In this week’s roundup, we look at the latest crypto structured products entering the market, latest firms to be regulated and the increasing weight of security token offerings (STOs).
Swiss on-chain capital markets platform Obligate has launched a USD Coin (USDC)-denominated barrier reverse convertible linked to Bitcoin.
Our expertise in derivatives allows us to transform high volatility from digital assets into attractive coupons and payouts - Gideon Hyams, STS Digital
Issued as an eNote, the platform’s trademarked digital smart contract-based security, by STS Digital Ltd, a leader in regulated digital asset services, the product is the first structured product launch on the Polygon blockchain.
For the first time investors can now access customised investment products issued natively on-chain which provides higher levels of transparency, automation, and efficiency, according to Tobias Wohlfarth, head of origination at obligate.
Wohlfarth added that the partnership with STS Digital ‘is set to redefine the investment possibilities available to investors on-chain, aligning perfectly with our vision of pioneering a regulated and decentralized financial future’.
The partnership will extend beyond the current product and aims at establishing an extensive product suite alongside a broad spectrum of digital asset services.
According to Wohlfarth (right), the addition of structured investment products to the Obligate platform underlines the scalability of its infrastructure ‘and its potential to deliver blockchain-based investment solutions for a broad set of client demands in the digital asset domain’.
STS Digital Ltd, which is overseen by the Bermudan Monetary Authority, is seeking to advance the digital asset field, delivering products ‘attuned to market needs and the sophisticated investor’.
‘Our partnership with Obligate allows us to bring structured products on-chain and make the product life-cycle fast and cost efficient. Our expertise in derivatives allows us to transform high volatility from digital assets into attractive coupons and payouts,’ said Gideon Hyams, co-founder of STS Digital Ltd.
EDG gets UK FCA approval
Enhanced Digital Group UK Limited, a subsidiary of Enhanced Digital Group, Inc. (EDG), a wholesaler of derivative and structured product solutions in the digital assets market, has become authorised and regulated by the Financial Conduct Authority (FRN 994619) on 1 November 2023.
‘EDG is committed to bringing regulatory standards and institutional-grade practices to this asset class - no different from those in traditional finance,’ said Chetan Sennik, co-founder and head of trading. ‘FCA registration not only confirms that we are on the right track, but it also reinforces the UK's dedication to the industry, playing a pivotal role in driving the institutionalisation and inevitable derivatisation of this asset class.’
The firm has focused on building up its capabilities over the last year. Earlier this year, it hired prominent former TradFi executive Cactus Raazi as head of US strategy. Raazi, a former Goldman Sachs and Nomura banker, joined from crypto trading firm Amber Group where he was US CEO.
Arta TechFin Partners with EDG UK as Exclusive Distributor of Digital Asset Structured Products in Hong Kong, Planning ASEAN HQ in Singapore
Back in April, EDG partnered with Arta TechFin, a hybrid fintech platform bridging traditional financial assets and digital assets to distribute digital asset structured products offering a variety of return scenarios, including asymmetric strategies and capital protected structures in Hong Kong exclusively. Arta offers a one-stop global solution in over-the-counter structured products and exchange-traded derivative products listed in Chicago and Hong Kong.
This partnership with EDG UK enables ARTA clients to access digital markets in traditional USD structured note formats. ARTA will be able to offer clients a. In addition to the EDG UK partnership, having partnership networks in New York, Singapore and Zurich.
HK platform aims at regulated structured products linked to RWAs via STOs
CSpro (Hong Kong) Limited (CSpro, formerly Signum Digital Limited), has announced the launch of security token offerings (STOs) for issuers and professional investors (as defined by Hong Kong law).
CSpro is licensed by the Securities and Futures Commission (SFC) to carry out Type 1 (dealing in securities) regulated activities. As the first primary issuance and distribution platform in Hong Kong specialised exclusively in STOs, CSpro is seeking to redefine the landscape of regulated structured products linked to real world assets (RWAs).
The CSpro platform is seeking to combine ‘cutting-edge technology with strategic partnerships to bring together security token issuers and professional investors through a seamless technology-driven experience and in line with relevant regulatory requirements’, according to Samson Lee, founder & CEO of CSpro.
‘Our mission is to unlock new frontiers in the digital asset space by bringing together token issuers and professional investors through a technology-driven platform to capture the benefits of security tokens backed by RWAs,’ said Lee.
The platform is now accepting applications from potential security token issuers of STOs for providing issuance and distribution services for STOs to professional investors.
OKX launches Seagull product, trading of segregated assets
Crypto exchange OKX has rolled out a new structure Seagull.
The product is non-principal protected and is denominated in Bitcoin (BTC), Ethereum (ETH), or Tether (USDT), its blog stated.
Seagull strategy means buying a call spread and selling an out-of-money put option. While a bullish seagull strategy involves buying a call spread and selling a put, the bearish seagull strategy involves buying a put spread and selling a call, according to OKX.
The latest product debut came after the launch of snowball structure earlier this year.
Meanwhile, the exchange announced on 15 Nov. that it has collaborated with Nomura-backed digital asset custodian Komainu and asset manager CoinShares to enable both its spot and derivatives trading without the counterparty risk associated with assets being held on the exchange as assets are held in segregated custody with Komainu.
‘For institutional investors, counterparty risk is the Achilles heel of crypto when trading on exchange,’ Lewis Fellas, head of hedge fund solutions at CoinShares, said in a jointed statement. ‘Without fail it’s the topic most discussed in investor meetings and a major challenge to be overcome as we prepare for true institutional participation in crypto markets.’
eToro partners with Index Coop on crypto portfolio
Trading investing platform eToro has joined forces with decentralised autonomous organisation (DAO) Index Coop to introduce a crypto smart portfolio that provides exposure to the emerging Web3 ecosystem, the company stated in a statement.
We anticipate this trend of investors seeking packaged products to continue growing, with a potential shift towards more active style products in addition to the existing focus on passive tools - Dani Brinker, eToro
The ‘Index-Coop’ portfolio, which opened for investment on 18 Oct., provides a ‘balanced exposure’ to four sectors of assets – including 30% of Bitcoin, 30% of Ethereum, and a basket of assets mirroring the allocation of two prominent Index Coop indices that consist of 30% of the DeFi Pulse Index and 10% of the Metaverse Index.
eToro stated that the portfolio aims to ‘offer investors an opportunity to explore various market themes by bundling together multiple assets under a predefined methodology.’
The initial investment threshold for the portfolio begins at US$500, and in backtesting, the portfolio gained 16.62% in the past year, Dani Brinker (right), head of investment portfolios at eToro, told SRP.
Brinker sees recent years’ growth in the ecosystem of managed product baskets, including exchange-traded fund (ETF) and structured products, is attributed to the “increasing popularity of managed products among retail investors who value diversification, low fees, and ease of access to broader indices and themes.”
“We anticipate this trend of investors seeking packaged products to continue growing, with a potential shift towards more active style products in addition to the existing focus on passive tools,” he said. “The growth drivers for this trend include the growing awareness of long-term savings, which are often facilitated through passive packaged products.”
Additional reporting by Summer Wang.
Image: Photo Sesaon/Adobe Stock.