I was not planning to work again, but when the opportunity to become Marketing Director of Digital Lending Capital Corp (DLCC) arose, I could not resist. Not only is its Founder and CEO, James Runnels, a grizzled veteran of the legacy Prime Brokerage industry; whose prescience about institutional participation in the crypto market has proven itself, in spades; but how about that — 20 years ago, we both worked at Salomon Smith Barney in New York City!
Last month, upon introduction by a mutual friend, he told me that 18 months ago, he commenced development of a unique, full-service, institutional grade crypto Prime Brokerage software and service solution, to bridge the gap between legacy finance and the emerging Digital Age. This project, Digital Lending Capital Corp — discussed in my introductory article last month — is launching Version 1.0 NOW, for public consumption.
This extremely complex task was undertaken whilst Bitcoin was amidst a bear market, with essentially no mainstream expectation that institutions would arrive. However, with Version 1.0 launching NOW, his timing could not have proven better. Clearly, the explosion of new, high profile investors in Bitcoin — from high-net worth individuals, to corporations and even governments; as Bitcoin rapidly approaches its all-time high price; validates his actions — and my view that Bitcoin will become a, if not the global monetary standard.
Regarding Prime Brokerage (full-service trading and back office solutions), here is what Raoul Pal, a highly respected crypto expert with deep legacy financial experience, said in an October 19th interview at the 31 minute timestamp.
“The (U.S. Office of the Comptroller of the Currency) just allowed custody of Bitcoin. That’s a code word for (crypto) prime broking for hedge funds. That’s coming, so Paul Tudor Jones was right.”
Prime Brokerage has been one of Wall Street’s most profitable businesses for decades, as it enables the disposition of myriad products and services, trade commissions, and infinite networking opportunities. This is why essentially all crypto banks and brokerages have RAPIDLY commenced an “arms race” to build Prime Brokerage capability, now that the long-awaited “Institutional Wall of Money” is arriving — with an Eagle-eye focus on January 1st , when calendar wise, the majority of hedge funds launch.
In legacy finance, Prime Brokerage incorporates all aspects of the institutional investment process —from trade settlement to custody, margin, and securities lending. All of these services will be utilized in the crypto world — as well as other, Digitally-unique services like staking.
However, as of now, the crypto Prime Brokerage space is highly fragmented, with most players only occupying one or two of these segments. Moreover, we are not aware of any full-service, institutional grade crypto Prime Brokerage software solution — which, as noted above, has taken DLCC 18 months to build, given the coding complexity involved.
This is why we are so excited to launch version 1.0 NOW, which we will discuss in later communications — and why we believe DLCC will be a crown jewel asset in the crypto Prime Brokerage space.
To that end, the “arms race” has exploded in recent months, starting with Coinbase’s acquisition of Tagomi in May — clearly, with the goal of building an in-house Prime Brokerage platform…
“The addition of Tagomi will round out our product suite for the fast-growing institutional trading market. It will allow us to offer custody, professional trading features, and prime brokerage services on one platform, giving sophisticated investors the seamless, powerful trading experience they have come to expect in equities and FX markets.”
Clearly, first moving crypto exchanges have enormous Prime Brokerage opportunities. However, they will unquestionably, rapidly, be challenged by other financial entities — particularly now that the regulatory tide is rolling in crypto’s favor.
To wit, the aforementioned OCC, or Office of the Comptroller of the Currency, announcing in July that Federally-chartered banks can be crypto custodians. And shortly afterwards, Wyoming (which this week, elected the nation’s first highly visible, strongly pro-Bitcoin Senator) awarding the first- ever State crypto banking charters — to Kraken in September, and Avanti in October. Throw in the rapid expansion of crypto services by major institutions like Fidelity; usage of Bitcoin as a store of value asset on corporate balance sheets like MicroStrategy and Square; and the emergence of major legacy investors like Paul Tudor Jones, Bill Miller, and Stan Druckenmiller (and likely, Abigail Johnson of Fidelity); and you can see why the race to service these mega-accounts is ON!
Another major player in the exploding crypto Prime Brokerage race is Galaxy Digital, the high profile crypto investment and banking firm run by Mike Novogratz — who prior to becoming famous in the crypto world, was a well-known legacy finance investor.
He has been extremely vocal about his goal of making Galaxy a premier crypto bank — and this week, proved it by acquiring BlueFire Capital and DrawBridge Lending, bringing trading and lending capabilities to its growing institutional service platform.
“DrawBridge and Blue Fire’s market-leading capabilities further reinforce our position as a go-to trading desk for institutional investors and traditional asset managers seeking exposure to digital assets,” said Christopher Ferraro, President of Galaxy Digital. With their expertise now under the Galaxy umbrella, we hope to accelerate the pace with which we continue bringing original trading products and services to the market.”
In our view, DLCC could not be better positioned to capitalize on this exploding market trend — particularly as, from what we can see, DLCC’s crypto Prime Brokerage software is as advanced as any in the space, if not the most advanced…that NOW, is be launched.
So, if you are currently operating a crypto hedge fund; or intend to launch one January 1st; we encourage you to contact us, so we can demonstrate 1.0 for you NOW.
Digital Lending Capital Corp is Crypto’s first full-service Prime Brokerage software solution — fully online, and actively operating in today’s exploding digital market. For more information, please go to https://www.dlcc.co/; email me, DLCC’s Marketing Director, at andy@dlcc.co; or Mike Hamill, Global Head of Hedge Fund Sales, at mike@dlcc.co.