US brokerage technology firm Alpaca plans to launch a prime brokerage business in the first quarter of 2027, targeting growing demand from hedge funds and institutional investors trading across cryptocurrency and traditional equity markets, according to a report by Bloomberg. 

The California-based company, which provides trading and custody infrastructure to financial institutions, is seeking to expand into financing, securities lending and other prime brokerage services as tokenised equities gain traction. 

Chief Executive Yoshi Yokokawa told Bloomberg that the move is intended to improve capital efficiency for institutional investors managing positions across digital asset platforms and conventional exchanges. 

Prime brokerage services could become increasingly important as trading firms seek to hedge tokenised equity positions against underlying shares or derivatives across different venues. 

Alpaca currently holds more than $3.5bn in underlying US equities backing tokenised products issued by over 10 companies, including Binance, Coinbase and Crypto.com. Yokokawa said the value of these holdings has increased eightfold over the past year. 

A key challenge for firms trading across crypto and traditional markets is the difference in settlement requirements. Cryptocurrency exchanges typically require trades to be pre-funded, while US equities settle later, creating potential financing gaps. 

Alpaca is working to improve the conversion of tokenised stocks into their underlying shares, which Yokokawa identified as a prerequisite for introducing greater leverage into these transactions. 

The company is also exploring netting arrangements that could reduce collateral requirements by offsetting obligations between trading counterparties, similar to mechanisms used in traditional clearing markets. 

The expansion will require additional balance-sheet capacity. Alpaca raised $135m in equity and $300m in debt earlier this year and expects to finance its prime brokerage activities through a combination of internal capital, borrowing and credit facilities. 

The move comes as other digital asset firms expand their institutional financing businesses. Crypto custody provider BitGo recently identified prime brokerage as a future growth driver, while Coinbase has reported increasing demand for its prime services. 

Alpaca's planned launch reflects growing competition to provide institutional trading infrastructure as digital assets and traditional securities markets become more closely integrated.