Key Takeaways
- • Q Securities, a Warsaw-headquartered fund services provider, filed paperwork with Luxembourg's CSSF to offer depositary services to crypto funds, according to the company's announcement.
- • Q Securities expects the first Luxembourg-domiciled fund investing fully in crypto assets to launch in less than six months, potentially by summer 2024.
- • Q Securities holds €17bn in assets under custody and serves 220 alternative investment funds, and was the first investment firm granted a Luxembourg AIF depositary license in 2023.
- • The company will target smaller and mid-sized institutional and professional crypto funds, which it says larger industry players often reject due to profitability pressures.
- • Global competitors are moving into the space, including State Street's planned digital asset custody partnership with Copper.co and Clearstream's support for crypto-linked products.
Summary
Fund services provider Q Securities said it expects the "first Luxembourg-domiciled fund investing fully in crypto assets" to launch in less than six months. The company plans to provide depositary services to crypto investment funds and has filed paperwork with the Luxembourg Financial Sector Supervisory Commission (CSSF) outlining its "intent to offer depositary services to crypto funds in Luxembourg." Tomasz Matczuk, chairman of the Q Securities supervisory board, said the company believes it is the first AIF depositary to have such an intention on the Luxembourg market. The company attributed the development of crypto-oriented funds partly to CSSF guidelines issued at the beginning of the year, and said the necessary regulatory and compliance work is underway.
Q Securities argues that a regulated fund structure would allow investors indirect exposure to crypto assets overseen by an asset manager, in contrast to direct investment via exchanges, crypto-trading platforms or ETFs. Wojciech Kozlowski, business development director at Q Securities, said investors would no longer need to actively trade their crypto positions.
The company cited market data to support the opportunity. Chainalysis reported that total cryptocurrency transaction volume reached $15.8trn in 2021, up 567% from 2020. Blockdata reported cryptocurrency assets under custody of $223bn in January. Competition is increasing: State Street said earlier in the month it planned to offer digital asset custody after a partnership with London-based Copper.co, and Clearstream supports crypto-linked finance products and has invested in FundsDLT, a blockchain-based fund distribution platform. Coinhouse, a French firm, has already obtained custody services authorisation from the CSSF.
Q Securities said it will focus on smaller and mid-sized funds serving institutional and professional investors, which it argues larger firms often decline because of profitability thresholds. Kozlowski also expects job growth in Luxembourg's financial sector once the first crypto fund launches, particularly for experienced bankers and fintech professionals.
Q Securities was founded in 2012 as a brokerage, which remains its larger business in Poland. It entered the alternative fund depositary business in 2016, expanded to Luxembourg in 2020 and onboarded its first Luxembourg client in 2021. It is not authorised to serve Ucits retail funds.
Q Securities argues that a regulated fund structure would allow investors indirect exposure to crypto assets overseen by an asset manager, in contrast to direct investment via exchanges, crypto-trading platforms or ETFs. Wojciech Kozlowski, business development director at Q Securities, said investors would no longer need to actively trade their crypto positions.
The company cited market data to support the opportunity. Chainalysis reported that total cryptocurrency transaction volume reached $15.8trn in 2021, up 567% from 2020. Blockdata reported cryptocurrency assets under custody of $223bn in January. Competition is increasing: State Street said earlier in the month it planned to offer digital asset custody after a partnership with London-based Copper.co, and Clearstream supports crypto-linked finance products and has invested in FundsDLT, a blockchain-based fund distribution platform. Coinhouse, a French firm, has already obtained custody services authorisation from the CSSF.
Q Securities said it will focus on smaller and mid-sized funds serving institutional and professional investors, which it argues larger firms often decline because of profitability thresholds. Kozlowski also expects job growth in Luxembourg's financial sector once the first crypto fund launches, particularly for experienced bankers and fintech professionals.
Q Securities was founded in 2012 as a brokerage, which remains its larger business in Poland. It entered the alternative fund depositary business in 2016, expanded to Luxembourg in 2020 and onboarded its first Luxembourg client in 2021. It is not authorised to serve Ucits retail funds.
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