Digital asset services firm Bequant has secured two “in-principle” approvals in Malta which will eventually lead to the firm being a licensed prime broker and crypto exchange in Europe.
“The prime brokerage offering has been our anchor product since we launched it,” Bequant CEO George Zarya said in an interview. “We tailored it to quants, prop traders and arbitrageurs that are the clients of prime brokers. Prime brokers minimize the counterparty risk on exchanges and allows for a high level of capital efficiency.”
After Coinbase acquired crypto prime broker Tagomi in May, it was able to facilitate at least $425 million of MicroStrategy’s blockbuster bitcoin buy through its Coinbase Prime service. Such are the stakes for establishing a prime brokerage arm in the time of heightened institutional interest.
Prime brokers are facilitators for financing and trading for deep-pocketed institutional investors. While the digital asset space doesn’t currently have a lot of prime broker options, several crypto firms including Coinbase, BitGo and Genesis Trading have announced this year their plans to build prime brokerage wings.
Bequant’s prime brokerage services include capital introduction, fund administration, securities lending, multi-exchange direct market access, custody, collateral management, leveraged trade execution, over-the-counter block trading, risk management and smart-order routing.
Since late August 2018, the company has been operating its prime brokerage and crypto exchange services provisionally under the Virtual Financial Assets Act while in close conversation with the Malta Financial Services Authority (MFSA), Zarya said.
The licenses will allow Bequant to continue operating its crypto exchange and to offer prime brokerage services to its clients.
In total, both approvals required Bequant to hold €730,000 in reserve and to have policies and procedures reviewed by the Malta Financial Services Authority, Zarya added.
Having gone through this rigor already will allow Bequant to apply for other securities licenses in Malta with relative ease in the future, Zarya said, potentially allowing the firm to handle tokenized securities and derivatives.
“The prime brokerage product has been our anchor since we launched it,” Zarya said. “In the new year, the major milestone for the industry is going to be an increased scrutiny on exchanges by clients as the market becomes more institutional.”
The firm is now connected to 14 exchanges and five OTC desks as sources of liquidity, up from 11 sources in August.