Coinbase has launched a cryptocurrency custody offering with an aim to make digital assets more accessible to institutional investors.
A lack of suitable custody offerings has held back traditional institutional investors from the cryptocurrency space, as safeguarding concerns and widespread stories of hacking circulate.
According to Coinbase, its custody offering is a combination of its cold storage for crypto assets, an institutional-grade broker-dealer and its reporting services.
Speaking to The TRADE Crypto’s sister publication – Global Custodian – last week, Sam McIngvale, product lead at Coinbase Custody, said the exchange is looking to become the most trusted and compliant provider in the market.
“We are taking the highest road that we can and setting the highest bar from a regulatory and compliance perspective,” said McIngvale.
“That means we are going to move a little slower with regards to how quickly our platform expands and comes to market, but ultimately we think that’s what is required to win the trust of the large institutions.”
“Our goal is to make our offerings look and feel like traditional finance; we want the crypto asset class to look like any other asset.”
Coinbase’s custody service leverages the systems of Coinbase partner Electronic Transaction Clearing (ETC), an SEC-registered broker-dealer and FINRA member subject to regulated financial reporting and independent audits.
In a statement, Coinbase said it will continue onboarding a set of world-class clients that includes leading crypto hedge funds, exchanges and ICO teams.
Nomura became the first bank to offer custody services for digital assets in May this year, while State Street has previously said that “servicing cryptocurrencies – whether it is from a custody, depositary or administration perspective – is something we would consider.”
Coinbase is currently responsible for the custody of more than $20 billion in crypto assets, according to the exchange. In a statement, Coinbase added that its new cold storage system “has undergone rigorous penetration testing and cryptographic design review” and that it plans further and “regular third-party examinations to ensure the platform’s ongoing security”.
“The most interest right now is from crypto first investors, two predominant groups – hedge funds and family offices,” McIngvale added.
“Family offices is a much larger segment than people give them credit for right now. The next wave of institutional investors are pensions and endowments. They are starting to ask questions now, but they could be six months away. Then at some point in the future you will see the more traditional asset managers.”