(Bloomberg) -- Several ex-Cantor Fitzgerald executives started a crypto lending platform with the expectation that it will serve operators of spot Bitcoin exchange-traded funds once they gain US regulatory approval.
Digital Prime Technologies’ Tokenet already lets clients including Xapo Bank lend out digital assets to others, such as EDX Clearing and global institutional credit network Hidden Road Partners, the Jersey City, New Jersey-based company said Tuesday. The setup offers risk-management tools and a chat functionality that lets users manage loans.
The firm joins a slew of exchanges and other companies, such as Swan Bitcoin, who are launching products to fill a void left by the demise of crypto lenders Genesis, Celsius, BlockFi and others. The crypto lending industry’s collapse last year left market participants with a dearth of options, and helped depress trading volumes into 2023.
The launch also coincides with rising optimism that an ETF holding Bitcoin directly will be approved in the US within months. If that happens, Digital Prime expects ETF issuers will have a huge thirst for borrowing Bitcoin, and will jump start the fledging crypto-lending industry.
“It’s almost like a rebirth of crypto lending,” James Runnels, the company’s chief executive officer, said in an interview.
For example, if authorized participants need to create new inventory in the ETF, but Bitcoin’s price suddenly jumps, they may chose to borrow the cryptocurrency, instead — and to buy it later at a lower price, Runnels said.
With ETFs, specialized traders known as authorized participants can work with an issuer to create shares when demand is building. When buyers’ appetites cool, participants redeem those shares with the fund’s sponsor to reduce the supply, keeping the ETF’s price in line with its net-asset value.
Runnels was a managing director at Cantor Fitzgerald, while Digital Prime’s Chief Operating Officer Bob Sherry was COO for Prime Services at Cantor until 2018. Glen Garofalo, head of margin and risk solutions, was managing director of prime services, head of margin, at Cantor, according to his LinkedIn profile.
Digital Prime’s DLCC Prime subsidiary received Financial Industry Regulatory Authority membership last year, and can operate as a broker-dealer registered with the Securities and Exchange Commission. Digital Prime received its seed funding from investors including TD Cowen Inc.