Institutional offerings are growing for digital assets
Prometheum raised funds ahead of the launch of its regulated alternative trading system for digital asset securities while US broker Cowen announced the public launch of its digital asset division.
Prometheum raised over $15 million prior to the launch of Prometheum ATS, which is regulated by both FINRA and the United States Securities and Exchange Commission. The current round brings the total investment in Prometheum to over $42 million.
Prometheum Secures Over $15M in Funding Ahead of Launch https://t.co/oM8qvVh92U
— Prometheum (@PrometheumInc) March 24, 2022
Aaron Kaplan, co-CEO and co-founder of Prometheum, told Markets Media that the ATS will launch in the second quarter of this year, or early in the third quarter, once integration with the custodian is complete.
“The first year we will be open to institutions, then we will move towards retail investors,” he added.
Prometheum was founded in 2017 by a group of Wall Street lawyers with the aim of enabling the trading of digital assets under existing securities laws. From a compliance perspective, it is much easier for institutions to connect to a regulated trading venue.
Kaplan continued that Gary Gensler’s comments show that the Chairman of the SEC considers many digital assets to be securities that must be traded under current regulations.
“The writing is on the wall and Gensler is leading the charge,” Kaplan added.
Additionally, President Biden issued an Executive Order on Responsible Development of Digital Assets on March 9, which Kaplan said will increase institutional interest in the sector.
“This is the first step in the process by which the federal government collectively seeks to regulate digital assets and the potential implications for investors,” Kaplan added. “We were hoping for a bit more information on the implications for the titles.”
Kaplan went on to say that the government has allowed digital assets to operate in a gray area and the executive order is the official statement that this is coming to an end.
“Many digital asset companies will need to modify their internal compliance mechanisms,” he said. “However, we assumed from the outset that digital assets should comply with securities laws.”
If the digital assets are deemed to be securities, they must be held by a depositary registered under the federal securities laws. Prometheum has also applied to be licensed as a specialty broker, allowing it to operate a digital depository.
“Becoming a special-purpose broker advances our game plan of launching a comprehensive ecosystem for issuing, trading and custodial of digital assets,” Kaplan said.
The importance of custody has been underscored by State Street Digital by choosing technology from London-based fintech Copper.co to develop and launch digital custody, subject to regulatory approval.
Exciting day for #StateStreetDigital which has entered into a licensing agreement with https://t.co/txZaXHwEJm to develop and (subject to regulatory approvals) launch an institutional-grade digital custody offering allowing customers to store and settle their #digitalassets in a secure environment.
— State Street (@StateStreet) March 9, 2022
Many regulated asset managers can only use a regulated custodian, which was not available for digital assets.
Swen Werner, head of digital custody at State Street Digital, told Markets Media that the company aims to create an integrated offering for customers holding both digital and traditional titles. “We want to be able to bridge the old and the new,” he said.
In the UK, TP ICAP is expanding its digital asset custody network to include BitGo and Komainu, two crypto asset custodians.
TP ICAP’s new digital asset platform, which awaits regulatory approval from the Financial Conduct Authority, will include a wholesale electronic over-the-counter market for spot trading of crypto assets and provide processing services direct and payment clearing for transactions executed in a network of digital assets. guardians. Hudson River Trading, Susquehanna, Flow Traders, Jane Street and Virtu Financial will be market makers on the new platform.
Cowen announced the public launch of its digital assets division, led by Drew Forman.
Dan Charney, Co-Chairman of Cowen and Company, said in a statement, “We are very pleased to publicly announce Cowen Digital, which has been trading crypto on behalf of our clients for several months. Working with our integrated partners Standard Custody and leading brokerage solutions provider, Digital Prime Technologies, Cowen Digital provides our institutional clients with the same level of thought leadership, product capability, service and professionalism they expect from Cowen.
Cowen is proud to present Cowen Digital – Institutional Solutions for #DigitalAsset Invest. #CowenDigital will provide full-service commercial execution and #keep solutions through a strategic partnership w @PolySignIncit’s @StandardGuard. Learn more https://t.co/bJRxeMJrd6#Crypto pic.twitter.com/NicSFHeU7n
— COWEN (@Cowen_Inc) March 23, 2022
Cowen Digital will offer comprehensive transaction execution and compliant custody solutions to institutional clients, with custodial solutions provided through the company’s strategic partnership with PolySign’s Standard Custody & Trust.
Standard Custody & Trust. has received a trust company charter from the New York State Department of Financial Services, as a regulated qualified custodian of cryptocurrencies and other digital assets.
In May 2021, Cowen made a $25 million strategic investment in PolySign when the broker led a $53 million first close of the fintech’s Series B fundraising.
PolySign and Cowen said at the time that they would work together to implement a comprehensive digital asset solution for institutional clients and to integrate PolySign’s digital banking technology into Cowen’s sales and trading platform.
Cowen Digital said it will allow institutional investors to access the company’s aggregated liquidity, use proprietary algorithms, benefit from streamlined operations, capital efficiency and post-trade reporting, trade directly from Standard Custody’s cold storage solution, avoiding pre-funding requirements.
The company’s future features will include derivatives and futures, financing solutions as well as institutional DeFi and NFT access.