2 minute read
Q&A: Eqonex
from SRPInsight 20
by SRP & FOW
Q&A: EQONEX
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The digital assets financial services company is expanding its offering as it works on the launch of a dedicated structured products unit.
Following the launch of its latest product - a USDdenominated bitcoin exchange-traded note (ETN) listed on the Deutsche Börse Xetra Exchange - in late September, the company’s head of sales, asset management, Nick Cogswell (pictured), talks about why cryptocurrencies are a good fit for structured products, regulation and the challenges ahead.
“Crypto assets have many similarities with structured products in that investors need to get around a complex idea and you have to be able to explain it as simply as possible whether that is the underlying or the payoff,” said Cogswell. “Some investors perceive cryptos as being quite complex, but the level of adoption despite the recent correction suggests that people understand the storyline. Like with some assets used in structured products, cryptos can be very volatile. Structured products can actually reduce investors’ exposure to volatility and provide a defined payoff.”
According to Cogswell, despite the sharp correction earlier this year the crypto market remains an exciting market at the moment with a lot of opportunity.
“From a product development perspective there is scope to create new underlyings and use different payoff structures to cover different investor needs,” said Cogswell. “There's always been demand for low volatility underlyings and this fits very much with crypto assets.
“Structured products can help to lower the risks and the volatility of the underlying themselves, so they are a very efficient way to provide access to investors.”
CHALLENGES Regulation will be key to move the market forward and create a framework where there is transparency and trust.
“Regulation is a natural progression for the crypto markets,” Cogswell said. “There will be bumps along the way, but ultimately we'll get to a stage where crypto is just another asset class with clear rules around what you can and what you can't do.”
Cogswell believes a regulated environment will bring more traditional investors, as well as further credibility to the new asset class.
“[It] will help to grow the market. Investors continue to seek nonmarket correlated assets and ways to diversify their exposures and portfolios. Structured products and cryptos meet those needs so they will play an important role as the market evolves,” said Cogswell.
However, the main challenge to create an environment where investors are aware of the risks involved and make informed investment decisions is education.
“Wealth managers and investors have never started using or investing in new asset classes overnight,” said Cogswell. “Investors must understand the risks and how they want to use this asset class in the portfolio. We spend a lot of time explaining people why this asset class is investable.”
Another challenge for the crypto industry is credibility.
“If you want to build trust with investors you need to have credibility,” said Cogswell. “For us that is non-negotiable and we’re making efforts to employ the best people and to be regulated.
“Being listed on Nasdaq and the fact that we have regulated entities and our custodian was the first FCA approved is hugely important for us to build trust.”
