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Darren Jordan, Komainu
Darren Jordan, Komainu

The future for digital asset ETPs 


Custody specialist, Komainu, was launched in 2018 as a joint venture between Nomura, digital asset investment manager, CoinShares and blockchain business, Ledger. The Jersey-based firm, which also has offices in London, Dublin, Dubai and Singapore, describes itself as a “gateway to the digital-asset ecosystem.”

Darren Jordan, chief commercial officer at Komainu, joined the firm two years ago, following a role in EMEA sales with digital-asset trust specialist, BitGo. Before then, he had gained more than 20 years’ experience in asset management and banking, across portfolio management, trading and sales.

Commenting on developments in the digital-asset, ETP market, Jordon says: “Digital-asset ETPs are emerging as a key contender for institutional adoption of cryptocurrency, due to their regulatory compliance, accessibility and familiarity for the finance industry, compared with direct crypto investment.

“Major approvals, like those for bitcoin and Ethereum ETPs in the US and ETNs in the UK signify positive strides towards mainstream acceptance and regulation of digital assets, helping to legitimise them within the broader financial landscape, while ensuring investor protection and market transparency.

“Single-asset ETPs, for example the bitcoin ETF, have stolen the headlines, but the next phase of innovation will be multi-asset digital asset ETPs. These capture a diversified basket of digital assets and cryptocurrencies and allow investors to track the market through one instrument.

“Asset managers and owners tend not to concentrate their holdings in single assets but seek diversification, and multi-asset products can provide a derisked entry into digital assets. Multi-asset ETPs are simply a liquid, efficient way for institutional asset managers to obtain diversified exposure.

“Sophisticated product development that provides institutions with both security and easy market access is the inevitable evolution of the market. Institutional investors want exposure to the crypto market, but they will want their exposure properly diversified and managed for risk. Single cryptocurrency and digital-asset ETFs cannot provide this, but a basket of dozens may be more appropriate. Innovation will come as businesses explore different combinations and sets of rules, and the ETP market will grow in size, complexity and capability.

“Alongside ETPs, custody solutions, regulatory clarity, institutional-grade infrastructure and risk management look ripe for development. This is not only a reflection of the evolving challenges and needs faced by institutions entering the crypto space, but also a response to their levels of comfort with existing market infrastructure. Overcoming these hurdles is instrumental in expanding institutional participation and advancing the institutionalisation of cryptocurrencies and blockchain technology.

“All financial instruments that institutions are familiar with, like derivatives and futures, and have the appropriate risk-management protocols and procedures attached, are where the market appetite will be.

He concludes: “At the moment, institutions are testing the water and getting to grips with what capabilities are on offer that can enable and enhance these sorts of product development. Custodial services will be key to any transactional or market-based activity involving complex digital-assets transactions and we expect the pace of innovation in this area to pick up rapidly in the coming months and years.”

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