This story was delivered to Business Insider Intelligence “Fintech Briefing” subscribers. To learn more and subscribe, please click here.
Cryptocurrency exchange operator Coinbase has announced the launch of Coinbase Custody, a custody service that will provide secure storage for institutional investors looking to trade cryptos. In the past month, over 100 hedge funds focused solely on crypto investing and trading have launched, according to Coinbase. This shows that the industry has seen a lot of growth, probably reflecting high customer demand.
Coinbase’s new offering is designed to support further growth in the sector, and marks a strong push by the company into the institutional sphere. Additionally, Coinbase announced that the company is expanding its electronic marketplace with an office in Chicago, launching a suite of tools that will support institutional investors trading cryptos, dubbed Coinbase Prime, and is providing support for institutional clients via its Institutional Coverage Group.
Rolling out custody services for institutional clients could help bring more firms into the crypto space. Coinbase Custody can be used by institutional clients like sovereign wealth funds, pension plans, or asset managers that want to engage in crypto trading, but need somewhere secure to store their assets, according to Recode. Securely storing digital assets is a major concern for these firms, and has perhaps been a barrier to entry — custody services are commonly available for other financial instruments, yet have been lacking in the crypto sector.
This service will make investing in cryptos more accessible for financial institutions by providing a critical component needed to responsibly engage in trading of the assets. As a result, Coinbase may succeed in getting more firms to invest in cryptos on its platform.
Meanwhile, launching institutional services will help diversify Coinbase’s business. Offering services to institutions will add a new revenue stream for Coinbase, and marks a major shift in its overall strategy. The company has made a name for itself as a way for the masses to access cryptos, and the launch of this suite of products is a clear departure from that focus.
If Coinbase is successful in its efforts to woo institutions, it could cement a reputation as a trusted platform among a client base that’s far more lucrative than retail investors. Moreover, Coinbase already has experience in storing cryptos safely, with around $20 billion crypto assets currently entrusted to it. We will therefore probably see many firms choosing to work with Coinbase, which will also boost the crypto industry as a whole.
Of the many technologies reshaping the world economy, distributed ledger technologies (DLTs) are among the most hyped. DLTs are most often associated with cryptocurrencies like Bitcoin, but such coverage sidelines the broader use cases of DLTs, even though they stand to make a far bigger impact on the broader the financial services (FS) industry.
DLT’s value lies in its ability to centralize record-keeping, while cutting out the need for authorization by an overseeing party, instead allowing a record to be confirmed by …read more
Source:: Business Insider