Coinbase to Offer Custodial Service for Institutional Investors
Coinbase Custody has the potential to pave the way for Wall Street to enter the market more formally. This is because Coinbase would be providing certainty to institutional investors who have typically shied away due to lack of security.
Paving the Way for Wall Street
In a recent blog post, Coinbase announced their plan to roll out Coinbase Custody. The newly published product will be a custodian wallet for institutional investors and would expect a minimum deposit of $10 million. The service would include $100,000 for setup fees and another 0.1 percent for monthly expenses.
CEO and co-founder of Coinbase, Brian Armstrong, published the announcement via Medium on November 16. In it, he writes that “By some estimates, there is $10 billion of institutional money waiting on the sidelines to invest in digital currency today.”
Only institutional investors would have access to custodian service, while retail investors are expected to use traditional Coinbase services. The company also claims to have already stored around $9 billion for their retail clients.
Imperfect Track Record
Though the company has a good track record and has been growing at an exponential rate, complaints from communities like /r/bitcoin are easy to find. Whether it be an inability to solve a technical problem, or the support team not moving swiftly enough, many users have been vocal about Coinbase’s imperfections as a company.
One Reddit user, richardtheassassin, commented, “I can’t wait to see Coinbase lose Goldman-Sachs’ funds and then put Goldman on hold for a month.”
However, this is not likely to be the issue with institutional investors who will be getting dedicated account managers, audit trails, withdrawal limits, and in some cases, the option to insure coins.
Guarantees For Investors
The institutional investors along with representatives will get some services for using Coinbase’s custodial services.
Often will be the case that accredited investors will be guaranteed response times for transfers of funds, multi-user accounts with separate permissions and multi-asset support.
Coinbase will continue supporting ethereum, litecoin, and bitcoin, but will also begin focusing on support ERC20 tokens and more.
The company has upwards of 12 million users and 47,000 merchants. Coinbase also has raised over $216 million from NYSE/ICE, USAA, BBVA, Westpac, and MUFG. In the past year, over 100 hedge funds were created to trade in digital currencies specifically.
For some, it may make sense to outsource their storage to a custodian service, like Coinbase, for small fees while they pursue other ventures. In any case, if done correctly, Coinbase Custodian would offer peace of mind to people who used it.
The massive inflow of institutional investors money into cryptocurrencies could give a huge bump to their valuations, as they would race towards having a more significant percentage of the financial market. To put things in a perspective, the current market cap of Bitcoin is only about 1.5 percent of the market cap of gold.
Coinbase plans to roll out access in early 2018, however, has already started to accept applications.