As asset managers ponder their involvement in trading cryptocurrency and digital asset-related products, Union Investment’s head of trading has said it is discussions with custodians in order to be ready to trade native crypto from the middle of next year.
Speaking at TradeTech Europe via digital link, Christoph Hock, head of multi-asset trading at Union Investment, explained how the German-based investor was exploring “the token economy” of which crypto was a part. Within plans to explore crypto-related derivatives, tokenisation and exchange-traded products, Hock added that the asset manager was preparing to trade cryptocurrencies from next year.
“Right now, we are not ready to trade native crypto, this will be possible from middle of next year onwards. We are [conducting] in-depth partnership talks with custody banks and working with them on a crypto custody solution,” Hock added.
An earlier audience poll at TradeTech showed that only 31% were still thinking about their firm’s digital asset readiness, 25% were either planning or ‘doing,’ and 19% were doing nothing.
Union Investment has been exploring digital assets for the past four years in an effort to do the appropriate prep work and educate itself.
“Looking at the product landscape, we are ready to trade exchange-traded notes, we are in talks with Bafin, you have CME-listed futures, Eurex recently launched a futures contract on crypto. Then obviously from traditional broker firms there are OTC derivatives replicating one-for-one exposure.
“The second is tokenisation of traditional assets. We have been the first European asset manage to be involved in a public transaction from the European investment bank. NFTs, the biggest use case for us, is around the real estate area, this might be an interesting use case going forward to trade real estate in the secondary market on an exchange platform.”
Hock was speaking on a panel on cryptocurrencies and digital transformation alongside representatives from Schroders, Nickel Digital and Fasanara Capital. Discussing the journey of crypto moving from retail to institutional, the panel discussed the regulatory and infrastructure challenges ahead.
“Traditional institutional investors are used to centralised, regulated asset markets. An asset that plays by slightly different rules can be scary,” said Benjamin Popatlal, multi-asset Strategist at Schroders.
Popatlal said the reticence of the institutional investor community is really a chicken and egg problem. “Investors are waiting for the market to mature, but it really is the process of institutions like ours opening our arms to this new asset class that will help it professionalise.
“We don’t think investors should classify them as currencies, necessarily. Classification as a commodity is more appropriate and we draw comparisons to agriculture.
“Agriculture will always be subject to the weather, but crypto will fall into more of a predictable behaviour pattern as it matures.”