Lee Neubecker(LN): Hi, I have
Jason Urban on the show today. He’s the President and
CEO of DrawBridge Lending. Thanks for being on the show Jason. – Thanks for having me, Lee. This is great, glad to be here today. – Jason, I’ve known you for awhile. You’ve been doing some innovative things in the lending industry as it relates to bitcoin and block chain. Tell us a little bit about that. Jason Urban(JU): Sure, so
what we do is we’re a lender against secured digital asset holdings and what we are providing is
the draw bridge, or the bridge, from these traditional lending sources, or pools of liquidity,
into this new ecosystem where everybody is trying to figure out how that landscape works. LN: What type of people would
have a need for your service? JU: I think they’re are
a wide variety of people. People who have these digital assets and because of the way they’re categorized here in the States from
the IRS perspective, when you spend them, when you use them, you encounter a taxable situation, but to the extent that you might
need to pay your power bill or to go on a vacation or buy
that boat you always wanted, you need fiat, you need US dollars, and what we provide is
a mechanism or platform for people to borrow against
the digital asset holders. LN: So, if someone’s
sitting on say 100 bitcoin, which is quite a bit of money, you’d allow them to take out
a loan against that bit coin and use that for short term
cash expense or whatever? JU: Yes LN: What is the duration
of your loans typically? JU: We typically focus one to six months. It’s a very volatile asset, and our backgrounds are
managing that volatility, but there’s only so much you can do when something moves as
rapidly as that does, which is an advantage to the asset, but it’s also difficult
from a lending capacity. So our loans are one to
six months in duration, and we offer renewal options,
so you can re-up and renew. Just the strike price
of that loan to value, think about your home moving
50% in a six month period, you might want to refi
or you might need to put more money up. We try to
mitigate a lot of those risks by offering the durations we do. LN: So, your clients actually give you their cryptocurrency and
you escrow it for them? JU: Yes, so what we do is we don’t like to take possession of their currency. What we like to do is use a
qualified third party custodian so that their digital
assets are resting there, so they know they’re there, and I can’t take them unless
they default on a loan or something unfortunate happens. All we want to do is provide
a mechanism or a platform for someone to monetize their holdings. We don’t want to take possession of them. We don’t want their private keys. We’ll only take those in the event that they default or want
us to satisfy their loan. LN: So in this business,
what measures do you take to help ensure that these
digital assets are safe from a cyber attack perspective? JU: Well, part of it, the
key for us, is cold storage. And cold storage is basically
storing these things on a server or computer where it’s not connected to the internet. It can’t be taken, so we require that all our custodians
deploy a cold storage method as opposed to a warm
storage or a hot storage. That way we know that the gold
is in the vault so to speak but that it’s not going
to be readily accessible to anybody out there. LN: Have you had a situation
where a customer gets angry because a price fluctuates and they feel that they were
cheated out of there value? JU: Interestingly we
don’t have that problem because of the mechanisms that
we deploy on the back end. So all our loans are no
margin call and non-recourse unlike a lot of people in the business that will have you retop. Think about it this way,
if I issue you a loan on an asset that’s worth $10,000, and I give you 50% of that asset in cash, if the value of that asset
goes from 10,000 to 5,000, I now need to create that cushion again, so you need to pay me more
money or reup or figure out. What we’ve developed, and our methodology, is a way to never have
to worry about that, and we use the financial markets. We’re markets experts,
and we’re risk managers, so we have mechanisms
by which we can ensure that you don’t have to worry
about topping off your loan. LN: Are there any restrictions on the type of customers you can have based on what the SEC imposes on you? JU: We are very compliant, so
we are registered by the CFDC, and we follow all the rules
and regs imposed on us by them. We have to do AMLKYC, anti-money laundering know your customer. We’re registered as a
non-bank lender in all 50, or in 31 states. We operate in all 50 states
so that we’re following not only consumer lending
laws but also securities laws and commodities laws. LN: Are there any requirements
you have on customers before you can take them as a client? Well one, we have to
do the AMLKYC on them. Right now, our products are geared towards accredited investors. Because of the way we do
the hedging on the back end we need to make sure that those customers are sophisticated enough to
understand what we’re doing. And so in order to do that, we need to put that accredited
investor cap on things. It’s a little different
under the CFDC umbrella. They call them qualified
exchange participants, or ECPs, so there’s a couple of
different buckets you wear, but it’s a little different than the SEC’s accredited investor, but effectively it’s the same thing. LN: Is there a minimum net worth that your customer’s have to have? JU: And that’s part of it, a minimum net worth of a million dollars, or an entity that’s a million dollars that’s what we require. LN: What sectors do you see that this type of lending
is getting the most interest in terms of where your
clients are coming from? JU: A wide variety, if
you really think about it, bitcoin, or digital assets as a whole, can be held by anyone. It isn’t a single group that says, “Hey, I’m really into this.” So we see funds, minors, people who were early
adopters of the technology, they’ve all kind of stepped forward. Additionally, we’ve got
a product that’s geared towards people who would
like to buy bitcoin and want to employ some
of the same methodologies that we’re employing right now. LN: Do you have any closing
thoughts you’d like to share? JU: I think that people
often confuse block chain and decentralized ledgers with bit coin. I think the block chain
technology is interesting on so many levels. I think that as the world
becomes more tokenized, and I think you’re going to
see more and more of that, everything from the artwork
that you see on the walls to buildings to physical
assets like gold, silver, oil. The world is moving towards that technology and that methodology, and I think that being an early adopter and understanding it is so important. If you want to make the same parallels, this is the internet in 1990 or 1995. The difference is the world
moves much faster today than it did back then. LN: So are you taking investors? JU: We’re always willing
to have strategic investors come into the space, and
we’re not opposed to that. We’re very well capitalized,
but we do recognize the value in being partners with people. And part of being partners
is financial as well. LN: Well thanks again
for being on the show. JU: Thank you very much.