It may have been heralded as the key towards financial inclusion, but Bitcoin still has a ways to go before it can finally bank all of the unbanked. Can lending bridge the gap between the current financial system and the emergent cryptocurrency market?
For coin lending platform DrawBridge Lending, the answer is a resounding yes.
Jason Urban, CEO of the Chicago-based investment and lending firm, describes lending—both for fiat and crypto—as an essential tool for assimilation. In an interview with CoinGeek, Urban explains:
“For more mainstream adoption of digital assets and cryptocurrency, we need a more developed ecosystem. Ancillary businesses beyond trading and exchanges give greater flexibility to other businesses like vendors, miners, and agencies that require payment. Leverage allows for increased buying power and flexibility for holders. Moreover, lending is vital for treasury management for businesses dealing in or accepting cryptocurrencies as payment.”
DrawBridge Lending is a relatively new player in the crypto lending services market. The firm, however, is drawing on its decades of traditional market experience to offer better products to the crypto space. DrawBridge is a licensed lender capable of providing commercial loans in 47 states and the Washington, D.C., and is a U.S. Commodity Futures Trading Commission (CFTC) regulated commodity trading advisor (CTA) and commodity pool operator (CPO).
“The DrawBridge team has decades of experience in the trading industry with firms such as Goldman Sachs, DRW (Cumberland Mining’s parent), and ABN Amro,” Urban tells us. “The key differentiator for DrawBridge is our use of financial markets and instruments to offer better products to the marketplace. The lending products we structure have no margin calls and all our loans are non-recourse. That means we will never ask a client for more coin or fiat if the price of the asset falls. Additionally, the cash we advance to the client is only secured by the asset pledged. We will never look beyond the pledged asset for the settlement of the loan.”
DrawBridge recently did just that with Bitcoin SV (BSV). The firm loaned a seven-figure sum secured by BSV and SegWitCoin BTC with a 3% interest rate—below the standard market rates. And because DrawBridge offers non-recourse loans, the borrower is able to retain BSV’s price appreciation while still generating sufficient returns to pay their loan. (Learn more about it here.) Urban admits receiving a cash loan against cryptocurrency is a relatively risky concept, especially for lenders, which are conservative creatures by nature.
‘Long term greedy’
“Volatility of the underlying asset is not viewed as a positive in those circles and crypto may be one of the most volatile asset classes on the planet,” Urban said. “Since we at DrawBridge utilize the wholesale lending market to source our lending capital, it is imperative that we ensure the lenders get their principal back. We employ derivatives to not only protect the principal but to also create income for the coin holder.”
DrawBridge follows Goldman Sachs’ mantra of being “long-term greedy,” which it does “by putting the customer first and offering a ‘white glove’ approach” to its clientele.
Urban explains, “We are uniquely positioned in that we can help monetize a client’s crypto but also produce some income to buy down their rate. All this is done with their full understanding and permission.”