X-Margin and Fireblocks Unlock Portfolio Lending for Institutional Trading of Digital Assets
- Lending , Trading Systems , Financial
- 22.04.2021 12:50 pm
X-Margin, a pioneer in applying privacy technology to credit and financial market risk, and Fireblocks, a leading digital asset infrastructure provider, today announce a partnership enabling financial institutions to source credit for cross exchange trading without revealing positions and other sensitive information to lenders.
Currently, most trading requires institutions to make separate allocations of capital for each exchange where they trade. This major inefficiency in the fragmented universe of digital assets is holding back wider adoption of the asset class by financial institutions. The cornerstone to the partnership's Portfolio Lending service is X-Margin Credit, the first solution to deliver instantaneous credit scoring and risk monitoring across entire portfolios while preserving privacy at all times.
Celsius, one of the largest crypto platforms in the industry, is the first to make loans to institutional borrowers using X-Margin’s credit infrastructure. It has made its first loan using the partnership’s Portfolio Lending service to high frequency trading firm Dunamis Trading, the terms of which are not being disclosed. Dunamis was part of the first ten adopters of Fireblocks and a key collaborator with X-Margin in its product development process.
Delfos Machado Neto, Managing Partner, of Dunamis Trading, said: “This solution will allow us to get similar leverage levels on our trading as one would with portfolio margining, position offset relief mechanisms and similar structures that exist in the traditional prime brokerage space, enabling us to increase our trading, and still allow us to stick to our conservative risk control metrics.”
X-Margin Credit allows lenders to monitor a borrower’s net trading position in real time, utilizing it’s proprietary privacy preserving risk scoring so if it falls outside the agreed parameters or risk profile, they can immediately call for additional collateral. This in turn enables institutional trading companies to source credit to leverage their positions, often at multiples of their original funds, across exchanges via the Fireblocks Network.
Alex Mashinsky, Co-Founder and CEO of Celsius, said: “As a lender, this gives us the tools to extend credit with confidence, managing credit risk when the value of the borrower’s trading portfolio changes constantly. We’re excited about this partnership because it removes the brake on growth for our clients’ businesses and the broader development of digital asset markets.”
Most lending for trading today is opaque and relies on trust and an institution’s track record. X-Margin’s infrastructure makes credit in the market more competitive by increasing transparency and security for lenders while keeping borrowers’ trading information private.
Michael Shaulov, CEO of Fireblocks said: “Ultimately, the Portfolio Lending infrastructure will lead to deeper and more liquid markets, which will in turn make pricing more attractive. Deploying Fireblocks to secure the Portfolio Lending infrastructure allows digital assets to be safely transferred between borrowers and lenders for cross-margin trading. We’re thrilled to partner with X-Margin, as minimizing capital and security risk will ensure the capital markets infrastructure continues to mature and attract institutional investment.”
X-Margin Credit is provably unbiased when evaluating an institutional trading company’s risk. The software conducts the computations without seeing the underlying trade data. It allows borrowers to build a credit profile.
Darshan Vaidya, Co-Founder and CEO of X-Margin, said: “X-Margin Credit sets a new benchmark for portfolio lending, reducing risk and increasing capital efficiency for trading digital assets. It’s a seismic shift for borrowers who can now access credit for cross-exchange trading by establishing trust directly without the need to disclose commercially sensitive information.”