Ben Strack

Another traditional finance giant is wading into the crypto space.



Deutsche Bank is set to establish digital asset custody and tokenization services via a new partnership with Switzerland-based Taurus — a firm that offers infrastructure to issue, custody and trade crypto, tokenized assets and NFTs.&nbsp;



“The market has evolved to an extent where we see partnership opportunities key to developing the products and services that our clients are demanding,” Paul Maley, head of Deutsche Bank’s securities services, told Blockworks in an email.&nbsp;



Deutsche Bank looks to initially offer custody of “selected cryptocurrencies and some stablecoins” for corporate and institutional clients in the German company’s “home market regions,” the executive added — though he did not name specific assets.



On the tokenization front, the firm aims to first tokenize traditional financial securities.



Read more: <a href="https://blockworks.co/news/real-world-assets-tradfi-defi-tokenization">TradFi, DeFi convergence continues through tokenizing real-world assets</a>



BlackRock CEO Larry Fink said last year that the tokenization of securities is “<a href="https://blockworks.co/news/blackrock-ceo-still-in-crypto-for-the-tech-despite-ftx-scandal">the next generation for markets</a>.” TradFi firms such as <a href="https://blockworks.co/news/jpmorgan-trade-on-public-blockchain-monumental-step-for-defi">JPMorgan</a>, <a href="https://www.businesswire.com/news/home/20230110005308/en/Goldman-Sachs%E2%80%99-Tokenization-Platform-GS-DAP%E2%84%A2-Leveraging-Daml-Goes-Live">Goldman Sachs</a> and <a href="https://blockworks.co/news/stablecoin-with-yield-franklin-templeton">Franklin Templeton</a> have been busy in recent years and months exploring the tokenization space.



“We expect to see more and more traditional assets and cash payments eventually come on-chain,” Maley said. “Positioning ourselves for the future is our primary focus and we are working on a select number of projects to develop our capabilities.”



<h2 class="wp-block-heading">A&nbsp; journey into the space&nbsp;</h2>



Deutsche Bank participated in <a href="https://blockworks.co/news/credit-suisse-taurus-deal">Taurus’ $65 million funding round</a> in February — a fundraise led by fellow traditional financial giant Credit Suisse.&nbsp;



Taurus co-founder Lamine Brahimi told Blockworks at the time that Credit Suisse and Deutsche Bank have integrated its tech, or planned to — noting there would be “landmark transactions” in the coming months.&nbsp;&nbsp;



Teaming up with Taurus also comes after <a href="https://blockworks.co/news/deutsche-bank-crypto-custody-license-germany">Deutsche Bank applied to Germany’s financial regulator</a> in June to provide custody services for cryptocurrencies.



The latest partnership reflects “a natural extension” of Deutsche Bank initiatives laid out in a December 2020 <a href="https://www3.weforum.org/docs/WEF_Cryptocurrency_Uses_Cases_2020.pdf">report</a> by the World Economic Forum’s Global Future Council on Cryptocurrencies. the company noted in a Thursday news release.



Deutsche Bank said its aim at the time was to create a custody platform for institutional clients that would “introduce a secure connected bridge between digital assets and a customer’s traditional banking services.”&nbsp;&nbsp;



The bank planned to manage various digital assets and fiat holdings on one platform and allow clients to access those assets via “an institutional-grade hot [or] cold storage solution with insurance-grade protection.”



“We are pleased to implement this global partnership with Deutsche Bank and look forward to supporting the bank in launching digital assets and DLT-based products and services across several booking centers,” Brahimi said in a Thursday statement.&nbsp;



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Financial giant Deutsche Bank eyes crypto custody, tokenization

James Cirrone

Despite the Securities and Exchange Commission&#8217;s crackdown on prominent participants in the industry, many traditional finance giants remain undeterred in their pursuit of crypto-related opportunities.



Though regulatory clarity will be key for such companies, industry watchers said, financial heavyweights look to utilize their regulatory muscle and large client bases to move deeper into crypto in a bid to help shape the future of finance.



