Ben Strack

The asset management unit of Nomura-backed crypto firm Laser Digital has introduced its first cryptocurrency fund, and intends to launch more products that go beyond bitcoin.



Its Bitcoin Adoption Fund, which launched on Tuesday, offers institutional investors long-only investment exposure in Bitcoin. This is the first of several &#8220;digital adoption investment solutions&#8221; that the company plans to introduce.



“Funds exploiting alpha and beta from both traditional and digital asset classes will follow,” Laser Digital Asset Management head Sebastien Guglietta told Blockworks.&nbsp;



He declined to comment on what types of products in particular could be next.&nbsp;&nbsp;



Japan-based investment bank Nomura <a href="https://blockworks.co/news/nomura-targets-crypto-venture-space-with-laser-digital">introduced Laser Digital last year</a>. The Swiss company was set to focus on Web3 and blockchain companies initially before branching out to offer trading and investment products to institutional clients.



Laser Digital’s asset management unit formed in February, with team members spread across London, Zurich and Dubai. It now has one product under its belt.&nbsp;



Registered as a mutual fund under the Cayman Islands Regulatory Authority, the fund has been registered for marketing in Ireland, Luxembourg and the UK, Guglietta said.&nbsp;



“Additional registrations may follow depending on investor demand,” he added.&nbsp;



Before being tapped to lead Laser Digital Asset Management, Guglietta was Nomura’s chief scientist officer. He also previously worked as a portfolio manager and senior scientist at hedge fund Brevan Howard.



After partnering with crypto asset manager CoinShares and digital asset security company Ledger in 2020 to start the crypto custodian Komainu, Nomura established Laser Digital. This later led to the creation of Laser Digital&#8217;s fund group.



<a href="https://blockworks.co/news/nomura-laser-digital-dubai-license">Laser Digital gained a full crypto license</a> from Dubai’s Virtual Asset Regulatory Authority in July. The company hinted at its latest product launch at the time, noting it would develop “[over-the-counter] trading services and a comprehensive range of digital asset investment products and solutions.”



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Laser Digital’s new asset management arm plotting full crypto suite

James Cirrone

Laser Digital, the crypto unit of Japanese bank Nomura, snagged a full crypto license from Dubai’s Virtual Asset Regulatory Authority.&nbsp;



Dubai <a href="https://www.vara.ae/en/licenses-and-register/public-register/laser-digital-middle-east-fze/">issued</a> the license last Thursday, granting Laser Digital the ability to serve both retail and institutional customers.



Now that the company — which is based in Switzerland — is established in the wealthy Middle Eastern city, it plans to launch its trading and digital asset management businesses in the coming months, according to a <a href="https://www.laserdigital.com/company-news/laser-digital-receives-virtual-asset-service-provider-licence-from-dubai-s-virtual-asset-regulatory-authority">press release</a>.&nbsp;



The company will offer institutional investors “[over-the-counter] trading services and a comprehensive range of digital asset investment products and solutions.”



<a href="https://blockworks.co/tag/nomura">Nomura</a> is one of Japan’s largest banks and <a href="https://blockworks.co/news/nomura-targets-crypto-venture-space-with-laser-digital">set up Laser Digital last September as its crypto offshoot</a>.&nbsp;



In less than a year after its founding, <a href="https://blockworks.co/tag/laser-digital">Laser Digital</a> has leapfrogged the world’s largest crypto exchange, Binance, in the race to be fully approved in Dubai. <a href="https://blockworks.co/news/binance-dubai-operational-license">Binance was approved for a operational minimum viable product (MVP) license</a> on Monday, which restricts it from offering its services to all retail investors.



Other more recent registrants in <a href="https://blockworks.co/tag/dubai">Dubai</a> include crypto exchanges Bybit and OKX. <a href="https://blockworks.co/tag/komainu">Komainu</a> also received full approval in May 2023 to offer custody and financing services to qualified institutional and retail clients, <a href="https://blockworks.co/news/crypto-custodian-komainu-follows-exchanges-to-dubai">after gaining provisional approval last July</a>.



Dubai’s interest in digital assets is nothing new. At the start of 2023, <a href="https://blockworks.co/news/dubai-free-zone-now-home-to-more-than-500-crypto-startups">Dubai announced that it had attracted more than 500 crypto companies</a> — in part because of the generous tax breaks it offers through its Dubai Multi Commodities Center, a dedicated hub for local crypto entrepreneurs.



