Novogratz’s Galaxy Digital gains approval for securities underwriting

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Novogratz's Galaxy Digital gains approval for securities underwriting

Michael Novogratz’s cryptocurrency investment bank Galaxy Digital has gained approval from the Financial Industry Regulatory Authority (FINRA) to underwrite registered public offerings of securities.

Galaxy Digital is a multi-service commercial bank that is focused on digital assets and blockchain technology.

Besides investing in cryptocurrency projects, the company offers private placement of the securities as placement agent as well as consulting on mergers and acquisitions.

Bringing IPOs to the crypto industry

With this license, the company can now act as an underwriter in registering public offerings of debt, equity, and other corporate securities.

Since Galaxy Digital focuses entirely on digital assets, the latest approval is alluding to the company’s ambition to emulate Goldman Sachs in the cryptocurrency industry.

Aside from working on security token offerings (STO), Galaxy is also considering issuing tokens which could connect to or simply represent ownership of several valuable objects as well as revenue streams.

“It’s a really young industry, and we are a pretty young business […] We are sober and patient about how fast it will grow, and we are well-capitalized. This feels like a perfect addition,” stated Novogratz.

While the cryptocurrency industry has grown to $280 billion, there is no company that has gone public yet.

Bitmain, the China-based Bitcoin mining giant, was the closest to achieving this, having failed to do so due to uncertain market conditions surrounding cryptocurrencies as well as internal conflicts.

Whilst Novogratz is aware that business could take some time to take off, there are already signs of demand for initial public offerings (IPO) within the cryptocurrency industry.

Cryptocurrency exchange Coinbase was valued at $8 billion in October of last year, and alongside other mining companies, might be considering a potential IPO in the near future.

Advising on mergers and acquisitions could also become relevant soon. Established companies like Mastercard Inc. and PayPal have started to pay attention to the cryptocurrency industry.

While Facebook’s Libra might fail to launch, such companies may look to acquire cryptocurrency businesses at some point as well.

Banking on first-mover advantage

Banking on first-mover advantage

Interestingly, Galaxy Digital is backed by a group of individuals with extensive experience in investment banking with some of them having worked at Goldman Sachs in the past.

For instance, Ian Taylor is leading the advisory business of Galaxy, having previously worked for 18 years at Goldman Sachs.

Taylor sees a lot of long-term potential to be uncovered as the business develops and gets a better understanding of the market needs.

“The business that we are building on the advisory side is a long-term, relationship-based business,” Taylor said.

“In time that will pay dividends as financing and strategic advisory opportunities arise.”

Traditional banks are yet to get involved with cryptocurrencies and digital assets. Therefore, Galaxy Digital betting on the emergence of the cryptocurrency industry with various undertakings in the space stands to gain a significant competitive edge and establish itself in the long run.

Novogratz believes that legacy banks have a poor understanding of the space, and the first-mover advantage should see Galaxy stay ahead of the looming competition.

“The traditional banks don’t have the DNA that they really need to understand the crypto community yet,” Novogratz said.

“Our edge over time is that we are going to see more projects and get an understanding of what works and what doesn’t.”