An espresso is ordered at 3pm on a Thursday afternoon by Steve Swain, co-founder and CEO of Lendingblock, a securities lending platform for digital assets. The order is understandable as Swain is speaking to AsiaHedge after back-to-back meetings on what is a global tour for his business.

Based in London, Swain has been via New York, Chicago, Tokyo and Singapore before reaching Hong Kong’s Mandarin Oriental Café Causette.

“We have a roughly equal client split across all geographies, and Asia is definitely a big part of the client base. We’ll establish our own footprint here in Asia next year,” he explains.

Lendingblock is also running a “sandbox” exercise with the firm’s cryptocurrency borrowers and lenders, about 30 financial institutions in all, testing out the business’ capabilities.

Currently there is very little institutional lending in crypto, certainly by comparison to traditional securities lending, and where there has been it has been done on an OTC basis. Lendingblock is attempting to scale this part of the marketplace.

“For the asset class to reach its full potential the infrastructure and building blocks need to be in place. The things that institutions take for granted in conventional or more mature asset classes,” says Swain.

“There is a maturation of the ecosystem, but the innovation and first movers won’t be the banks. We, and others like us, have come from that background and are confident enough to take the personal risk to build those next generation of financial institutions.”

Risk is an often-spoken word in the digital assets space, especially when it comes to the safekeeping of cryptocurrencies, with Swain saying that cybersecurity is the number one concern for his clients.

“The industry is not at a point where there is 100% confidence,” he says. “That drives people to cold storage solutions. Custodians with nuclear bunkers and facilities with armed guards. But there are those with crypto on a nano who keep it under their bed.

“It’s ironic to me that an asset class which is purely digital has gone back to the equivalent of a bag of cash stuffed under the mattress. That’ll evolve.”

For its part, Lendingblock has just teamed up with digital assets custodian Vo1t to provide a military-grade cold storage capability. Key features include extreme security measures such as multiple layers of encryption of private keys, geographic distribution of private keys, thermal, vibration and motion detection, Faraday shielding to prevent against wireless infiltrations, 24/7 patrols and alarm monitoring with police response.

“If a security breach happens it’s a fatal blow to your business and your credibility. Building that confidence with the client base is incredibly important,” says Swain.

Swain’s client base is increasingly institutional as larger funds dip their toe into digital assets. “There are larger funds who don’t want to miss out. That’s where the growth will come from, established funds with large portfolios exposing their clients to cryptocurrencies.”

But, even though the asset class has been around for a relatively long time, bitcoin for instance just celebrated its 10-year birthday, digital assets will remain a drop in the financial markets ocean for now.

“We think that as a foundation of an asset class, blockchain has great potential,” Swain says. “But, if US pension funds allocated just 0.5% that would be far greater than the crypto universe. Things are moving forward but there is still a long way to go.”

Coffee with Steve Swain on AsiaHedge.