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Nomura crypto arm locks down full license in Dubai

There was a sharp decline in the number of crypto mergers and acquisitions (M&amp;A) in Q2 2023, with intra-sector deals experiencing a 50% fall-off.



While deal activity <a href="https://blockworks.co/news/record-q1-crypto-ma">had hit an all-time quarterly high</a> in the first three months of 2023 — 54 transactions — that figure dropped to 32 between April and June, according to crypto advisory firm Architect Partners.&nbsp;



The quarter-over-quarter decline was driven by a drop in intra-crypto deals, which fell 50% from 36 to 18, Architect Partners Head of Growth Dan Wang told Blockworks.&nbsp;



“Bridge” transactions — deals between crypto and non-crypto companies — saw less of a decrease, dropping from 18 to 14.



“Crypto companies are being more prudent and selective on where and how they choose to allocate time and resources,” Wang said.&nbsp;&nbsp;&nbsp;



Ten of the 32 M&amp;A deals during the second quarter disclosed what the acquirer paid, amounting to $370 million, according to Wang. This compared to roughly $400 million of disclosed transaction volume last quarter — a marked difference from when that number peaked during the first quarter of 2022 at $1.6 billion.&nbsp;



The 86 crypto M&amp;A transactions in the first half of 2023 is behind <a href="https://blockworks.co/news/crypto-ma-deals-hit-record-high-in-2022-despite-downturn">the record pace set in 2022</a> — a year that saw 204 transactions, a 13% increase from 2021.&nbsp;



<h2 class="wp-block-heading">Notable deals</h2>



Among the latest, and more significant transactions, was Laser Digital’s buy of Elysium Technology Group, a post-trade solutions provider for FX and digital assets. The company made the acquisition for an undisclosed amount.



Laser Digital is the digital asset business of Japan-based financial services firm Nomura.&nbsp;



Read more: <a href="https://blockworks.co/news/tradfi-crypto-participation-crucial">TradFi participation, clear rules crucial for crypto adoption: Laser Digital CEO</a>



Elysium offers “air traffic control” for its capital markets business — comprising trade settlement, real-time position reporting, and a securities database with digital asset symbology, Architect Partners’ Michael Klena said in a June 30 <a href="https://architectpartners.com/laser-digital-acquires-elysium-technology-group/">note</a>.



Institutional-grade, cross-asset functionality is set to drive client decision-making in the crypto space, he added.&nbsp;



“As the roles market participants play in digital asset markets continue to evolve, Laser Digital is positioned as a key FX and digital asset post-trade infrastructure provider with traditional financial institution roots, which is the counterparty profile that institutions want to do business with,” Klena wrote.&nbsp;



Another particularly notable transaction during the second quarter was Ripple’s buy of crypto custody tech provider Metaco for $250 million in mid-May, Wang told Blockworks.&nbsp;



Citibank and BNP Paribas are among the users of Metaco’s Harmonize-branded product lineup, which allow institutions to trade, settle, transfer and custody digital assets.



The acquirer, a specialist in blockchain-based international payments, seeks to “transform” the $156 [trillion] cross-border payment market” and help issue and settle tokenized assets — capabilities for which security are critical, Klena wrote in a May 17 note.&nbsp;&nbsp;&nbsp;



“Metaco’s custody technology and related products allow Ripple to protect client assets, control the evolution of the technology and related services as needs dictate and represent a potentially attractive new revenue stream as assets under custody scale,” Klena added.&nbsp;



These transactions join other significant deals done earlier this year, such as <a href="https://blockworks.co/news/coinbase-one-river-acquisition">Coinbase’s buy of One River Digital Asset Management</a> in March and ConsenSys’s <a href="https://consensys.net/blog/press-release/consensys-acquires-hal-to-augment-infuras-blockchain-notification-and-automation-capabilities/">acquisition</a> of blockchain development tooling platform HAL.



Wang also pointed to the merger between Hut 8 Mining and US Bitcoin Corp., <a href="https://blockworks.co/news/bitcoin-miners-cut-costs-rebound">first revealed in February</a>, as a notable 2023 transaction. That combination, set to give the company a hash rate capacity of 7.5 exahashes per second (EH/s), <a href="https://blockworks.co/news/hut-8-secures-50m-loan">is still pending</a>.



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Number of crypto M&A deals plummeted in Q2

According to Jez Mohideen, the CEO of Laser Digital, the ongoing regulatory debates surrounding cryptocurrencies will play a crucial role in determining the future trajectory of institutional adoption in this sector. As firms continue to explore and experiment with tokenization, it remains a key area of interest within the industry.



