Announced back in November 2017, the Coinbase Custody platform is finally fully functional and ready to welcome its first members. While the US-based crypto exchange already acts as a custodian for its Coinbase PRO (formerly known as GDAX) customers, the new service is targeted directly to institutional investors.
Writing in the official blog, Coinbase Custody Product Lead Sam McIngvale said that, “Today, we’re proud to announce that we’re officially open for business. Over the coming weeks, we’ll continue on-boarding a set of world-class clients that includes leading crypto hedge funds, exchanges and ICO teams.“
For those not familiar with traditional financial terms, custodians are institutions that hold investor assets to minimize the risk against their theft and loss. Additionally, custodians offer numerous other services, such as account administration, transaction settlements, collection of dividends and interest payments, tax support, etc.
Custodians play a major role in traditional finance and are usually big financial institutions that have to be registered with the Securities and Exchange Commission (SEC). Some of the biggest US custodians include JPMorgan Chase, Citigroup, The Bank of New York Mellon and other financial lynchpins. The lack of universal crypto regulation means there are very few, if any, reliable custodians for virtual currencies, therefore the Coinbase platform is definitely an important and welcome development for the crypto sphere.
As you would expect with institutional clients, the entry bar is quite high. Coinbase Custody is only available to European and American institutions and the minimum deposit is $10 million, plus a $100,000 initiation fee. The service will also charge 10 basis points in monthly fees. Coinbase currently only supports BTC, ETH, BCH and LTC, although plans to add more digital assets and expand its services to Asian customers have been announced.
Mr. McIngvale shed some more light on the custodial service details, claiming that, “Coinbase Custody is a combination of Coinbase’s battle-tested cold storage for crypto assets, an institutional-grade broker-dealer and its reporting services, and a comprehensive client coverage program.“
Cold storage is essentially storing the digital currencies offline – away from any hacker‘s reach. Coinbase plans to also introduce secure hot wallets to allow for active trading. The exchange claimed it currently holds more than $20 billion worth of cryptocurrencies on behalf of retail clients and hopes to add a further $5 billion by the end of 2018 via the custodian platform.
The new service already has 10 clients and Coinbase hopes to add no less than 100 large institutional clients to its roster by the end of the year. Polychain Capital, a crypto fund that reportedly holds over $1 billion of assets, is one of the first to sign with Coinbase Custody.
Its CEO, Olaf Carlson Wee had nothing but praise for the exchange, claiming that, “Coinbase is incredibly well positioned to store the next $100 billion of crypto assets. The company has a very, very long history of successful digital asset storage.“
The news comes amidst a flurry of new developments for the American crypto exchange. The Coinbase Index Fund, which is also targeted at institutions, has been launched a couple of weeks ago, while the CEO Brian Armstrong also started a crypto charity, aimed at helping people from emerging markets. There have also been rumors that Facebook is eyeing the acquisition of Coinbase, although these are likely just speculation more than anything.
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I have been following the crypto markets since mid 2017, just in time to witness the incredible surge of the digital asset industry. Fascinated by the potential of blockchain technology I’ve started to dig deeper and that’s how I ended up meeting the Toshi Times team. I hold a Political Science degree, therefore the crypto regulation development is particularly interesting for me. I’m also heavily involved with music, running my own label, a YouTube channel and working with distribution. People call blockchain the ‘Fourth Industrial Revolution’ and I believe it will change our daily lives in the coming years and we will have the front row seats to witness it.