Coinbase is reaching out to establishment institutions such as sovereign wealth funds, pension plans, or asset managers by providing what it calls Coinbase Custody which will store digital assets for them.
The move will provide the exchange a new source of revenue. However, it is also an attempt to win over Wall Street and encourage establishment firms to invest in the cryptocurrency area. Institutional investors are used to having services such as keeping safe custody of assets.
Adam White, a Coinbase vice-president leads the new effort. He points out that the surge of interest in cryptocurrencies has been led by retail investors not large major financial institutions. As a result the type of services such institutions require have not been made available for the most part.
White said: “A bunch of institutions looked up and said, ‘We can’t ignore this anymore. We don’t understand it, but we’re going to have to.’” Coinbase expects the custody service will provide an incentive for major institutions to invest in the crypto market. Large financial institutions are used to such a service to keep their assets safe. Custodians may sometimes also execute trades on behalf of their clients.
Custody Service to be made available to a few firms at first
As the appended video featuring the CEO of Coinbase explains the service is only for institutional investors as it requires considerable investment to make use of the custody service.
The service will be made available to a few prominent cryptocurrency companies such as Boost VC and Scalar Capital. Boost VC is st VC is a startup accelerator for blockchain, virtual reality, and other technology companies. It is well known as a business incubator for Bitcoin companies. Scalar Capital is an investment management company that specializes in crypto assets.
Some institutions already use Coinbase for trades. The company says it has stored almost $20 billion in crypto assets. However, so far the success of the exchange is mainly due to individuals who believe in the currencies rather than on large established institutions.
Traditional financial institution often wary of crypto assets
Many in the finance industry have negative views of the cryptocurrency market with some executives roundly condemning it and investors such as Warren Buffet are also very critical. The market has been extremely volatile and attractive mostly to those who are of a speculative nature rather than investors. Many cryptocurrency activists also saw the whole enterprise as a means of in effect avoiding or even replacing the existing financial system.
However, some coins such as Ripple have tried to make applications of the technology which will be useful to financial institutions and some major investment banks are now beginning to trade in bitcoin-related deals. Two large Chicago exchanges trade in bitcoin futures.
Coinbase is a large digital currency exchange with headquarters in San Francisco Californian. The act as brokers for bitcoin, bitcoin case, etherium, and litecoin with fiat currencies. They operate in around 32 countries. They provide bitcoin transactions and storage in 190 countries around the world.
Coinbase is also introducing a premium service called Coinbase Prime that will provide additional information for clients such as a sovereign wealth fund. Coinbase is also setting up an internal team to deal with these big spenders.