Wall Street investment bank Cowen Inc. has debuted a new digital asset unit to offer spot bitcoin and cryptocurrency trading to institutional investors, Bloomberg reported Wednesday.
The firm leveraged its small footprint to front-run its bigger competitors as the finance hub seeks to embrace the burgeoning asset class’ spot markets. Goldman Sachs executed its first over-the-counter (OTC) bitcoin options trade earlier this week, trying to plug into derivatives-based offerings as uncertainties and complexities around spot products hold back developments.
“We have a big first mover advantage in this space,” Cowen co-president Dan Charney told Bloomberg. “Because of our culture, we’re able to work with our legal and compliance and our regulators in a way that maybe our bigger competitors aren’t, and we’re just able to get to solutions faster.”
Cowen’s new business unit will target mainly the bank’s hedge fund, mutual fund and family office clients, per the report. Assets purchased by these institutions will be held under the custody of institutional-grade platform Standard Custody & Trust Co.
It is unclear whether clients will be able to withdraw any bitcoin they purchase, but given that Cowen will act as a custodian it appears clients will not have that option. Without proper self-custody, those institutions will be limited to the potential price appreciation of the asset and not be able to store wealth without third-party risk or transact value freely. However, such use cases are arguably more compelling for individuals.
Cowen’s new unit also plans to offer derivatives and futures trading of cryptocurrency, lending and institutional access to decentralized finance platforms and non-fungible tokens, per the report. The unit launched with 40 employees from the bank but it reportedly plans to more than double its staff soon.