Crypto asset manager CoinShares snags broker-dealer license, a move experts say is to strengthen its US presence

Quick Take

Crypto asset manager CoinShares has obtained a broker-dealer license from FINRA
The asset manager appears to have acquired the license through acquisition, an industry insider told The Block
Sources said this move will likely enable the asset manager to offer security tokens or crypto investment products to U.S. investors
The firm currently issues eight cryptocurrency exchange-traded products (ETPs) in Europe. In 2018, it was ordered by the SEC to suspend the trading of two of them in the U.S.

CoinShares Capital, an entity that appears to be owned by European asset-manager CoinShares, is now a registered broker under the Financial Industry Regulatory Authority (FINRA).

The FINRA website shows that the New York-based firm recently underwent a name change from Group Capital to CoinShares Capital, and the broker-dealer is now registered under CoinShares' Chief Strategy Officer Meltem Demirors.

According to an industry insider, CoinShares likely has acquired Group Capital and transferred its broker-dealer license to the parent company. A CoinShares spokesperson declined to comment.

Obtaining broker-dealers through acquisitions is nothing new in the crypto space - Coinbase and MakerDAO have both taken this route. However, as The Block previously noted, broker status acquired through this path faces its own restrictions.

In 2018, Coinbase bought Keystone Capital in the hope to issue securities on blockchain as a regulated broker-dealer. However, the plan can't come to fruition fully as the Keystone license did not explicitly permit the exchange to offer securities, according to sources.

Possible expansion in the U.S.?

Although it is unclear what CoinShares will do with the license, the FINRA record states that the firm is looking to conduct "private placements of securities." This means that the firm will likely offer security tokens to accredited investors in the U.S., two industry experts told The Block. It is also possible for the firm to issue cryptocurrency investment products similar to Grayscale's bitcoin trust fund, a popular investment vehicle among U.S. investors. However, the broker-dealer license does not allow CoinShares to offer ETPs in the U.S., the two experts clarify.

In early 2018, XBT Provider AB, a subsidiary of CoinShares, entered the U.S. market with two exchange-traded products (ETPs), Bitcoin Tracker One and Ether Tracker One. However, trading of both was soon suspended by the Securities and Exchange Commission (SEC), citing "confusion amongst market participants" regarding their regulatory status.

Meanwhile, FINRA documents indicate that CoinShares Capital has been in operation since September, with Demirors being the firm's CEO controlling less than 5% of the company.

CoinShares Capital's regulatory green-light follows those of Harbor and Watchdog Capital. Earlier this year, FINRA was reportedly facing a backlog of broker-dealer license applications. However, interest among crypto firms to become broker-dealers is on the rise, with crypto custodian BitGo and crypto investment app Abra all seeking the regulatory blessing.