- Former Cantor Fitzgerald executives launch Tokenet, a crypto lending platform, anticipating a surge in demand with the potential approval of spot Bitcoin ETFs.
- Tokenet aims to address the crypto lending gap left by the collapse of several lenders in 2022, offering robust risk management tools for institutional clients.
The Rise of Tokenet: A Strategic Pivot in Crypto Lending
In the wake of last year’s crypto lending implosion, a group of Wall Street veterans from Cantor Fitzgerald have unveiled Tokenet, a crypto lending platform designed to empower operators of anticipated spot Bitcoin exchange-traded funds (ETFs) once they receive the green light from U.S. regulators.
I've gotten a lot of questions regarding my current view on Spot #Bitcoin ETFs over the last couple weeks. This is the first section of the note I put out yesterday with @EricBalchunas.
TLDR: Our view hasn't changed much https://t.co/dRAm5IsdQf pic.twitter.com/Htsi3n2XxV
— James Seyffart (@JSeyff) October 13, 2023
Bridging the Void in Crypto Finance
The collapse of titans in the crypto lending sector like Genesis and Celsius carved a deep void in the market. Tokenet, a brainchild of Digital Prime Technologies based in Jersey City, New Jersey, steps in to fill this breach. The service is already operational for clients including Xapo Bank, facilitating the lending of digital assets to partners like EDX Clearing and Hidden Road Partners. Its offerings are not merely transactional; Tokenet provides sophisticated risk management tools along with a communication feature to streamline loan management.
This forward move coincides with a palpable rise in optimism that the U.S. will greenlight an ETF backed directly by Bitcoin in the imminent future. Digital Prime harbors expectations that such approval will trigger a domino effect, quenching the ETF issuers’ thirst for Bitcoin borrowing and kickstarting a renaissance in the crypto lending market.
Anticipating ETF Dynamics
The mechanism of ETFs is complex yet elegant. Specialized traders, known as authorized participants, collaborate with issuers to manage the ebb and flow of shares in response to demand shifts. This dynamic keeps the ETF price in sync with its net-asset value. When unexpected price spikes occur, rather than buying outright, these participants may opt to borrow Bitcoin through services like Tokenet, intending to acquire it later at a more favorable price.
The masterminds behind Tokenet are not novices in the realm of high-stakes finance. James Runnels, the CEO, is a former managing director at Cantor Fitzgerald. Similarly, Digital Prime’s COO, Bob Sherry, and head of margin and risk solutions, Glen Garofalo, boast impressive tenures at the financial powerhouse.
The operational legitimacy of Digital Prime’s subsidiary DLCC Prime is backed by membership with the Financial Industry Regulatory Authority and registration with the Securities and Exchange Commission. Moreover, the venture’s inception was bolstered by seed funding from influential investors, including TD Cowen Inc.
As the drumbeat for the approval of spot Bitcoin ETFs grows louder, the stage is set for Tokenet to capitalize on the ensuing institutional influx, poised to redefine the contours of crypto lending.
