TRADING: DIGITAL ASSETS For investment banks, being digital increasingly means forming the right technology partnerships, and that’s especially so if they want to move into the booming digital asset space. The size of this market is growing rapidly, and so is institutional interest as big banks that have been slow to catch on, realise they risk losing out on multi-trillion dollar business. “Digital assets aren’t going to go away – it will be a 10, 15, 20 trillion dollar business in the next couple of years, driven by asset tokenisations, stablecoins, and central bank digital currencies,” says Olivier Dang, COO of the wholesale digital office at global investment bank Nomura. Dang has a remit that spans the bank’s electronic trading platform, digital assets and new business opportunities. While partnerships are already central to Nomura’s strategy, they are critical when it comes to digital assets, he says. “About three years ago, and before many of the other traditional banks looked at the space, we decided to enter the digital asset
custody market. But we did so as a traditional bank, and there was no way we were going to build an in-house solution that would meet the needs of cybersecurity, or that could keep up with the pace of technological change. New coins that we may want to support are coming into the market every month, or even every day.” So, instead, Nomura formed a joint venture (JV) to create a next-generation digital asset custodian called Komainu, alongside Ledger, a French fintech, and CoinShares, a large crypto firm. Ledger provides a platform to secure, buy, exchange and grow crypto assets, while CoinShares describes itself as a pioneer in digital asset investing, whose mission is to expand access to the digital asset ecosystem. “Nomura brings 100 years of experience to Komainu,” says Dang. “We operate in regulated markets and have the institutional experience and scale. Ledger brings technology, and CoinShares has the expertise and knowhow in the crypto market. “The Komainu JV is now fully regulated, has a few billions of assets
under custody, and is live and servicing institutional clients.” It demonstrated how a large institution can successfully partner to leapfrog into untapped markets, taking investment banking in a new direction. It was also a smart move for Nomura, fortressing its position in a segment of investment banking that Dang acknowledges today’s traditional actors may cede to new players within the next decade. “Already, the likes of Binance, FTX, and Coinbase are generating significant revenue, and transacting massive volumes, matching the levels in traditional exchanges and banks,” says Dang. Based on technology developed in just the last few years, commissions made on crypto provide plenty of firepower for technology investments such as into DeFi – decentralised financial – products using Ethereum and blockchain applications. “You already see protocols using automated market makers to generate volume on certain coin pairs,” says Dang, “and there are no brokers or actors in the middle. Very few traditional banks are in that space today. It’s difficult to enter because of know-your-customer and lack of regulation, but that’s not to say things won’t change.
Investing in the future What will tomorrow’s investment bank look like? Olivier Dang, COO of the Wholesale Digital Office at Nomura, and Matthew Lempriere, Head of Asia Pacific at BSO, discuss digital assets, technology and industry partnerships ffnews.com
Issue 22 | TheFintechMagazine
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