Cowen Inc., an independent American investment bank established over a century ago, is set to become the latest mainstream financial services company to enter the crypto custody business.
According to Bloomberg, Cowen has inked a partnership with Standard Custody and Trust Company. The collaboration will also include a $25 million investment in Standard’s parent company, PolySign Inc., which has Ripple chief technology officer David Schwartz on its board of directors.
According to Cowen, there is a growing demand for crypto exposure among institutional investors, with CEO Jeffrey Solomon stating: “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.”
Custody remains a major roadblock for institutional entry into the crypto scene, as hedge funds and asset managers are required by law to have client’s assets held by recognized custodial services. Commenting on the issue, Solomon elaborated:
“If you’re an institutional investor with a fiduciary requirement, 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.”
In recent times, some U.S. banks have begun to wade into the crypto custody scene. Back in 2019, Fidelity — which manages $4.9 trillion in assets — debuted its cryptocurrency custody product, and as previously reported by Cointelegraph, it has even expanded its coverage to Asia.
Cowen’s $25 million investment is part of a $53 million funding round for PolySign as it moves toward creating products that enable greater institutional adoption of cryptocurrencies. PolySign’s Standard Custody subsidiary also recently secured approval from the New York State Department of Financial Services to operate as a limited-purpose trust company.