Boutique investment bank Cowen Inc. started a digital asset unit offering institutional clients access to spot cryptocurrency trading, a step that puts it at the front of Wall Street’s push into the expanding industry.
Cowen Digital will allow clients to trade 16 cryptocurrencies including Bitcoin, Ethereum and Solana, according to a statement. The business, targeting Cowen’s hedge fund, mutual fund and family office clients, will also provide custody of the assets through Standard Custody & Trust Co.
Wall Street has made tentative steps into crypto assets as the administration under President Joe Biden seeks to regulate the rapidly growing industry. As a smaller bank, Cowen has been able to move fast in emerging sectors like digital assets, said co-president Dan Charney. The company started offering crypto custody services last year.
“We have a big first mover advantage in this space,” Charney said in an interview. “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.”
Regulatory uncertainty, internal compliance and know-your-customer rules have held large banks back from entering the crypto spot market, where risks can be higher because of the volatility and pseudonymous nature of the assets. Goldman Sachs Group Inc. this week announced it had executed its first over-the-counter crypto options trade.
Cowen’s new business also plans to offer crypto derivatives and futures trading, lending and institutional access to decentralized finance platforms and non-fungible tokens. It provides principal trading, where it takes on risk during the transactions.
Drew Forman, who led Cowen’s derivatives business, will be the head of Cowen Digital. The unit, which launched with about 40 employees from the firm, plans to expand to more than 100 staff in the near term.
Trading from its Connecticut office, the unit can serve clients in at least 35 states though not yet in New York. It has a pending application for New York state’s BitLicense, which governs businesses working with virtual currencies, and is exploring licenses in Canada, U.K., and Asia, Forman said.
“This will be a meaningful division,” Charney said.
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