Century-old investment bank Cowen to offer crypto custody services for institutions

• American multinational investment bank Cowen revealed that it would be offering custody services for cryptocurrencies and digital assets for institutional investors. 
• As part of the offering, the New York-based firm invested $25 million in PolySign.
• The surging demand for crypto has incentivized Wall Street to help their clients gain access to the new asset class.  

Investment bank Cowen recently announced that it would hold cryptocurrencies for asset managers and hedge funds. The century-old bank holds almost $12 billion in assets under management. 

Wall Street takes a closer look at crypto

The New York-based firm, founded in 1918, says it will provide “institutional-grade” custody services for cryptocurrencies and a range of digital assets through its partnership with Standard Custody & Trust Co. The bank will also make a $25 million investment in Standard’s parent company, PolySign Inc, part of its $53 million Series B funding round. 

The world’s largest cryptocurrencies by market capitalization have witnessed a surge in prices this year – attracting hedge funds and asset managers to enter the market. Jeffrey Solomon, CEO of Cowen, said:

The demand is clearly here. We’re going to be able to help a lot of our institutional clients get over the hump and start trading digital assets in the not-too-distant future.

Despite noting the heightened demand, Solomon highlighted the importance of custody service since there is a lack of clear regulations for asset managers. The Securities & Exchange Commission continues to determine how to apply its Custody Rule, which aims to ensure that funds held by custodians would not be vulnerable to risks such as loss or misuse in the market. 

Currently, investors are faced with the challenge of the scarcity of custodians that offer services for the new asset class. Solomon added:

If you’re an institutional investor, the bar is extremely high for you to put investments in any asset that does not have a clear chain of custody that you can access at a moment’s notice. Even if you had a view on the asset class, if you can’t demonstrate custody, then you can’t trade it.

Many Wall Street firms have also been catering to their client’s needs, as the appetite for adding cryptocurrencies to investment portfolios has been steadily increasing. Goldman Sachs and Morgan Stanley have revealed plans to help their clients get exposure to the crypto markets. 

Unlike Goldman Sachs and Morgan Stanley – which only offer indirect access to crypto, Cowen plans to provide custody for the underlying assets, which no major Wall Street firm has provided until now.

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