Three of the world’s leading banks — Citigroup, BNY Mellon and Wells Fargo — have joined a funding round for a US developer of cryptocurrency trading technology, highlighting the work now being done on Wall Street to prepare for the growing adoption of digital assets.
The $105mn Series B financing, scheduled to be announced on Tuesday, values the company, called Talos, at $1.25bn. Led by technology investor General Atlantic, the round also includes such previous Talos backers as Fidelity Investments and venture capital investors Andreessen Horowitz and PayPal Ventures.
The deal comes as crypto prices are falling and many of the great powers of traditional finance are waiting for greater regulatory clarity to make crucial decisions on digital asset strategies.
It shows that behind the scenes, financial groups are looking for ways to make the crypto trade safer for institutional investors and prepare for the prospect that traditional assets will take a digital form — as tokens residing on blockchains, the technology underpinning cryptocurrencies.
“We see crypto as the tip of the spear,” said Mike Demissie, head of digital assets and advanced solutions at BNY Mellon, which has $45.5tn in assets under custody or administration and $2.3tn in assets under management. “Other types of assets are going to be tokenised and be made available on this type of infrastructure.”
Talos occupies one of the less racy corners of the crypto business, essentially building computer plumbing for institutional investors who have a responsibility to make trades on the best terms for their customers. Its offering helps clients see prices at leading exchanges and market makers in one place, and issue instructions for all stages of a trade — even complex algorithmic ones.
“Our job is to make sure our clients can connect,” said chief executive Anton Katz, an MIT-educated software engineer whose past experiences include serving as head of trading technology at AQR Capital Management, a hedge fund, and competing as a member of the Israeli national shooting team. “We are the rails.”
Katz said he expects Talos will handle a greater variety of digital assets in the coming years as trading methods developed in the crypto business find uses in traditional finance.
“The experimentation that is happening in crypto is driving other asset classes to see what can be done more optimally, what can be done differently,” he said. “The vast majority of our conversations with large institutions right now are literally about that — what is going to be the impact of this technology on the existing ecosystem.”
Aaron Goldman, managing director and co-head of financial services at General Atlantic, said Talos was well-placed to grow as the “casual” ways of the early crypto industry give way to greater participation by institutional investors with fiduciary responsibilities.
“We are moving away from an earlier era in which trades were executed by calling your buddy and telling your clients I trade with her because I know she has the best prices,” Goldman said.
He added: “Now, market structure is evolving. You have to show people you were able to go to the market, see different prices, and execute in the most efficient and thoughtful way, and later you can go back, audit and demonstrate you received the best execution.”