As we kick off the new year, we reflect on what a busy 2018 it has been for Lendingblock. We have reached multiple milestones, and we are proud of how much progress we have made, despite at times, difficult market conditions. This year will be an important year for Lendingblock and the market as we will launch our lending exchange which we believe will be transformational for the institutional crypto market. And, we couldn’t be more excited about the year ahead.
We also recognise we could not have gotten to where we are today without the support of our community. For this, we truly thank you. We look forward to keeping you updated on our continued journey to bring securities lending to the digital asset economy.
At the end of November, we launched our institutional on-boarding. Since then, we have been working with about 100 clients on this due diligence process to ensure they are set up and integrated with the platform. We are currently taking these clients through our KYC and AML procedure to be approved to start using the platform when it goes live. This is an important process, and each one is taking us a couple of weeks to complete to our standards. We are proud to announce that QCP Capital, Magpie Capital, London Block Exchange, Neufold and Shiftmarkets are amongst these on-boarded clients.
In parallel with client on-boarding, we conducted a market survey with our target clients. The survey provided us with direct input on why, how and how much institutions plan to use Lendingblock. For example, clients shared their specific use cases for their borrowing and/ or lending needs, the loan terms they will be interested in, and the specific digital assets they will want to borrow, lend and use as collateral.
Highlights from the survey:
- ETH and BTC are the top two digital assets that our clients are interested in borrowing and lending, with some interest in XRP and other large assets in the top ten;
- ETH, BTC and stable coins are the top choices to be used for collateral;
- Demand for lending is biased towards loans of 30 days or longer, whereas borrowing demand is spread more evenly across loan terms including significant interest in 1 and 7 days borrowing. It will be interesting to observe how this impacts rates and liquidity, and where equilibrium is reached;
- Approximately 50% of clients expect to be lending or borrowing between one and five million dollars equivalent at any point, 25% between five million, and 25% above ten million;
- Asia, Americas and Europe are each well represented, with the split being close to 30/40/30.
Becoming a regulated entity has always been a key focus for Lendingblock. We know this is important for our clients, and we have been proactive in engaging with regulators. We are proud that in November, we received in-principal licence approval to operate as a DLT provider by the Gibraltar Financial Services Commission. As normal for the GFSC application process the preliminary approval was subject to satisfying a number of action points relating regulatory capital, governance and controls. We are working with the GFSC in order to satisfy these points, holding fortnightly calls with GFSC to update them on our progress in the run up to obtaining the full DLT provider license.
After our client Alpha testing in October and November which resulted in 500 loans being processed, the team has been concentrating on incorporating feedback, developing the internal tools needed to allow our operations team to do their jobs, including the critical process of liquidating collateral which necessitates significant tech and process integration with a wide range of OTC brokers.
We also quietly released the platform onto the BTC and ETH main nets and completed our first real (but very small) loans.
We are actively building deeper relationships with other firms in the crypto markets ecosystem. For example, we plan to integrate the Lendingblock platform with a number OMS trading platforms which will allow us to offer our borrowing and lending capability to their existing clients, and are exploring partnerships with custodians that will allow assets in custody to earn interest income.
Lendingblock is currently in discussions with a number of potential strategic equity investors from within the digital asset and fintech industry. This is driven by factors including regulatory capital requirements associated with finalising the DLT provider licence, market conditions, and a desire to maximise the value of the business.
Here at Lendingblock we truly feel we have made incredible progress to date, and over the past few months we have been vigorously testing the platform and making changes and tweaks as needed. Creating a product from scratch and trailblazing a new technology in a nascent and complex market sometimes means time frames shift and roadblocks pop up. We have withstood a lot of challenges along the way, and we continue to stay acutely focused on delivering a great product. We have been listening to what our clients are telling us and have also spending some time reassessing market dynamics. Our intent is to launch when we, our regulators, and our clients are 100% ready, and to attempt to do so beforehand would not be responsible or sensible. We are expecting that this will now be in Q2, and our team are continuing to work hard with our clients, partners and regulators to make that happen.
Regards and best wishes for 2019!