This interview is part of our new Blockchain In Lending series, where we interview the world's leading thought leaders on the front lines of the intersections between blockchain and lending.
In this interview we speak with Jason Urban, CEO of DrawBridge Lending, to understand how his company is using blockchain to transform the lending business, and what the future of the industry holds.
1. What's the story behind DrawBridge Lending? Why and how did you begin?
JU: The team at DrawBridge all have backgrounds and storied careers in the financial markets, specifically centered around derivatives. We all believe that digital assets will revolutionize money and continue to be adopted as a medium of exchange. As is the case in any healthy financial ecosystem, supporting services such as the ability to borrow and lend in a variety of currencies is necessary for broader adoption. We utilize our deep understanding of risk management and regulatory compliance to access deeper pools of liquidity in more traditional financial markets. We are the bridge from the traditional institutions to the new digital asset class.
The adoption of digital assets requires a more developed ecosystem. Ancillary businesses beyond trading and exchanges give greater flexibility to other businesses like vendors, miners, and agencies that require payment. Lending (both fiat and crypto) is essential for this assimilation. 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. Furthermore, fiat lending against cryptocurrency allows for greater buying power and affords holders with the ability to redeploy capital or add to positions as they see fit.
2. Please describe your use case and how DrawBridge Lending uses blockchain
JU: Holders and users of crypto assets have limited uses for their holdings currently. We offer a number of products that give these constituents more choices in how they utilize their holdings. First, we offer fiat loans secured by digital assets. These loans unleash the buying power of the asset without relinquishing control of the asset or the tax consequences of selling. These loans are great for holders that need to make fiat payments and do not wish to liquidate their holdings. We differentiate ourselves in this space as our loans have no margin calls and are non-recourse to the borrower as we will never look beyond the pledged asset for the settlement of the loan.
Additionally, we offer the ability for individuals to lend their assets to other users. While the benefits of lending out your coin are simple, the holder receives a yield on their asset, there are many hidden challenges. Whether it’s a proprietary lending company or “saving’s account”, the extensive credit exposure and the cross contamination that avails itself in current models put lenders’ assets at risk. There is a need for greater transparency into the credit worthiness of their counterparties. Our coin lending platform addresses these issues.
3. Could you share a specific customer/user that benefits from what you offer? What has your service done for them?
JU: We recently had an excellent use case. We supplied a fiat loan to a miner looking to expand his operations. The borrow pledged coin to our third party, qualified custodian and we issued a fiat loan in the amount of 75% of the pledged collateral. The miner was able to get the cash he needed but still maintained his upside exposure. BTC rallied 25% in the following weeks. The miner still owns his coin but also received the cash he needed to grow. That loan does not have a margin call and is non-recourse. He owes us nothing until the end of the loan and we will never ask for more money. Had the miner sold his coin for his fiat needs, he would not have benefited from the run up in price. In this way, he received the fiat he needed, was never at risk for putting up more collateral, and he was able to participate in the increase in value of BTC. At the end of the loan, we will return his BTC to him when he satisfies the interest and principal.
4. What other blockchain lending use cases are you excited about?
JU: We are very excited about digitization of other real assets. As commodities like bullion, oil, and agricultural products get put on a blockchain, we feel there will be an opportunity to lend in this space. The digital asset space is small when compared to other asset classes. We believe that these other assets will gradually migrate to a blockchain. When they do, we will be there to help extend leverage and allow holders to extract value.
5. Where will DrawBridge Lending be in five years?
JU: We will be a full-service financial services business addressing the needs of the marketplace. We anticipate being the provider that allows the client to receive leverage (fiat lending), earn interest (coin lending), receive risk management advice and help with portfolio construction and management.