Since the SEC sued <a href="https://blockworks.co/news/binance-changpeng-zhao-face-sec-charges">Binance</a> and Coinbase, competing exchanges have delisted <a href="https://blockworks.co/news/sec-10-tokens-securities">tokens that the SEC deemed securities</a>, including <a href="https://blockworks.co/news/robinhood-nixes-ada-matic-sol">Robinhood</a>, <a href="https://blockworks.co/news/etoro-curtails-crypto-securities">eToro</a>, and <a href="https://blockworks.co/news/bakkt-delist-cardano-polygon-solana">Bakkt</a>.



The SEC kicked off 2023 with <a href="https://blockworks.co/news/genesis-gemini-charged-with-securities-violations-by-sec">a lawsuit against Gemini and Genesis</a> for allegedly mishandling customer funds. It telegraphed its <a href="https://blockworks.co/news/sec-sues-coinbase">lawsuit against Coinbase</a> by <a href="https://blockworks.co/news/sec-serves-coinbase-in-latest-alleged-crypto-securities-violation">slapping the company with a Wells notice</a> in March.



Despite the <a href="https://blockworks.co/news/sec-crypto-enforcement">SEC’s ramp-up of enforcement actions in the space</a>, certain TradFi firms are staying the course — seemingly viewing the space as a long-term play.



<h2 class="wp-block-heading">BlackRock, Deutsche Bank, Citadel Securities continue crypto journeys</h2>



BlackRock, a fund group with $9 trillion in assets under management, filed with the SEC to <a href="https://blockworks.co/news/blackrock-files-bitcoin-etf">create a spot bitcoin ETF</a> last week.&nbsp;



EDX Markets, a crypto exchange designed for institutional investors, launched on Tuesday with the backing of Citadel Securities, Fidelity Digital Assets and Charles Schwab. <a href="https://blockworks.co/news/tradfi-launches-crypto-exchange">Noticeably compliant with the SEC</a>, it only offers four assets on its trading platform: bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>), ether (<a href="https://blockworks.co/price/eth">ETH</a>), litecoin (<a href="https://blockworks.co/price/ltc">LTC</a>) and bitcoin cash (<a href="https://blockworks.co/price/bch">BCH</a>).&nbsp;



Also this week, Deutsche Bank <a href="https://blockworks.co/news/deutsche-bank-crypto-custody-license-germany">applied to Germany’s financial regulator</a> to provide crypto custody services, joining more crypto-native companies including Berlin-based <a href="https://www.finoa.io/blog/bafin-qualified-custodian-license/">Finoa</a> and <a href="https://blog.bitpanda.com/en/we-have-received-largest-crypto-licence-german-regulator-bafin">Bitpanda</a>.



Spokespeople for Deutsche Bank and Citadel did not immediately return requests for comment about potential future offerings. BlackRock declined to comment.&nbsp;



CK Zheng, former head of valuation risk at Credit Suisse and co-founder of crypto hedge fund ZX Squared Capital, said that traditional industry players are increasingly recognizing the enduring presence of bitcoin. He went on to argue that the asset has already entered a new bull market cycle.



Bitcoin’s price is up nearly 16% from seven days ago — leading to <a href="https://blockworks.co/news/bitcoin-touches-30k-stocks-dip">a brief breakthrough Wednesday at $30,000</a>. The asset peaked at nearly $70,000 in November 2021.



<h2 class="wp-block-heading">TradFi confident despite regulatory challenges</h2>



But traditional finance players such as BlackRock, Deutsche Bank and the backers of EDX Markets aren&#8217;t venturing into crypto on a whim, according to Jeff Feng, co-founder of Sei Labs.&nbsp;



Feng noted these companies have spent time understanding the long-term benefits of blockchain and digital assets — such as faster and cheaper cross-border transactions, financial inclusivity, and greater transparency.&nbsp;



Read more: <a href="https://blockworks.co/news/crypto-is-not-dead">Crypto is not dead: Fortune 500 companies bullish on the space</a>



BlackRock CEO Larry Fink said last year he believes the tokenization of securities is “the next generation for markets” — <a href="https://blockworks.co/news/blackrock-ceo-us-lagging-innovation-tokenization">adding in a March letter</a> that such offerings could drive efficiencies, shorten value chains, and improve cost and access for investors.



