Digital Prime Technologies is set to release its automated lending platform Tokenet at the end of Q1 2023. The platform will enable institutional dealers to post borrow needs, broadcast lend availability and select collateral haircuts. It seeks to provide loan lifecycle management, as well as a number of counterparty risk tools.
Courtney Campbell will spearhead the institutional dealer-to-dealer digital asset lending platform that hopes to build a bridge connecting traditional finance to digital asset lending and prime brokerage markets.
Since the inception of Digital Prime Technologies in 2019, regulation, compliance, transparency, best practices and corporate governance have all been core to the firm鈥檚 DNA, according to Campbell. The provider of prime brokerage technology solutions was formed with a focus to build an enterprise-grade product that was embedded with best practices that could plug into traditional financial institutions.
鈥淲e are emulating what is seen and works in traditional finance and applying that to digital assets,鈥� says Campbell. 鈥淭oday, this approach is more relevant than ever, based on what we have all witnessed in the digital landscape in the past 12 months.鈥�
Speaking to SFT, Campbell indicates that Tokenet will mirror traditional finance lending platforms to allow its clients to enter the world of digital asset lending, in the same familiar confines that they are accustomed to from traditional finance. 鈥淲e know the language that our clients speak and we have created a system that speaks the same language,鈥� Campbell adds.
Tokenet looks to resonate with clients from an operational, compliance and business opportunity perspective. Users are able to post needs and axe lists, set terms of loans, agree on acceptable collateral and have the support of the system for a full suite of reports.
Having access to a platform that emulates traditional finance creates opportunity for participants in that space to enter into digital asset lending, as those tools 鈥渃urrently, do not exist鈥�, explains James Runnels, Digital Prime Technologies co-founder and CEO.
According to Runnels, there have been some painful moments in the digital asset lending space over the past 12 months. 鈥淎s rapidly as that business has grown, from inception to today, there were a lot of blow ups 鈥� mostly due to a lack of best practices in the digital asset space,鈥� Runnels says.
The 鈥渂low ups鈥� were reflected in international headlines that announced the names of several digital asset lending firms that entered bankruptcy. The world watched as crypto trading and derivatives platform FTX filed for Chapter 11 bankruptcy in November 2022 in the District of Delaware. Digital asset lender BlockFi also filed for bankruptcy later that month and crypto lender Celsius did so four months previous.
鈥淲hile what we witnessed could essentially be considered a stain on the space, within that chaos, you can find opportunity,鈥� Runnels explains. 鈥淭hat is the opportunity that we are solving for, to clean up that non-traditional approach to digital asset lending, provide traditional institutions with the tools that they are accustomed to and manage the cycle of a loan in a very efficient, best practice type manner.鈥�
Tackling the hurdles of recent headlines, Campbell believes that Tokenet will bring back confidence and trust in the market. Efficient markets require borrow and loan activity, which have been in decline recently, according to Campbell. She predicts that the use of proper governance and risk management tools will bring participants off the sidelines and back into the digital asset lending space.
Tokenet will support users in managing risk and collateral. Clients will have the ability to post collateral bilaterally or in an FBO triparty account with a qualified custodian. Lenders and borrowers using Tokenet will have a transparent view of their collateral, as well as a real-time valuation of that collateral. A full suite of APIs, among other technologies, will be incorporated to provide clarity and transparency for each Tokenet user.
The platform offers a full robust chat functionality that aims to help users to speak to one another and negotiate on collateral and mark-to-markets. In addition, users will have the ability to turn on and off different counterparties, set collateral haircuts and assign credit limits, depending on their risk parameters.
Staying ahead of the game
After spending the entirety of her career in the securities finance industry across a number of Wall Street firms, Campbell made the jump to digital assets in 2022. Viewing firsthand how digital asset lending differs from traditional lending, Campbell says the contrast was day and night.
鈥淲hen James and Bob approached me to spearhead the launch of Tokenet I jumped at the chance, because I knew something like this was desperately needed for the market to mature and to get to that level of institutional adoption,鈥� Campbell recalls.
She continues: 鈥淭okenet and Digital Prime Technologies, as a whole, have built the full tech suite that will enable tradfi to move into digital asset lending and prime brokerage. With our technology, our team and our guidance, the market will be able to uncover new revenue streams and meet their client needs in the digital asset space.鈥�
Financing and lending is the backbone of traditional capital markets, Runnels notes. Without having a safe way to effect that, it will be hard to accomplish mass adoption, from an institutional perspective, in the digital asset world. Tokenet was designed to solve this.
Runnels states that Tokenet provides only a small learning curve for users, as it emulates what has already been accomplished in traditional finance. He explains: 鈥淧articipants are already accustomed to the practices that are embedded in Tokenet, the only difference really would be that instead of traditional equity securities, these are now digital assets.
鈥淭he movement, the operational practices, the governance behind it all is similar to what participants are using already. We feel that Tokenet will be a seamless integration into tradfi, to solve for the lack of safe borrowing and lending in digital assets.鈥�
Currently, Campbell believes that there remains a 鈥渕assive鈥� opportunity in capital markets, with a large amount of revenue 鈥渟itting in the investment bank鈥� 鈥� one of the main opportunities that digital assets bring to the prime brokerage space. Moving forward, Campbell predicts a significant uptick for traditional finance to offer prime brokerage in digital assets.
Following Campbell鈥檚 comments, Runnels indicates that due to the retail-driven nature of the digital asset sector, a number of prime brokerage tools were not brought to market properly 鈥� something Digital Prime Technologies aims to combat with its prime solutions tech stack.
鈥淗ow prime brokerage has been defined in the digital asset space is definitely not the same way as how traditional finance has defined prime brokerage,鈥� Runnels highlights. 鈥淲hen regulation does become clearer for regulated banks and broker-dealers, I think we are going to see some swift movement into the prime brokerage space, as we define it from tradfi and we are well positioned for that. It is one of our core offerings, there is a lot of opportunity there to do it properly.鈥�
Digital Prime Technologies has received positive feedback from the industry regarding its Tokenet platform, according to Runnels, something that is indicative of what the firm has built and what is needed in this space.
He says: 鈥淭here is a lot of grey space in digital assets 鈥� specifically in lending and in prime 鈥� we are here to take that grey space and make it black and white, and define it in a manner that folks are accustomed to and need.鈥�
鈥楤est practices鈥� is not just a term, it is how Digital Prime Technologies operates, says Campbell. She concludes: 鈥淪taying ahead of the game by bringing the right team in is how we are going to make a difference and get things safely moving in the right direction. It is all embedded in our product suite. It reflects the collective experience and culture of our firm.鈥�
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