Investment banks subscribed to the figure – Newspaper Kommersant No. 142 (7343) dated 08/08/2022

Companies issuing digital financial assets (DFA) are going to invite underwriters to place their issues. The exit of classical investment banks into this niche fits into the logic of the conservative approach of the Central Bank. This will both support the business of the banks themselves and guarantee investors a return on investment, experts say. However, analysts warn that banking services are not free – and the emergence of another intermediary in the chain may reduce the profitability of investment projects.

As it became known to Kommersant, classical underwriters began to enter the market of digital financial assets (DFA). The first memorandum of cooperation was signed by the fintech company Lighthouse (placed the first issue of the CFA in the form of a tokenized pool of receivables, see “Kommersant” dated June 28) and Gazprombank (one of the largest Russian organizers of placements of bonded loans, see “Kommersant” dated 5th of August). As noted in the Lighthouse, it is planned to “develop and implement a mechanism for attracting funding through the issuance of CFA.” Gazprombank did not respond to Kommersant’s request.

Digital financial assets are similar to bonds, however, with a wider list of available models of monetary claim, and the issuer also has the opportunity to define various models of periodic income (constant or variable interest payments, application and various formulas, payment conditions for CFA, etc.). In such conditions, according to the Lighthouse company, the role of professional participants in the securities market – “underwriters, investment consultants who have accumulated extensive experience in developing financial instruments” – is growing. Atomyze said that their own structurers are now involved in the release process. At the same time, they specified that banks plan to offer CFA to their customers.

The new direction should be of interest to professional stock market participants. In the context of a shrinking stock market, this direction can really become a help for investment banks, says Moscow Digital School expert Efim Kazantsev. Interest for credit institutions is not only the organization of the issuance of such instruments, but also the offer of the CFA to its customers as a new product, points out Nikita Bashkov, head of the financial markets block at PSB. In Russia, the infrastructure has not yet been formed, therefore, in order to protect investors, the Bank of Russia proposed to allow exchanges and central counterparties to trade in the CFA in addition to CFA operators, said Aaron Chomsky, head of the investment department at ICB Fund.

Against this background, the expert considers it logical “the appearance on this market of classic investment banks that will be able to offer the same services, but in a new technological package.” “The essence of their business, in fact, will remain the same: for companies – to help increase their shareholder value, provide an investor base, resolve regulatory issues, and for investors – to reduce risks and set benchmarks,” he said. The investment bank, which has the opportunity to negotiate with the often skeptical Central Bank, can bring a new CFA project to the market, Yefim Kazantsev believes. “And in some cases, it can become a guarantor of return on investment by assuming an obligation to buy back all CFAs issued by the issuer at a predetermined price (the so-called firm commitment),” the expert added.

However, the appearance of another intermediary in the chain, Yefim Kazantsev, is more likely to be considered a disadvantage – “it is obvious that banks will not provide such services for free”, which “will somewhat reduce the profitability of investment projects implemented through underwriters, but will at least allow them to be implemented.” However, as Aaron Chomsky notes, the further “evolution of financial markets with the transition to blockchain technology involves not only the emergence of security tokens (in the Russian Federation – DFA), but also the elimination of professional market participants, in which the need will disappear.”

Ksenia Kulikova