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Taking a long-term view in digital assets

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In March last year, US investment bank Cowen became one of the first Wall Street firms to offer trade execution in digital assets for institutional investors with the launch of Cowen Digital. The firm outlines its strategy for growth after an eventful first year in the digital assets space, and its expectations for the emergence of a more robust institutional marketplace.

Cowen was one of the first US banks to enter the institutional digital assets space, with the launch of Cowen Digital in March 2022. What inroads has the firm made since the launch, and how is the business strategy evolving?

Cowen Digital was set up by a strong team comprising experience from across both traditional markets and digital assets, combining Wall street rigour with deep knowledge of the digital asset market fundamentals. As co-founders, Drew Forman and Eric Rose are proud to be part of one of the first Wall Street firms leading in offering trade execution for digital assets for institutional investors. The response to Cowen Digital’s launch has been strong, not just from existing clients but also from crypto-native firms such as hedge funds looking for the institutional-grade services the firm can provide, given its trusted history and long-standing experience in traditional markets. 

Cowen Digital clients are already accessing leading tokens through our high-touch trading desk. Over the last year, we have added the Eze OEMS to our platform, further extending our access to liquidity alongside the most relevant market data. Likewise we partnered with Lukka to offer our institutional investors enhanced reconciliation processing and reporting solutions. A unique part of our offering is our digital asset analysis, led by Digital Data Scientist David Kroger – who is building out a data warehouse, providing deep dives and insights into leading tokens and protocols, as well as regular market updates for our clients.

Since launch Cowen Digital has expanded the team with a number of prominent hires. These include Director of Institutional Sales, Jackie Rose, formerly Head of Institutional Business Development at Blockchain.com; former Coinbase Institutional Sales Associate, Chase Campbell, who joined Cowen Digital as Vice President of Digital Asset Sales; and Taylor Cable, Managing Director, Cowen Digital Europe. Cable is based in London and leads Cowen Digital’s European and Asian activities. He formerly held institutional positions at Blockchain.com, including COO of Blockchain.com Asset Management and Head of Institutional Client Trading. 

What industry issues have arisen over the past year and how has the ‘crypto winter’ affected your plans and strategic approach?

The digital asset market is never boring and 2022 was certainly an eventful year with a number of prominent firms leaving the market, for a variety of different reasons including the emergence of bad actors. 

Despite recent volatility in the sector, we remain confident about growth and investment opportunities for the long-term including the tokenisation of real-world assets. We are continuing to build out our trading solutions, adding additional tokens, and closely monitoring market opportunities. Cowen Digital takes a long-term view and is actively hiring and expanding the team in a strategic build over the next five years. 

What was the rationale behind Cowen deciding to develop a custody partnership with Standard Custody and make a strategic investment in PolySign, Standard Custody’s parent company?

As digital assets continue to grow and mature as an asset class, institutional investors need trusted custody and trading solutions on par with their requirements for investing in traditional securities. Our partnership with PolySign is a good example of how Cowen has positioned itself to better serve our clients by identifying disruptive trends that we believe will impact investment markets for years to come. PolySign has developed proprietary, next-generation blockchain technology that we believe will be foundational to the development of secure, trusted digital asset infrastructure. 

This partnership brings us closer to the goal of making the market for digital assets safe, secure and accessible to institutional investors. Partnering with a qualified, insured, NYDFS- regulated custodian, means that digital asset custody is a safe harbour for client assets. Every client vault is segregated, and the process is designed to ensure that assets are fully protected.

How do you see the current crypto crisis affecting institutional investor appetite for digital assets and the emergence of a better regulatory framework for the sector?

Most of the major institutions we speak to continue to build infrastructure that will allow them to invest in digital assets either now or in the future. Greater regulatory certainty is welcome and we are glad to work closely with all the relevant regulatory bodies to ensure that investing in digital assets is as safe and secure as investing in any other asset class.

Additionally, bear markets offer well-known opportunities to acquire assets when prices are low and there will always be investors who have the risk appetite to invest now in anticipation of future growth.

How do you expect the digital assets industry landscape and ecosystem to be changed and reshaped by the events of recent months?

The events of the last few months, especially the collapse of FTX, have been painful for affected investors and other firms damaged by the fall-out. We believe, however, that the ultimate result will be beneficial for the industry in the long-term. This turmoil has highlighted aspects of the market infrastructure and regulatory framework that needed to be improved. 

Cowen Digital was created from the outset with these safeguards and investor protections in mind – for example, the separation of trade execution and custodial functions. The more robust the marketplace becomes, the greater likelihood we have that institutional interest in digital assets will continue to grow and strengthen.

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