Digital Lending Capital Corp. (DLCC)—a new private company—offers full-service prime brokerage solutions for digital assets.
"Our all-in-one user interface leverages both API and SaaS product offerings to connect clients with a growing network of liquidity providers to transact, borrow and lend digital assets, and manage collateral," states DLCC, "Our product suite also offers traditional prime brokerage services."
"Prime brokerage is a bundled group of services that investment banks and other financial institutions offer to hedge funds and other large investment clients that need to be able to borrow securities or cash in order to engage in netting to achieve absolute returns," states Investopedia.
Financial institutions need a minimum account size to be able to transact with prime brokers and all prime brokers have different requirements and fees.
"There would not be hedge funds if it weren't for the large, bulge-bracket investment banks like Goldman Sachs and Morgan Stanley and Bank of America Merrill Lynch and Credit Suisse that provide them with these prime brokerage services," confirms Forbes.
"Our platform is agnostic across the board," stated James Runnels, co-founder, CEO and director of DLCC. "Our clients can trade Bitcoin or Ethereum, or any other digital asset. We don't care if it goes up or down, left or right. Volatility is our friend. That's what we care about."
"If crypto is going to be considered a real asset class—which I think we are on the verge of now—you need traditional players to come into the space and participate in the manner that they're accustomed to, from a regulatory perspective," added Runnels.
All of DLCC's clients go through a rigorous KYC (Know Your Customer) and AML (anti-money laundering) process before they can be on-boarded.
We asked Runnels if DLCC is set up for retail investors.
"In our current iteration, we can only onboard institutional clients," explained Runnels. "That's defined by investors with greater than $5 million in assets. That said, we are in the process of submitting a member application with FINRA (Financial Industry Regulatory Authority) and the NFA (National Futures Association) to be a registered as broker-dealer."
Once the broker-dealer registration is finalized (180-day process) DLCC would have the ability to onboard "sophisticated retail clients."
Streetwise Reports did a demo on DLCC's platform and—despite the complexity of the service—found it entirely intuitive.
Aves Lair, a New York City-based accelerator that supports start-ups in the verticals of AI, blockchain, cloud and data, has made an investment in DLCC.
"DLCC, a member of our Winter 2020 accelerator cohort, has built a suite of prime services that allows traditional asset managers and allocators—including global macro hedge funds, family offices and endowments—to participate in digital assets," explained John Payne for Aves Lair on Hacker Noon.
"DLCC's prime services suite makes participating in digital assets less confusing and fragmented for institutions, can be plugged into a firm's existing infrastructure, and borrows best practices and rules and regulations from traditional asset classes," continued Payne.
"The product offering allows users to trade digital assets through the company's prime brokerage platform, locate and borrow digital assets, short digital assets with cutting edge tools to manage directional risk, lend digital assets to augment yield, and manage collateral across users' open positions, as well as profit and loss."
Aves Lair states the DLCC's platform "mitigates the fragmentation that discourages traditional institutions from participating in digital assets."
"Most everyday investors understand the operational components of buying and selling traditional stocks," explained Runnels. "That's ingrained in everyday finance. DLCC's software embeds those operational components with all the rules and regulations and best practices that govern those traditional securities."
"The real meat on the bone—the most financially meaningful part of prime brokerage and traditional finances—is borrowing, margin financing, all those tools that sophisticated fund managers use to manage directional risk," added Runnels.
"DLCC clients have the ability not only to just buy and sell, but also borrow and lend in one ecosystem, with one counterparty," explained Runnels, "In crypto prime today, there are usually multiple counterparties. That is complicated and makes investors uncomfortable."
"When traditional hedge fund allocators, endowments and family offices allocate capital to a fund manager, they know that their prime broker will have all the tools to manage directional risk in one relationship versus having three or four or five different relationships," added Runnels.
DLCC also has a comprehensive white label solution for institutions looking to offer a full suite of prime services to clients.
We asked Runnels if he planned to take DLCC public.
"It's a possibility that we will do an IPO," stated Runnels, "But, in my opinion, there's a higher likelihood that DLCC gets acquired by a traditional financial entity before an IPO takes place."
"Typically, prime brokers are created through acquisitions," explained Runnels. "These businesses need to stay relevant. DLCC's technology is an extension of their core business—lending and borrowing. We could plug our platform right into a bank today. For these reasons we feel that an acquisition is more likely than an IPO."
"DLCC's prime services offering has the potential to revolutionize how traditional institutions participate in digital assets and help the traditional finance world lean into, embrace and adopt digital assets," stated accelerator fund Aves Lair.
1) Lukas Kane compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. He or members of his household own securities of the following companies mentioned in the article: None. He or members of his household are paid by the following companies mentioned in this article: None. His company has a financial relationship with the following companies referred to in this article: None.
2) The following companies mentioned in this article are billboard sponsors of Streetwise Reports: None. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the decision to publish an article until three business days after the publication of the article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases. As of the date of this article, officers and/or employees of Streetwise Reports LLC (including members of their household) own securities of DLCC, a company mentioned in this article.