Investment Bank Cowen (COWN) Launches Digital Asset Unit

The bank has future plans to offer crypto derivatives, lending, DeFi, and NFTs

U.S. full-service investment bank Cowen Inc. (COWN) announced on Wednesday, March 23, that it has launched a dedicated digital asset division, becoming the latest Wall Street bank to enter the emerging cryptocurrency space.

Key Takeaways

  • Cowen has launched a new digital asset division called Cowen Digital.
  • The unit will offer trading to institutional clients in established cryptocurrencies and provide a custody service.
  • Cowen has future plans to branch out into crypto derivatives, lending, DeFi, and NFTs.
  • Cowen says its smaller size enables it to adapt quickly to evolving crypto regulations.

The new unit named Cowen Digital will allow the bank's institutional investors to trade established cryptocurrencies, including Bitcoin, Ethereum, and Solana. It will also provide a custody solution to store digital assets through Standard Custody & Trust Co.

"Through Cowen Digital, our clients now have access to the crypto and digital asset markets with our institutional quality and fully integrated end-to-end execution and custody capabilities," Jeffrey Solomon, Cowen's chair and CEO, said in a statement. "Cowen is committed to outperforming for its clients by staying at the forefront of innovation," he added.

The bank has spent 15 months developing the necessary systems and infrastructure to launch the division, according to the statement.

Plans for Other Crypto Services on the Horizon

Cowen Digital—to be led by the bank's former equity derivatives head Dan Forman—intends to increase its initial headcount from around 40 to more than 100 staff members in the near term and has plans to branch out into crypto derivatives, lending, decentralized finance (DeFi), and non-fungible tokens (NFTs).

The announcement comes a month after U.S. banking giant JPMorgan Chase & Co. (JPM) launched into the metaverse by opening a lounge in the blockchain-based virtual world of Decentraland. In the lounge, customers can buy virtual plots of land with NFTs and purchase other services using cryptocurrency. More recently, New York-based investment bank The Goldman Sachs Group, Inc. (GS) continued its push into cryptocurrencies, executing an over-the-counter (OTC) crypto options trade facilitated through digital asset investment firm Galaxy Digital—the first transaction of its kind by a major Wall Street bank.

Total assets locked in DeFi platforms have risen from around $600 million in 2020 to over $200 billion as of March 2022.

Regulatory Advantage

Lack of regulatory clarity surrounding cryptocurrencies has led to slow uptake of digital currencies by Wall Street banks. However, a recent executive order by President Joe Biden to assess the risks and benefits of the nascent industry may provide a much-needed framework for financial institutions to follow.

Cowen believes that its smaller size enables it to adapt quicker than its larger rivals to evolving crypto regulations. "We have a big first-mover advantage in this space," the bank's co-president Dan Charney told Bloomberg 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," he added.

On March 9, President Biden signed a long-awaited executive order instructing federal agencies to study various impacts of cryptocurrency use. The order will task regulators with reviewing risks to consumers, investors, and the broader economy.

Article Sources
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  1. Cowen. "Cowen Launches Digital Asset Division Offering Trading and Custody Solutions for Institutional Investors."

  2. CoinDesk, "JPMorgan Is the First Bank Into the Metaverse. Looks at Business Opportunities."

  3. Bloomberg. "Goldman Sachs to Offer Over-the-Counter Crypto Options Trading."

  4. DefiLlama. "Total Value Locked (USD)."

  5. Bloomberg. "Bloomberg to Offer Spot Crypto Trading in Early Move by Wall Street."

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