Quick Info

• Degree - Master of Financial Risk Management
• Graduating year - 2021

What is your project title?

Stablecoins Global Expansion & Open Lending Exploration

Who is your project sponsor (i.e, company)?

Stablecorp

What challenge were you asked to solve by your sponsor company? 

The overall goal with Stablecorp was to assist the team in diving deep into the stablecoin market and open lending market. For the purpose of researching, we were expected to have a defensible estimate of the Canadian stablecoin market size based on well-researched and relevant U.S. comparables. From the foreign exchange hedging side, a hedging strategy in place enabled Canadian-dollar-based stablecoins (QCAD and VCAD) issued by Stablecorp to access U.S. dollar stablecoins use cases where relevant.

To provide risk management prospects, we were expected to deliver a data-driven risk analytics model for underwriting the existing open lending platforms included in the underlying fund. Also, by conceptualizing a fully transparent rehypothecation circular lending model, we were able to monitor the on-chain leverage procedure in real-time. On the technology side, we were asked to end up building a real-time data processing model and performing automated custom queries to analyze multiple facets of on-chain data.

What background knowledge and technical skills were absolutely essential for you to complete this project successfully?

First and foremost, it's important to have basic knowledge of stablecoins, DeFi, and other fintech-related topics. This is a rapidly changing industry, with numerous emerging projects launching every day. Therefore, it is crucial to stay inquisitive and curious. Due to the decentralized nature of DeFi, the trading information, project protocol, and open-source code are easily accessible online. Thus, knowledge of web-scraping and data storage is essential for this project.

We mainly utilized API to scrap on-chain cryptocurrencies trading data, built real-time monitoring models with Python, stored data and models in the Azure SQL database. To establish a rehypothecation model, strong knowledge in financial modeling and financial statement analysis could help transform complex DeFi protocol into some ratios or key indicators that can be analyzed and assessed.  Last but not least, conceptualizing foreign exchange hedging strategies and researching U.S stablecoins use cases require a high level of familiarity with derivatives.

What kind of opportunities did you have to interact with other staff members at the company during your virtual work experience?

Stablecorp is a relatively small-size company, so we have access to almost all of our employees, including the CEO, CIO, risk management department, business development department, and data analytics team. Stablecorp is a partnership between 3iQ, which provides leading crypto asset management in Canada, and Mavennet, a recognized leader in blockchain technology. Therefore, we also have close relationships with the staff members at those two companies.

We had weekly virtual meetings with all staff members at Stablecorp to summarize the work streams, along with setting goals and assigning tasks for the following week. With our supervisor, we had daily routine meetings to report our work progress and discuss any questions that we might have.

Do you feel that the project helped you to better understand the risk management industry, and has it changed your ideas about where you'd like to work after graduating?  

The project has helped us deepen our understanding of risk management in two aspects – credit risk and market risk.

For credit risk, we developed the comprehensive risk rating model with tailored rating criteria for centralized and decentralized open lending platforms, respectively. Coupled with due diligence, the credit rating model is pretty similar to the borrower rating procedure originated by banks.

For market risk, we designed the foreign exchange hedging strategies to support the newly issued Canadian stablecoin VCAD. The strategy was aimed to mitigate the market risk by using forward to lock in the FX rate. As a result, we could make a Canadian dollar vehicle to access the U.S. dollar-dominated digital asset fund by contributing the Canadian dollar directly.

This project didn’t change the career path I envisioned. As the value of Bitcoin spikes, related industries are booming. Traditional financial institutions, such as banks, consulting firms, or pensions, are also considering incorporating cryptocurrencies into their portfolios or assets.

This experience at Stablecorp provided more opportunities and possibilities for my future career development.

Which courses and sessions at Rotman have you found most beneficial to your project?

Advanced Investment & Innovations in Financial Technology. These two courses trained and improved my coding skills in Python. The special blockchain lectured held in Innovations in Financial Technology also strengthened my foundation of knowledge in Fintech.

Was the experience and overall project outcome expected?

Every staff member at Stablecorp is passionate about the cryptocurrency industry and is willing to give us as much help as possible. Our supervisors trained our capabilities to generate solutions to problems while also cultivating our abilities to provide creative insights. Fintech is an emerging topic. As of today, the Canadian-dollar-based stablecoins lending market remains a blue ocean. All the achievements we accomplished generally met the expectations for the current phase. Stablecorp is now in the progress of global expansion, so our project was contributed to the company’s short-term achievements and long-term strategic plans.

What are your tips and advice to students completing the Risk Management project next year?

Typically projects are held face-to-face, however, due to covid, all projects were moved online. For next year's MFRM candidates, the industry project is likely to move from remote to on-site. It takes a lot of effort to complete a project that is relevant to the real world. After this nine-week project, you could expand the industrial networks and have the opportunity to leverage your skills while developing the gaps in your needed skillsets.

My advice is to choose a topic that really interests you and devote yourself to it.

Any parting thoughts?

Special thanks to our sponsors, Alex McDougall, Julie Paterson, Kesem Frank, Jean Desgagne and Marc Doucette.

The Master of Financial Risk Management is a full-time program designed to prepare ambitious young professionals for careers in risk management and finance.