Hex Trust, a Hong Kong-based digital-assets servicing firm, sees huge opportunity for providing custody and related services for the crypto world.
So do big established banks like BNY Mellon and State Street, which are taking steps into the world of custody for digital assets.
That might explain Hex Trust’s recent close of a $6 million Series A round.
“This is to ensure we have the right infrastructure to cope with the market’s exponential growth,” said co-founder Alessio Quaglini. “We have a good mix of investors from both the traditional and blockchain space.”
He says the raise is all about seizing the opportunity in cryptocurrencies, securities tokens, and other aspects of the universe, such as non-fungible tokens (NFTs). The business plans to hire in Hong Kong and Singapore to meet demand from banks, exchanges and corporations, and to expand into Europe.
That growth, however, is also leading huge global custodians to enter the digital-assets space. They lack Hex’s crypto experience but they will bring serious funding and relationships.
Traditional and crypto backers
Plenty of investors are backing Hex Trust to win the race.
QBN Capital led the round along with traditional venture-capital and family office players, such as Cell Rising, Radiant Tech Ventures, and Mantra DAO.
Frank Tong, managing partner of QBN, said, “We believe [Hex] will play an important role in Hong Kong becoming the international financial center for China and digital assets trading hub in APAC.”
Blockchain-native investors include Kenetic Capital, HashKey, Fenbushi Capital, Borderless Capital (a fund affiliated with Algorand, a blockchain network), and broker Genesis Block.
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Kenetic was a seed investor in Hex. Kenetic’s founder and managing partner, Jehan Chu, is a director on Hex’s board. “Hex Trust is Asia’s bridge between the old financial world and the new digital reality,” he said,
Henri Arslanian, PwC partner, invested in a personal capacity; Quaglini says the high-powered consultant will also assist the team with licensing and connections with financial institutions.
Quaglini says the quality of the backers is due to two trends that they think Hex Trust can exploit.
First, more financial institutions are entering digital assets, as brokers, traders, originators, and custodians. State Street and Goldman Sachs have recently announced expansions into crypto, for example. Some may be competitors but many are potential clients.
“The top twenty banks all have programs for digital assets or have issued [requests for proposals] to support their business models,” Quaglini said. “This isn’t like two years ago, where financial institutions preferred to work in private distributed ledgers. Now, offering digital assets to clients is becoming their main business.”
The second trend is the move by some corporations to buy digital assets for their treasuries, such as the U.S. payments company, Square.
Quaglini says if the S&P500 universe of companies allocates 1 percent of their assets to Bitcoin, it would drive the coin’s price to $100,000 or more.
He reckons 2021 is still a year of ramping up. Next year should reveal the results, at least in price terms.
On the product side, Hex Trust is busy help with collateralized loans, in which a client uses bitcoins as collateral to offer cash loans to prop desks, or to create structured products for wealthy investors.
The firm, launched in 2018 and has a trust license, now has over $1 billion of digital assets under custody. Its clients include Huobi Asset Management, which has recently been granted a license by the Hong Kong Securities and Futures Commission.