Roger Bayston, head of digital assets at Franklin Templeton, said <a href="https://blockworks.co/news/stablecoin-with-yield-franklin-templeton">blockchain technology is set to be “transformational”</a> for capital markets. The firm has a mutual fund that utilizes the Stellar and Polygon blockchains and is exploring other ways to utilize such tech.



Others such as Fidelity and <a href="https://blockworks.co/news/state-street-launches-digital-finance-unit-for-crypto">State Street</a> have business units dedicated to the crypto space — with the former launching <a href="https://blockworks.co/news/fidelity-launches-metaverse-experience-in-tandem-with-new-etfs">crypto-related ETFs</a> and <a href="https://blockworks.co/news/fidelity-doubles-down-metaverse">creating metaverse experiences</a>.&nbsp;



“Their movements in this space signify a proactive approach toward innovation, aimed at shaping the future of finance while leveraging their resources and institutional strength to comply with regulatory standards,” Feng told Blockworks.&nbsp;&nbsp;



He added the finance giants have decades of experience operating in heavily regulated environments and are likely confident in their ability to manage potential regulatory risk.



But as large financial institutions look to move further into the crypto segment “to fill the voids created by the last bust,” he added, regulatory uncertainty in the US remains a hurdle.&nbsp;



A clear definition of which crypto assets are securities, commodities — or if they constitute as something else — will be key. The moment a regulatory framework is established, TradFi companies will bring financial products and services to crypto “in full force,” Zheng said.



Such intentions set up the opportunity for traditional companies to use their wide institutional client bases to snag opportunities from crypto-native firms, according to industry watchers.



They might also look to partner with or buy promising crypto companies as a way to fast-track crypto-related offerings. These could range from trading platforms to digital asset management and custody solutions.&nbsp;&nbsp;



“Many of these firms saw that Robinhood was able to disrupt the brokerage industry with zero-commission trading this decade and want to be in a position to benefit from the global adoption of cryptocurrencies,” Feng said.



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TradFi firms wading deeper into crypto waters despite regulatory uncertainty

Shalini Nagarajan

German investment bank Deutsche Bank has applied to Germany’s financial regulator to provide custody services for cryptocurrencies.



“I can confirm that Deutsche Bank has applied to BaFin for a license for crypto custody,” a spokesperson for the bank told Blockworks via email on Tuesday.&nbsp;



Bloomberg first <a href="https://www.bloomberg.com/news/articles/2023-06-20/deutsche-bank-applies-for-digital-asset-license-amid-growth-push" target="_blank" rel="noreferrer noopener">reported</a> the development, citing Deutsche Bank’s global head of corporate bank, David Lynne. 



Lynne reportedly said the bank is growing its digital assets and custody business. BaFin declined to comment.



Deutsche’s application to BaFin is seen as part of a broader strategy to boost fee revenue for its corporate bank unit. This move aligns with its subsidiary asset management firm DWS’s efforts to expand income through offerings related to digital assets.



In February, DWS was <a href="https://www.bloomberg.com/news/articles/2023-02-08/deutsche-bank-s-dws-in-talks-to-invest-in-crypto-firms-dda-tradias" target="_blank" rel="noreferrer noopener">reportedly</a> considering investments in two German crypto companies to boost growth. The companies were Deutsche Digital Assets, which offers crypto exchange-traded products, and Tradias, a market-making firm.



BaFin keeps an eye on companies in Germany that provide services related to crypto assets, including crypto trading platforms, crypto ATM operators and companies offering crypto custody services.



Obtaining a BaFin license allows crypto companies to confidently advertise and offer their services in the German market.



