Institutional Interest In Bitcoin Is Taking Different Forms

Institutions are coming to Bitcoin
BTC
and crypto. This phrase was common in 2018-2019, when the bitcoin price tanked more than 60% from its 2017’s high, with all the crypto assets following its lead. It was a hard bear market in the crypto industry, and the promise of institutional interest in these products was a usual prayer. But 2023-2024 is when this supposed interest might come into reality.

It’s not only about a bitcoin exchange-traded fund like what BlackRock among many other financial services companies are pursuing. Now, different prominent institutions are trying to get into Bitcoin and become key actors, especially in custody terms. For example, on September 14, the globally known German bank, Deutsche Bank unveiled an agreement with the Swiss crypto firm Taurus to provide digital assets custody and tokenization services to its institutional clients.

“As the digital asset space is expected to encompass trillions of dollars of assets, it’s bound to be seen as one of the priorities for investors and corporations alike. Our focus is not just on cryptocurrencies but supporting our clients in the overall digital assets ecosystem,” explained Paul Maley, Deutsche Bank’s global head of securities services, as Reuters reported. The bank manages over $1.4 trillion in assets, and the crypto market has a total capitalization of $1.1 trillion, per Coingecko data.

This approach is familiar to Deutsche Bank. The bank has been working to offer cryptocurrency services to its clients over the past three years and even applied for a digital asset custody license from the Federal Financial Supervisory Authority in Germany in June 2023, as CoinTelegraph reported.

This announcement is one of many movements around bitcoin custody. On September 14, American bitcoin exchange Swan announced a joint venture with the global digital assets custodian Bitcoin to offer a new service of BTC custody. The key difference with the Deutsche Bank’s product is that this one will be “bitcoin-only,” meaning that the only asset the firms will offer to custody is bitcoin. Still, the product is pending regulatory approval, and it’s planned to be live in 2024.

Institutional Investors Will Also Have Lending Services

However, the potential institutional interest in bitcoin is not only becoming a reality in custody services. Build Assets Management also launched the Build Secured Income Fund I in partnership with the American bitcoin custody solutions company Unchained.

“The Fund is one of the first direct lending private credit funds that invests in over-collateralized consumer and business loans backed by bitcoin,” a joint press release detailed. The goal is to offer a “compelling yield profile” to help accredited investors and institutions meet their income needs. It also will provide access to dollar capital to the bitcoin borrowers.

This fund will take advantage of the liquidity of the bitcoin market, as the collateral can be liquidated in a matter of minutes, which is an entirely different reality from other commonly collateralized assets. Build will hold short-duration, senior secured, over-collateralized consumer and business loans from its clients.