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Institutional Crypto Space Develops as Coinbase Launches Custody Service

Avatar Nick Chong 2 years ago

The institutional environment around cryptocurrencies has continued its relentless development, with Coinbase recently launching their custody service.

Coinbase Custody Accepts 10 Institutional Investors

Since its creation in June 2012, Coinbase has continually cemented itself as one of the best consumer-centric cryptocurrency services. But with its recent launch of Coinbase Custody, the popular company intends to make a positive impact on incoming institutional investors. Coinbase Custody aims to secure the business of institutional investors, by providing reliable cold storage options for these customers.

Bloomberg reports that the cryptocurrency service provider has already accepted deposits from ten hedge funds and family offices, all within its first week of operation. Coinbase’s aspirations don’t end there, with the firm hoping to take on 100 institutional clients, managing a collective value of $5 billion in crypto assets come January.

Some were shocked that institutional clients would place such a large amount of trust on one firm, but a blog post from Sam Mcingvale, product lead at Coinbase Custody, shows that Coinbase is prepped for the incoming investment. The post read:

“Over the past six years, Coinbase has pioneered leading crypto storage techniques and is currently responsible for the custody of more than $20 billion in crypto assets. Coinbase Custody builds on this expertise to offer a brand new, independent solution for our institutional customers.”

This new service will only be accepting investors with a minimum balance of $10 million, charging a 0.1% fee on a monthly basis and $100,000 on set-up.

To ensure the security of funds, Coinbase will enlist a variety of unique security techniques. The aforementioned blog post gave four unique features which will help to secure funds, listing:

  • On-chain segregation of crypto assets
  • Split, offline private keys that require a quorum of geographically distributed agents to use cryptographic hardware to sign transactions
  • Multiple layers of security
  • Robust cold storage auditing and reporting

The features mentioned above provide new levels of security, mitigating a majority the risk of cryptocurrency loss, in the form of a computer hack. One feature which stands out is the “geographically distributed” multi-signature requirements for withdrawal, ensuring that there is not a single point of failure.

In its current state, the service only offers custodial support for the ‘Coinbase Four’, which are Bitcoin, Ethereum, Litecoin and Bitcoin Cash. However, Mcingvale noted that Coinbase plans to add support for more cryptocurrencies within the near future.

Institutional Investment Sub-Industry Grows At An Unprecedented Rate

Coinbase wasn’t the only firm taking up the institutional investment spotlight, as Blockchain has also announced its own institutional platform, affectionately named Blockchain Principal Strategies by the cryptocurrency infrastructure firm. Along with offering custodial services, BPS also intends on providing cryptocurrency analytics and research services that may be reminiscent of what Wall Street has to offer. Peter Smith, Blockchain’s CEO, hopes that BPS will fill the growing need for an all-in-one service for institutional investors, offering services which others can not.

Goldman-Sachs backed Circle recently announced a 30% monthly increase in investments made on its established ‘Trade’ platform, which is directed at offering OTC trading for institutional clients. This figure comes amidst the bearish state the market has been in, possibly signaling that institutions see these prices as a bottom before the impending bull run.


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Nick Chong

I am a writer who has been following the cryptocurrency space since 2013. A focus of my coverage has been the financialization and mainstream adoption of Bitcoin. My insights and interviews have been featured in leading...

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