The regulator has already granted crypto custody licenses to several companies, including a unit of Germany&#8217;s <a href="https://www.boerse-stuttgart.de/-/media/files/gruppe-boerse-stuttgart/pressemitteilungen/en/2023/230330-mr-boerse-stuttgart-digital-crypto-custody-licence.ashx?la=en&amp;hash=493B74F3E3996EA0DC0F8EF3AFDDB005" target="_blank" rel="noreferrer noopener">Boerse Stuttgart</a> stock exchange, Berlin-based <a href="https://www.finoa.io/blog/bafin-qualified-custodian-license/" target="_blank" rel="noreferrer noopener">Finoa</a> and well-known crypto exchange <a href="https://blog.bitpanda.com/en/we-have-received-largest-crypto-licence-german-regulator-bafin" target="_blank" rel="noreferrer noopener">Bitpanda</a>.



In Feb. 2022, BaFin <a href="https://www.bafin.de/EN/Aufsicht/FinTech/Geschaeftsmodelle/DLT_Blockchain_Krypto/DLT_Blockchain_Krypto_node_en.html" target="_blank" rel="noreferrer noopener">cautioned</a> about the speculative nature and risks of investing in crypto assets. It advised against relying on investment recommendations found on social media, as they can be unreliable or misleading.



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Deutsche Bank seeks crypto custody license approval in Germany

Crypto infrastructure provider Taurus is gearing up to open offices in Paris and Dubai — and boost its engineering team via incoming capital from two prominent banks.&nbsp;



The plans come after Credit Suisse led Taurus’ $65 million funding round. That news broke on Tuesday. Deutsche Bank also participated in the capital infusion.&nbsp;



André Helfenstein, chief executive for two of the bank’s Switzerland affiliates, said in a statement that the company, via its partnership with Taurus, is looking to be the leading Swiss bank in the digital assets space.&nbsp;



“We continue to embrace new and innovative technologies, and expect to soon launch several digital asset services for clients on both the issuing and the investment side,&#8221; Helfenstein said.



Founded in 2018, Geneva-based Taurus offers clients the ability to manage cryptoassets, execute staking, tokenize assets and process digital currencies of their choice.&nbsp;&nbsp;



Taurus co-founder Lamine Brahimi said in a statement it would utilize Credit Suisse’s expertise to develop a platform that covers any type of digital assets, beyond just cryptocurrencies.



The link-up with Credit Suisse comes after France-based Banque Delubac &amp; Cie collaborated with Taurus last April to launch its digital asset offering.



Brahimi told Blockworks at the time that he <a href="https://blockworks.co/news/french-bank-delubac-cie-first-to-offer-regulated-digital-asset-services">expected more incumbent banks to follow Banque Delubac &amp; Cie</a> in moving into the space.&nbsp;



<h2 class="wp-block-heading">What’s next for Taurus?</h2>



Brahimi said there’s “premium” working with strategic partners versus pure financial investors.



“Being able to scale some transactions we&#8217;ve made — equity, debt, structured products — with such banks with a global footprint will be win-win-win,” the co-founder told Blockworks in a statement on Tuesday. “[Credit Suisse and Deutsche Bank] have or are integrating our tech and you will see landmark transactions in the coming months.”



In addition to making engineering hires, the company intends to use the $65 million to open up more offices and maintain “stringent” security, risk and compliance requirements.



Brahimi said engineers make up roughly 70% of Taurus’ current staff. The Ethereum <a href="https://ethereum.foundation/" target="_blank" rel="noreferrer noopener">Foundation</a> selected Taurus in May 2021 to lead a security review of Ethereum beacon clients. 



As for global expansion, Taurus said it’s looking to enter the European Union with an office in Paris. There are also plans in place to establish a Middle Eastern foothold via an office in Dubai.&nbsp;



Dubai, which <a href="https://blockworks.co/news/dubai-is-the-latest-government-to-roll-out-crypto-law-set-up-regulator">rolled out its first crypto legislation</a> in March 2022, said last month it has become <a href="https://blockworks.co/news/dubai-free-zone-now-home-to-more-than-500-crypto-startups">home to more than 500 crypto companies</a>.&nbsp;



“It&#8217;s important to be close to our clients and key financial centers where we see an acceleration,” Brahimi said. “Paris and the UAE are good hubs also to serve neighboring financial centers.”



