Deutsche Bank’s asset management arm is exploring stakes in two crypto firms

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(Kitco News) – The asset management arm of Deutsche Bank AG is in talks to invest in two German cryptocurrency firms as part of the bank’s efforts to revive growth, Bloomberg reported Wednesday.

DWS Group, led by CEO Stefan Hoops, has held several discussions focused on acquiring a minority stake in Deutsche Digital Assets, a Frankfurt-based provider of crypto exchange-traded products, according to people familiar with the matter.

Tradias, a market-making firm owned by Bankhaus Scheich, is another potential investment target. In late 2021, Frankfurt prosecutors chose Tradias to sell confiscated cryptocurrency in a way that minimized volatility. Like DDA, discussions about investing in Tradia revolve around the purchase of a minority stake.

The pivot to crypto comes as Hoops tries to rehabilitate DWS’s reputation after allegations of greenwashing resulted in probes by US and German authorities. It’s an interesting approach to take since the crypto ecosystem has been rocked by its own scandals and doesn’t exactly have a good reputation with global regulators.

In December, Hoops provided an overview of the bank’s blockchain and digital currency strategy, which included a plan to “build-or-buy various specific blockchain-related services” as a way to “lay the foundation for a digital future.”

During an earnings call last week, Hoops said DWS has “begun to evaluate strategic partners and begin due diligence on potential targets” in areas where it wants to develop new capabilities, such as digital assets. According to Hopps, the recent drop in digital asset prices could present “interesting opportunities” for DWS.

Interest in blockchain technology and how it can be integrated into traditional finance has been growing among the institutional crowd in recent months as several heavy hitters have become involved in the technology.

In October, Bank of New York Mellon (BNY Mellon), America’s oldest bank, announced that it would begin allowing customers to hold their cryptocurrency holdings alongside their traditional investments on the same platform – becoming the first major US bank to do so.

The results of a survey commissioned by the bank found that 70% of institutions surveyed indicated that they would increase their digital asset activity if services such as custody and execution were available from recognized, trusted institutions. 88% signaled that they are still going ahead with their previously decided plans despite the market downturn.

The vast majority (91%) of institutional investors are interested in investing in tokenized products, but want to do so in a secure and compliant way, the survey found.

BlackRock, the world’s largest financial manager by AUM, has also increased its activities in the cryptocurrency space over the past year. In August, the firm partnered with Coinbase, the top US-based cryptocurrency exchange, to provide greater access to cryptocurrencies for institutional investors starting with Bitcoin (BTC).

In August, BlackRock also launched a private trust offering institutional clients in the US direct exposure to Bitcoin. The following month, the firm launched its iShares Blockchain Technology UCITS ETF, which was created to track the NYSE FactSet Global Blockchain Technologies Capped Index. The fund was “designed for investors seeking exposure to a broad range of companies involved in the development, innovation and use of blockchain and crypto technologies.”

According to Joseph Chalom, global head of Strategic Ecosystem Partnerships at BlackRock, the firm’s institutional clients are “increasingly interested in gaining exposure to digital asset markets and are focused on how to effectively manage the operational lifecycle of these assets.”