Japan-based financial giant <a href="https://blockworks.co/news/nomura-targets-crypto-venture-space-with-laser-digital">Nomura launched Laser Digital</a> last September. The crypto company was set up to initially focus on investing in firms within the DeFi, centralized finance, Web3 and blockchain infrastructure segments.&nbsp;



A recent survey conducted by Laser Digital, which included professional investors managing approximately $5 trillion in assets, revealed that 82% of respondents hold a positive view of the digital asset class. In particular, they expressed optimism for the performance of bitcoin and ether over the next 12 months.



The internal findings, seen by Blockworks, included responses from wealth managers, family offices, insurance asset managers and various investment funds, among other professional investors.



Despite many surveyed institutions viewing the asset class favorably, a vast majority would like to see the digital asset and traditional finance worlds collide.&nbsp;&nbsp;&nbsp;



Roughly 90% of those surveyed said they or their clients would be more likely to allocate investment vehicles backed by large traditional financial institutions.



Read more: <a href="https://blockworks.co/news/blackrock-clout-bitcoin-etf-approval">Is BlackRock’s clout enough to get its bitcoin ETF past the SEC?</a>



About the same percentage — 91% — said they want to see digital assets combined with traditional asset classes to produce “all-weather” income strategies.&nbsp;



<h2 class="wp-block-heading">Institutions testing tokenization&nbsp;</h2>



Various financial institutions believe that by building the right rails, they can bring more trust and credibility to an asset class that over the last year has seen the collapse of Terra’s algorithmic stablecoin, as well as the bankruptcy of FTX and others, Mohideen told Blockworks.



Some are testing such rails on private blockchains. Firms are also experimenting with tokenization, for example — projects the Laser Digital CEO said are among the space’s “low-hanging fruit.”&nbsp;



BlackRock CEO Larry Fink has <a href="https://blockworks.co/news/blackrock-ceo-us-lagging-innovation-tokenization">touted the tokenization of securities</a> as “the next generation of markets.”



Franklin Templeton’s tokenized money market fund — using the Stellar and Polygon blockchains to offer transaction transparency — has gained more traction in recent months after launching in 2021. WisdomTree is <a href="https://blockworks.co/news/wisdomtrees-latest-blockchain-enabled-funds-to-use-ethereum-stellar">getting set to introduce “blockchain-enabled funds”</a> on its upcoming financial app.&nbsp;



Roger Bayston, Franklin Templeton’s head of digital assets, said last week <a href="https://blockworks.co/news/stablecoin-with-yield-franklin-templeton">blockchain technology is set to be “transformational” for other capital markets</a> going forward.



“The digital rails set by the Web3 universe will be significant,” Mohideen said. “As you get more and more assets digitized and tokenized, these rails will pave the rails for significant conversion of traditional assets into this universe.”



The CEO added: “I don’t think that’s going to happen overnight. I don’t think that can happen without having serious regulatory debates, which is what’s starting to happen.”



<h2 class="wp-block-heading">Regulatory resolutions will be key</h2>



The Laser Digital survey found that 76% of respondents pointed to legal or regulatory restrictions that could prevent them or their clients from investing in a crypto-related product.&nbsp;



While the EU <a href="https://blockworks.co/news/eu-parliament-passes-mica-vote">passed of the Markets in Crypto Assets (MiCA) regulation</a> in April and <a href="https://blockworks.co/news/crypto-exchanges-hong-kong">Hong Kong has become a desirable place for crypto firms</a>, the US lags behind.&nbsp;



<a href="https://blockworks.co/news/coinbase-binance-suits-different">The SEC sued Binance and Coinbase</a> earlier this month in the latest examples of what many in the industry have dubbed the agency’s “regulation by enforcement” tactics in the absence of a clear crypto framework in the US.&nbsp;



David Hirsch, chief of the SEC division of enforcement’s crypto division, <a href="https://blockworks.co/news/sec-hirsch-faces-the-music">took exception to that categorization</a> during a keynote discussion at last week’s DACFP Vision conference in Austin last week. While the SEC has put forward a “sincere effort” to provide guidance where it can, “we’re not your lawyers,” he added.



These regulatory actions, which are topics discussed for years, have not come out of nowhere, Mohideen said. The debates around which crypto assets are securities, and the resolutions expected to come from them, are “not unhealthy” in the long run, he added.&nbsp;



“Despite the digital asset world wanting to kind of live on its own terms…the need for [financial institutions] to bridge the gap so that assets can go from one to the other basically,” he said. “For that to happen you need to have some sort of standardization.



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