Nomura is to launch a new company to help institutional clients diversify into cryptocurrency, decentralised finance and non-fungible tokens, despite a recent run of volatility in the crypto market that has raised fundamental questions over its safety for investors.
According to people with knowledge of the company’s plan, Japan’s largest investment bank will combine a number of digital asset services under a single wholly-owned subsidiary that will have a staff of about 100 by the end of 2023.
Last week, Nomura successfully executed its first bitcoin futures and options trades on Chicago-based futures exchange CME by DRW’s crypto-trading arm Cumberland.
The unveiling of Nomura’s plans, which have been under discussion for four years, coincides with a spectacular crash in the value of some of the world’s most prominent cryptocurrencies, sparking concerns about the entire crypto market.
While crypto investors are keen to interpret the recent volatility as a “correction”, the bitcoin price last week slumped below $30,000 for the first time since last summer and tether — the largest stablecoin — failed to maintain its link with the US dollar.
The new company, which will be run by current Nomura executives but will hire extensively from outside, will allow the Japanese brokerage to compete with other major global banks already offering institutional clients services and products linked to bitcoin, stable coins and other digital assets.
Nomura joins Goldman Sachs, Citigroup, Bank of New York Mellon and other global financial institutions that have all become active in the cryptocurrency market in recent years.
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“If we don’t do this, then it’s going to be more difficult down the line to be competitive,” said one of the Nomura executives, who said that despite the questions that surround digital assets, the opportunity cost of failing to offer investment facilities to institutional clients was too high.
Despite the risks associated with digital assets, Nomura executives said that interest from institutional clients was strong and would continue to grow as the market for cryptocurrencies, NFTs and other assets grew attractive as a means of diversifying more traditionally run portfolios.
“Any asset class at the moment that has discounted cash flow is all under huge stress in an inflationary environment. But I think . . . many managers will be looking and thinking about potentially allocating towards blockchain technology and blockchain opportunities,” the Nomura executive said.
Nomura will initially transfer about 15 employees to the new digital asset subsidiary, which has not yet been given a name but will be headed by Jez Mohideen, Nomura’s current chief digital officer for its wholesale business.