Brahimi said he expects regulatory clarity to come around tokenized securities in most key financial centers — as well as stricter enforcement around the boundary between a cryptocurrency and a security.



“We might see some commercial stablecoins initiatives led by regulated institutions,” he said. “As a tech firm that is itself regulated, Taurus is ideally positioned to serve clients looking for top-notch security and regulatory compliance.”



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‘Landmark Transactions’ To Come After Credit Suisse Deal, Taurus Exec Says

Morgan Chittum

<div id="highlights-block_6241e5748becc" class="highlights">
 <ul>
 <li>NFTs have an estimated total addressable market (TAM) of over $1 trillion, according to Deutsche Bank</li>
 <li>Earlier this month, Meta CEO Mark Zuckerberg said the company was “working” on bringing NFTs to Instagram “in the near term”</li>
 </ul>
 
</div>



From <a href="https://cms.blockworks.co/twitter-integrates-nfts-with-new-profile-picture-feature/" target="_blank" rel="noreferrer noopener">Twitter’s move</a> to verify NFTs on user profiles, to <a href="https://cms.blockworks.co/youtube-doubles-down-on-nft-integration-exec-says/" target="_blank" rel="noreferrer noopener">YouTube execs&#8217; mentions</a> of integration of cryptoassets on its platform — companies have made advances to push the blockchain-based collectibles into the limelight the past year.



Instagram, however, may finally take non-fungible tokens (NFT) mainstream with its forthcoming integration, Deutsche Bank said in a research report published Sunday, <a href="https://www.coindesk.com/business/2022/03/28/nfts-could-go-mainstream-with-instagrams-planned-support-deutsche-bank-says/" target="_blank" rel="noreferrer noopener">cited by Coindesk</a>.



Mark Zuckerberg, chief executive of parent company Meta, earlier this month <a href="https://techcrunch.com/2022/03/15/instagram-nfts/" target="_blank" rel="noreferrer noopener">said</a> the company was “working” on bringing NFTs to Instagram “in the near term.”



Per a <a href="https://cms.blockworks.co/report-meta-will-incorporate-nfts-into-ambitious-metaverse-plans/" target="_blank" rel="noreferrer noopener">report</a> from the Financial Times, which cited sources familiar with the matter, the tech giant will launch an NFT marketplace. Instagram and Facebook will reportedly develop a feature to allow users to showcase NFTs on their profiles.



Instagram could lower barriers in the nascent space, the bank said, and simplify the purchase and selling process of NFTs. The NFT market is in “hyper growth mode” and garnered roughly $25 billion in transaction volume last year.&nbsp;



Additionally, Instagram’s brand recognition will “legitimize NFTs, which could serve to erode buying hesitancy across the company’s broader audience,” Deutsche Bank said.&nbsp;



Per the bank’s note, NFTs have an estimated total addressable market (TAM) of over $1 trillion. This figure is led by use cases such as art, gambling and collectibles.&nbsp;



Colin Fitzpatrick, founder of NFT startup Animal Concerts, previously told Blockworks that the chance of the company getting into NFTs is “highly likely,” but holders should be careful.&nbsp;



“The responsibility will fall on the NFT community’s shoulders to make sure Meta behaves fairly and doesn’t try to monopolize profits and what is supposed to be a democratic industry,” Fitzpatrick said.



The bank’s report follows on the heels of Morgan Stanley’s related <a href="https://cms.blockworks.co/morgan-stanley-sees-8-trillion-metaverse-market-eventually/" target="_blank" rel="noreferrer noopener">note</a> to clients last month, in which analysts predict the metaverse’s initial TAM in China will be roughly $4 trillion, as it replaces the mobile internet with a more “immersive experience.”



“We expect the metaverse TAM to be expansive and go beyond the current online consumption market, which is mainly dominated by e-commerce and online entertainment spending,” the note said.



Shares of Meta Platforms Inc. (FB) are down 0.69% at $220.28 at time of publication.



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