Institutions just got one step closer to going “all in” on crypto.
The Gibraltar Financial Services Commission (GFSC) — the chief regulatory body of one of the top crypto friendly countries — granted a Distributed Ledger Technology (DLT) license to Lendingblock earlier this month. An institutional exchange provider, Lendingblock could launch the world’s first institutional digital assets lending exchange as early as 2019.
We caught up with CEO Steve Swain to get the details on why it matters, especially for institutions looking to get into the crypto game.
1. You have your own interesting personal background in finance and tech. Share that?
I have spent the past 15 years in financial services technology, holding hands-on management roles with global banks, including Macquarie, Credit Suisse and UBS. Over those years I worked advising institutions on regulatory technology and fintech across three continents in Sydney, New York and London.
I also spent some time at a big-four technology consulting firm, focusing on financial services and the convergence of traditional financial services and the crypto economy. This is during that time that I realised that proper market infrastructure was desperately needed!
2. For those who aren’t familiar with it, what does Lendingblock do?
Lendingblock is an open exchange for matching borrowers and lenders of cross-chain crypto assets, bringing securities lending to crypto markets. To date, institutions have been underserved by the crypto financial market and its fragmented infrastructure. Lendingblock’s exchange is providing this much-needed infrastructure for institutional investors to use digital assets as a part of their everyday investment strategies and capitalise on volatility.
Hedge funds, asset managers, family offices, VCs and exchanges will use this secure lending exchange to tap into the institutional crypto market ecosystem to find liquidity, generate additional sources of alpha, facilitate arbitrage strategies, settle shorts and capture directional views of market participants.
Digital asset holders can lend out their securities to borrowers in the short to medium term and receive regular interest payments in return. Borrowers can obtain the digital assets they need without having to buy them outright on the open market.
The Lendingblock exchange provides borrowers & lenders with transparency through full price discovery, smart contract technology and KYC and AML checks.We’ve also recently announced a partnership with Vo1t, digital asset custodian to provider military-grade security to keeping clients’ assets safe.
3. Why is securities lending important?
Securities lending plays a critical role in mature capital markets. Today the US stock market has $15 trillion assets in circulation with 12.5% of these assets or $2 trillion on loan. $4.5 billion of interest is earned on those loaned assets. Our observation is that the same drivers, and a need for liquidity, also apply to digital assets. The current digital asset market has $200 billion of assets in circulation and only .1% of those assets are being loaned out. This means that by 2021 the digital asset lending market has potential to become a billion dollar business.
4. What is the value of a full DLT license?
As a true believer in the importance of getting our industry into regulatory shape, seeking authorisation from a leading regulator was always a priority for us.
The GFSC has developed one of the most advanced DLT regulatory frameworks in the world. Lendingblock had to undergo an extensive application and approval process that included meeting 9 principles as part of the GFSC’s regulatory framework.
The in-principle approval as at DLT provider puts Lendingblock well on track to launch the world’s first institutional digital assets lending exchange as a fully regulated DLT provider early in the new year. This also makes us well-positioned for our continued discussions with other regulators, such as the CFTC and the SEC, as we continue to ensure that our exchange meets its strategic aim of operating compliantly across multiple jurisdictions.
5. What is your services timeline?
This week we are delighted to announce that Lendingblock is open for institutional onboarding. Up until now, our alpha testnet has been live and trading with over 30 institutions worldwide.
Following this successful testing period, qualified institutions can, as of this week, sign up for access and will be able to commence borrowing and lending BTC, ETC, BCH and LTC across various maturities. The lending exchange will officially go-live in early 2019.
You can reach out to my CMO, Kelly Pettersen, [email protected].