my last business was able to work very closely to someone I look up to very much. And that's a group of people. Maybe I'll just put it at Figure Figure Technologies. And it's Mike Cagney who has done a remarkable job leading the way in real world asset use case where he's tokenized, essentially added massive efficiency to the home equity line of credit space. I mean he's originating assets, they're using a very, very similar type of the technology, legal, financial and governance rails. He's originating Ewoks at $700 per deal where his competition is still doing it at around 10,000. But he's not doing this without an immediate truth. I mean this is essentially adding truth and replacing it with trust. And again, kind of quoting him and we've adopted this language into our business. I mean, why not learn from the best. And I believe that he, he is kind of leading this space right now. Why not, why not ride coattails? Why not let a lot of people who have spent more time and money solving problems, why don't you let them then lead you? So little, little tidbit for founders out there. Learn from other people's mistakes, don't make your own. So yeah, we've been very close to what he's been doing in a lot of ways and learning again from the figure ecosystem and the four big things that we've identified is specifically immutable truth being again lied to, something tangible. Blockchain is like a problem looking for a solution. Or is it a solution looking for a problem? In the case of small medium business lending or asset backed collateral lending, not done on say institutional grade or kind of IG level, really gets back down to the lifeblood of US economy, which is small medium businesses. So I'm very passionate about supporting this heartbeat of America if you will, and allowing these businesses to bring on capital to promote their business and move it forward and stay solvent and stay liquid without paying factor rates of 1.1.5. We really do this. I mean the AI component of it that really kind of led the answer to your first two questions is one thing, but it's really about blockchain. It's the blockchain is really the thing that is the moat and it's the thing that's less sticky right now for a lot of founders compared to AI. But I would really and or business people. But I really encourage people to start to look at things like Uniform commercial code, Article 12. This is very, very important because this is again defining an emergence of how asset backed collateral works. It's really a game changer. It creates literal legal framework and it's all written around something called the CER controllable electronic record. And so we use blockchain to tokenize these records, creating a digital birth certificate of sorts for literally every piece of collateral. And what this does is it ends the paper chase. Blockchain doesn't show down slow down deals, it accelerates them. This is all done through an immutable audit trail. So in a dispute, in a say a he said, he said, he said dispute, which can be very expensive, blockchain provides an unalterable ledger of who owned what and who it was pledged to. And say who has first priority. It turns the legal discovery process into a simple database query. This is something that's very efficient for small and medium businesses that are in dispute and or the lenders, the bank or non bank warehouse lenders or the investors into those markets traded through securities in the secondary market. And finally using smart contracts for compliance. Smart contracts automate the covenants of the loan. So if a borrower's collateral value drops below a certain threshold, the system will automatically trigger a notification or a margin call. Essentially ensuring accountability is baked into the code, not just the contract.
- [12:41]
A
That's awesome. Thank you for sharing a lot there to unpack. But at the end of the day you have surrendered yourself with some very successful people. You talked about your friend, your mentor in the blockchain space, which has helped obviously you grow and accelerate in your platforms and your growth. But blockchain is key. We talked about this the last time you're on the podcast. It doesn't slow the process. In your case, as you mentioned, it actually accelerates it and speeds are really a non factor now. And which I really like about blockchain is that immutable truth that Is there plain and simple. And I really like that. So I really appreciate that, Cole. And the last question of the day as we look ahead, Cole, how do you see AI blockchain and real time verification reshaping private credit markets over the next decade and what will define the most resilient lenders in that future?
- [13:34]
B
Yeah, I mean this is one of my favorite questions. This has been the nut everyone has been trying to trying to crack and let's call it the death of T&2 settlement. A decade may be too long. We will probably see it happen. I think we're seeing it happening right now with defi primitives kind of being baked into RWA and traditional assets, regulatory tailwinds and real market demand. And I feel like for the first time technology really has caught up to the problem. And I think over the next decade we'll move towards instantaneous liquidity. I think instantaneous liquidity does exist today. There are some platforms that really do offer this. I would say the liquidity within these platforms isn't super high, but it is actually there. This is something. And I can mention a few of these platforms for your listeners just because they're probably curious. You look at something like figure Democratized, Prime Centrifuge, Maple Finance, Ondo Securitize, Golden Finch, Morpho and I think go a long way. But these are the pools, if you will, that I see and is in my opinion that will be growing and be cut with more liquidity being able. And I know that they're very thirsty for assets. These pools are very hungry for assets, the people administrating these pools. And I see that what will happen is especially as these assets move on, when you verify the collateral and the lean priority in real time, there's no reason a loan shouldn't be funded within minutes versus weeks. I know, Brian, I'm cramming a lot of information in in a short period of time. But I believe that the value, the data is very valuable. And this use case specifically is packed full of signals that can allow us to move forward and really kind of show the world that yes, these two technologies work well with regulatory tailwinds and we can actually achieve these things without waiting for a lot of and spending a lot of time and money working with innovative solutions. I mean this really exists today and it can be built. I call the rise of programmable credit. We see credit that self adjusts based on real time business performance and real time business information. AI will ingest the SMB to small medium business accounting data via basic APIs and ingest and the interest rates will fluctuate dynamically based on the actual projected risk essentially. So the market making is done kind of real time democratizing the asset class. We talk about democratizing all the time when it comes to blockchain. Well, what does it really mean? Real time verification of private credit assets, in this case SMD assets, the secondary trading of merchant cash advance invoice factoring, inventory factoring, just as an example, asset backed or non asset backed lending. There's a very wide range of institutional and even retail investors that are looking at this system to significantly lower costs and ultimately cost of capital. I mean that's the holy grail is does this system, yes, the system that we're speaking of creates the flywheel to move faster at lower risk. But the big question is, is that does it reduce cost of capital? And that's the holy grail. That's what really we're aiming at. Everybody wins if cost of capital goes down. And then finally, what we're looking at doing with distributed ledger technology is defining, defining who the resilient lenders actually are. It's like we call them the winners. The winners are going to be the ones with not the biggest roller dexes or the biggest like who you know or not being the most trusted. It's the ones that are the most truthful. You don't have to have a gut feeling about a borrower anymore. The most resilient lenders will be beta first. Those who have opted into proof and not relying on trust, those who have moved from relational lending to computational lending. They are going to be the ones who didn't just adopt AI and blockchain as buzzwords, but integrated it and baked it into their the core of their, their lending management workflows.
- [17:32]
A
That's awesome. I really appreciate that. And like you said, a lot to unpack here. We could probably have a two hour podcast, but I think this is enough to whet my audience's appetite. But to highlight a couple things, I agree with you. The technology today is truly catching up to these solutions that are needed to be developed for today's problems. But I picked apart a few things. Love this move towards instantaneous funding. I think that's awesome in this day and age we live in. But collateral, collateral verification in seconds, that's unheard of. And this rise of programmable credit, I thought that was pretty interesting how that can rise and fall based on markets and that sort of thing. So many options here obviously for lenders, but at the end of the day, going to make this more efficient, more transparent. And like I said or you said, hopefully we'll be able to truly reduce capital by rolling out these solutions. So thank you and Cole, it was such a pleasure having you on again and I look forward to speaking with you real soon.
- [18:30]
B
Thanks Brian. Appreciate your time and keep up with the great work spreading the message.
- [18:34]
A
Bye for now.